Health Tech Investors Are Done Paying for Promises 

That is the central finding from McDermott Will & Schulte’s Health Tech Investment Forum, where investors, operators, and capital providers gathered to take stock of where the market is heading. Their conclusion was blunt: provable return on investment has replaced innovation as the currency of the industry.

According to McDermott, healthcare IT deal activity hit record levels in 2025 and remains active going into 2026. But the conditions have shifted. Buyers are more selective. Sellers are more cautious. And the easy money is gone.

One reason is the collapse of what forum participants called the “SaaSpocalypse” — a correction in private valuations tied in part to uncertainty around artificial intelligence. The traditional playbook for building value, which relied heavily on expanding valuation multiples, no longer works. Companies now need mid-teens earnings growth just to hit target returns for investors.

Live polling of forum attendees drove the point home. When asked what drives valuation today, 34% of respondents pointed to scalable revenue growth, 31% to AI-driven efficiency, and 20% to demonstrated ROI. Growth and measurable performance are no longer separate conversations.

What this means in practice is that capital is flowing to companies that sit inside the workflows their clients depend on — billing, staffing, care navigation, revenue cycle management. These are areas with persistent inefficiencies and a clear way to measure improvement. Companies that control the data, own the decision-making process, and are deeply embedded in their customers’ operations are in the strongest position.

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The AI story is more complicated. Interest in AI-native companies remains high, but investors are growing cautious about businesses whose competitive edge depends on models anyone can access. According to McDermott, the focus is shifting to companies that use AI to complete real tasks — closing care gaps, automating administrative work, improving billing performance — rather than those that simply surface recommendations and dashboards.

“AI is creating value by completing workflows, driving decisions, and producing measurable results — not with consumer interfaces and insights,” the firm wrote. “Solutions that can execute are far more defensible than those that generate recommendations alone.”

That distinction is reshaping how companies are built and financed. Investors expect early-stage companies to show not just growth, but how each dollar spent connects to a measurable outcome. Lenders are underwriting deals more carefully, with sharper attention to cash flow and long-term viability.

Due diligence has also changed. Investors are now examining the depth of workflow integration, the quality of customer retention, the legal rights to underlying data, and how clearly a company can attribute its claimed results. Firms that present elaborate, multi-layered ROI frameworks are losing credibility. Those that anchor their pitch around a small number of clear, defensible numbers are winning deals.

The exit landscape reflects all of this. IPOs remain rare. Most liquidity is coming through strategic acquisitions and private equity-backed deals, often through creative transaction structures. Companies with strong retention and embedded workflows continue to attract buyers. Others are waiting longer and settling for lower prices.

McDermott will continue the conversation at its HealthEx conference in Nashville, where senior leaders across the healthcare provider, investor, and operator communities will focus on what it takes to scale and execute in today’s market.