Healthcare Technology Trends To Watch In 2024

Digital health and health technology adoption advanced rapidly in the wake of the COVID-19 pandemic, as investor dollars flooded into the space and providers quickly picked up telehealth capabilities.

But funding has slowed significantly from its pandemic boom in 2021, and some companies shut their doors in 2023. Still, interest in emerging technologies is high this year — particularly as artificial intelligence promises to streamline operations and lessen administrative burdens for clinicians.

As organizations continue to digitize, cybersecurity remains a significant challenge, with healthcare data breaches exposing hundreds of thousands of patients’ sensitive personal and health information.

This year may prove a development period for the health technology sector, experts say. Providers and payers will work to integrate digital tools throughout their organizations, and industry watchers may see efficacy and outcomes data after years of digital health investment. 

2024 could include more evolution of the current levels of technology, rather than earth-shattering new innovations, said Alex Lennox-Miller, lead analyst in healthcare IT at market intelligence company CB Insights.

“The pace of change and technology in healthcare over the last couple of years has been faster than I’ve ever seen before,” he said. “If we can maintain that pace — even without anything absolutely game-changing and revolutionary — that would be a huge win for the healthcare industry as a whole.”

M&A may pick up as digital health funding normalizes

Investment in digital health companies reached years-low levels last year after starting to decline in mid-2022. Higher interest rates limited venture capital’s ability to raise funds, and lower valuations and a frozen IPO market further reduced available cash for startups. 

But the decline isn’t a complete collapse for the industry. Rather, it reflects a normalization after the investment explosion in 2021, experts said. Digital health funding levels this year will look similar to 2023, and may start to increase — particularly in the back half of 2024 — though the floodgates aren’t likely to open completely. 

Consolidation may also pick up in 2024, a trend that industry watchers have been eyeing for months as funding ticked down and potentially pushed startups toward dealmaking. Digital therapeutics, mental health providers and weight loss companies could be attractive acquisition targets, experts said.

High-quality products that solve narrow healthcare problems are potentially the best opportunities for consolidation, said Jennifer Goldsack, CEO of the Digital Medicine Society. 

Buyers of digital health products are tired of managing a host of point solutions, so quality offerings that could be brought into a more integrated tool are valuable — especially to healthcare behemoths like CVS Health or startups that raised hefty Series D rounds a few years ago, she said. That could also force the cream to rise.

“What we want to see is consolidation, cherry-picking the best practices, use of the very best tech, the best teams coming together to really give complete solutions to the challenges in healthcare rather than individual tools,” Goldsack said.

Now that some digital health startups funded during the height of the investment boom have been operating for several years, the industry could see data on how effective these solutions are at improving access and quality of care, said Cheryl Cheng, founder of venture capital firm Vive Collective. 

“This is where you’ll see a little bit of that separation between the wheat and the chaff in terms of the companies that have built really robust clinical models with good unit economics and can scale, versus the ones that maybe were still drafting off of COVID pandemic tailwinds,” she said.

Building the infrastructure for AI in healthcare

Buzz about the potential for AI in healthcare reached a fever pitch in 2023, especially for generative AI technology, which can create new content like text or images. Tech giants like Google, Microsoft, Oracle and Amazon announced new products last year aimed at tackling operational tasks and reducing administrative burdens.

But it’s still early for generative AI. The industry is still in the discovery phase when it comes to how it could be best used, said Sunny Kumar, partner at digital health venture capital firm GSR Ventures. 

“If you look at the mobile phone as a platform, I think no one would have told you in 2009 — when the iPhone was coming out — that the industries the iPhone would disrupt most was going to be the taxi industry with apps like Uber or the mapping industry with things like Google Maps,” he said.

The infrastructure behind AI needs to be developed, including how tools will be effectively integrated into the healthcare system, how to set and follow appropriate safety and compliance standards, and how buyers of these products will learn what data they were trained on.

In 2024, there may be less hype and money flowing into the space as developers water the seeds they planted last year, said Vive’s Cheng. 

Transparency will become increasingly important this year, especially for clinical decision support tools or algorithms that assist with claims appraisals, said CB Insights’ Lennox-Miller.

Lawmakers heard testimony last year about algorithms used by insurers to predict how much care patients might need, which advocates argued drive coverage denials and push patients to self-pay or manage an appeals process. Humana, Cigna and UnitedHealth were sued last year over their use of algorithms to process claims.

“For lack of a better way to put it, your transparency needs to be transparent,” Lennox-Miller said. “If you’re showing how your algorithm works, and it’s just a math equation or a really complicated set of documents, that doesn’t help.”

Regulators eye cybersecurity standards

Healthcare organizations will need to get serious about cybersecurity this year, and they may face increased regulatory pressure to tamp down data breaches, experts said.

Breaches at healthcare organizations have become increasingly common over the past five years. The HHS’ Office for Civil Rights found a 93% increase in large breaches reported to the agency between 2018 and 2022 and a 278% spike in breaches involving ransomware during that period. 

Cyberattacks initially focused on larger healthcare systems, but smaller providers and business associates are now targets, said Amy Magnano, partner at law firm Morgan Lewis. Attackers are becoming more sophisticated too, using AI and machine learning tools to hone their strikes, including crafting more compelling phishing emails.

More states may move to create their own healthcare cybersecurity regulations in 2024, she said. New York proposed its own rules for hospitals in November, which aim to protect facilities and keep them operating when cyberattacks occur — along with funds allocated in the state’s budget to help hospitals upgrade their technology systems.

States like California, Washington, or others that already have more robust medical records requirements might be interested in regulation, Magnano said. But providers will likely prefer improved infrastructure, funding or guidance as opposed to a fragmented regulatory approach. 

“A lot of these privacy acts on a state-by-state level, they’re all a little bit different,” she said. “So preventing cybersecurity attacks, I don’t know if regulation on a state-by-state level is going to be the thing that improves that issue.”

The HHS has also signaled interest in boosting cybersecurity requirements for hospitals through Medicare and Medicaid, releasing a concept paper in December that outlined a strategy to receive new authority and funding.

Though the intent is good, many hospitals are already operating on slim margins — especially rural facilities that need to stay operating to preserve access to care in the communities they serve, said DiME’s Goldsack. The risk calculus may have already changed for providers, as they face fines and damages from lawsuits after data breaches, she noted.

To make matters worse, cybersecurity experts aren’t easy to find, said Tina Wheeler, partner and U.S. healthcare leader at Deloitte. Some health systems have moved to outsource their cybersecurity teams, especially if they’re small and can’t afford an expansive staff.

Either way, healthcare organizations will need to focus on upskilling their entire workforce in cybersecurity practices, as one weak link could mean a data breach, Goldsack said. 

“You are only as good as your weakest link,” Goldsack said. “Don’t think you can keep an entire healthcare system safe in the digital era if you have three brilliant cyber experts somewhere in leadership.”