After Robust Start to the Year, Digital Health Market Faces Clouds From Budget Bill, Tariffs

Digital health firms attracted $6.2 billion in the first half of 2025, paced by AI-enabled startups, up from $6.0 billion in H1 2024. While 2025 saw fewer total deals in the first half, with 245 funding rounds compared to 273 in 2024, the average raise was larger at $26.1 million compared to $20.4 million, reflecting more investment in later-stage rounds.

M&A activity was also up. Companies closed 107 deals in H1 2025, nearly equaling the 124 deals done in all of 2024.

Rock Health analysts warned, however, that policy changes could alter the investment picture going forward. The biggest impact is likely to come from new Medicaid work requirements and changes to the Obamacare marketplaces, per the report. Together, those changes could result in as many as 14 million Americans losing their health insurance and force many rural hospitals and health clinics to shut their doors, according to analysts, shrinking the potential addressable market for digital health tools and services.

The report advises investors to look for startups focused on digital health solutions that are aligned with the Trump administration’s priorities outlined in Health Secretary Robert F. Kennedy, Jr.’s Make American Healthy Again initiative and to track ongoing regulatory and legislative changes to health policy.

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“The call of innovators has always been to find opportunities amidst change and headwinds. As policies solidify and implementation becomes reality, digital health innovators are wise to identify how they may support federal priorities—such as chronic disease or food as medicine—and elevate initiative-aligned digital health solutions,” the report advises.

Related: Competition Law Enforcement and Policy in Healthcare Markets: An Overview From Chile

Another source of uncertainty is tariffs, the report notes. The Rock Health analysts point to a report released in May by the American Hospital Association that warned tariffs could have significant implications for health care and medical supply chains. The U.S. imported “over $75 billion in medical devices and supplies in 2024. Among the imports were syringes, blood pressure cuffs, IV saline bags, and surgical tools,” the AHA report found.

Many medical devices and equipment manufactured in the U.S., also rely on foreign-sourced materials, such as rare earth minerals. Tariffs or a loss of access to those inputs could lead to significant manufacturing disruptions, the report notes.

One sector of the health market expected to be positively impacted by the policy changes, is the health care lobbying business. Fierce Healthcare reports on a newly complete merger between Horizon Government Affairs and Monument Advocacy aimed at building out a healthcare lobbying shop in Washington, DC, and key capitals, including New York, California, Florida, and Texas.

“I think the what we’re seeing in this administration is a strong desire to leverage the latest technology and data assets to really transform the economy,” Horizon CEO Joel White told Fierce. “But in healthcare, we have such low bar legacy regulations and burdens on doctors and hospitals and technology developers, we don’t even have baseline interoperability built into everyone’s systems, and so transforming that, I think [CMS Administrator Mehmet] Oz and [HHS Secretary Robert F.] Kennedy Jr. and the president have all been very clear this is a key priority for them.”

Everlane Equity Partners provided funding for the merger. “This is just the beginning,” Everlane managing partner Evan Horton said in a statement. “We look forward to continuing to expand Monument’s capabilities and footprint.”