One challenge for healthcare journalists this year has been determining the status of AI on the Gartner Hype Cycle. We have clearly moved past the Innovation Trigger and are currently in the Peak of Inflated Expectations, where rising hype may lead to unrealistic expectations. However, we have not yet reached the Trough of Disillusionment, which is likely on the horizon.
As nearly every vendor claims their solutions are “AI-driven,” it has become challenging for reporters to distinguish between genuine advancements and mere marketing hype. At Healthcare Innovation, our strategy is to stay closely connected with health system CIOs, CMIOs, and chief AI officers, focusing on their prioritized use cases and the quantifiable improvements they observe. We also aim to interview venture capitalists and consortium leaders who are concentrating on AI startups in healthcare.
This month, we released our annual package of 10 Transformative Trends, dedicated entirely to AI. Topics cover governance, regulation, and the impact of AI on specific areas like oncology, revenue cycle management, and cybersecurity. We encourage readers to explore this package while reflecting on how use cases are evolving and what health tech executives and investors anticipate for the future.
In October, Menlo Ventures published a report on AI adoption in healthcare, indicating that 22 percent of healthcare organizations are using domain-specific AI tools. This marks a sevenfold increase from 2024 and a tenfold increase from 2023. Health systems lead with a 27 percent adoption rate, while outpatient providers and payers sit at 18 percent and 14 percent, respectively.
According to Menlo Ventures, the $4.9 trillion healthcare industry, which constitutes one-fifth of the U.S. economy but accounts for only 12 percent of software spending, is now adopting AI at more than double the overall economic rate. Healthcare AI spending reached $1.4 billion this year, nearly tripling investment from 2024.
Two key areas addressing immediate operational challenges and delivering measurable ROI are ambient clinical documentation, valued at $600 million, and coding and billing automation, worth $450 million. Other rapidly growing categories include patient engagement and prior authorization.
In September, I interviewed Murray Brozinsky, a partner at Aegis Ventures. He noted the fluctuating enthusiasm surrounding AI and mentioned that while the initial excitement following the rise of ChatGPT has led to some disillusionment during implementation, the focus remains on integrating generative AI into workforce issues. Brozinsky emphasized efficiency as a key priority and suggested new opportunities for solving previously insurmountable problems using AI.
In June, I had a conversation with Ochsner Health CIO Amy Trainor regarding the health system’s collaboration with Latent to develop clinical AI tools aimed at enhancing prior authorizations for specialty and retail pharmacy services. Trainor expressed her concern about potential conflicts between payer and provider AI systems, aiming to avoid a competitive “war of bots.”
Shortly thereafter, I spoke with Fawad Butt, founder and CEO of Penguin Ai, who highlighted the ongoing competition between payer and provider AI agents. He described the current landscape as an active “agent war,” noting that providers are often adopting AI more swiftly than payers due to the complexity of payer processes.
In 2025, many health systems continued to establish AI governance teams and processes, and several startups aimed to assist in this arena, including Vega Health and Qualified Health. Kedar Mate, co-founder and chief medical officer at Qualified Health, underscored the necessity of implementing digital governance structures to effectively manage generative AI technologies and enhance operational performance.
Returning to my discussion with Trainor, she expressed a shift in sentiment regarding major EHR vendors’ pace of AI tool development. Six months prior, she felt progress was lacking, but recently observed a notable acceleration, particularly with partners like Latent. Trainor asserted that deploying AI entails more careful consideration than simple updates and must adhere to responsible AI principles.
As we anticipate further rapid advancements in AI throughout 2026, it is crucial to remain attentive to these developments.
—
