SAN FRANCISCO, Oct. 21, 2025 (GLOBE NEWSWIRE) — Menlo Ventures, a leading venture capital firm investing at the forefront of artificial intelligence, today released its inaugural State of AI in Healthcare Report , showing that AI spending across healthcare reached $1.4 billion in 2025 , almost tripling last year’s total. The data also reveals that healthcare organizations have adopted AI 2.2x faster than the broader economy.
“For years, AI in healthcare felt like a promise waiting for proof,” said Greg Yap, Partner at Menlo Ventures. “Now we’re seeing evidence at scale that AI tools can actually fit into clinical workflows, make work easier, and improve outcomes. Our research shows that the healthcare industry is reaching an inflection point in AI adoption.”
According to the report, 22% of healthcare organizations have deployed domain-specific AI solutions, up 7x from 2024. Health systems lead with 27% adoption, followed by outpatient providers (18% ) and payers (14% ). Additionally, the industry now counts eight AI unicorns across medical documentation, revenue cycle management (RCM), and payer operations, surpassing every other vertical AI category.
Key Findings:
- The Pilot Phase Is Over (For Many): Of the $1.4 billion now flowing into healthcare AI, the vast majority is in production, not pilots. Providers account for $1 billion (75% ) of that spend. The biggest categories are ambient clinical documentation ($600M ) and coding and billing automation ($450M ); the fastest growing are patient engagement (+20x YoY ) and prior authorization (+10x YoY ).
- Providers Accelerate, Payers Proceed with Caution: Buying cycles for AI tools are 18% shorter for health systems and 22% shorter for outpatient providers as they race to capture operational gains. Buying cycles for payers are 20% slower as they remain largely in piloting and experimentation mode.
- Startups Capture Vast Majority of AI Spend, but Incumbents are Striking Back: Startups currently dominate, capturing 85% of healthcare AI spending to date. However, most customers report a slight preference for buying AI from their incumbent electronic health records (EHR) provider.
- Ambient Scribe Adoption Faces Retention Risk: 67% of outpatient providers using ambient scribes expect to switch vendors within three years.
- Life Sciences Build Proprietary Models for Drug Discovery: Pharma and biotech companies are experimenting with AI across the drug development lifecycle, with 66% looking to build or fine-tune proprietary models, including various foundation models of biology and drug discovery. Pharma and biotech companies also cited R&D data analysis (63%) as the most common area of interest where AI can be used to ingest public data, analyze experimental data, and ultimately design or conduct experiments.
AI has taken hold in healthcare, but the real opportunity is just beginning to unfold. From patient engagement to payer operations to drug development, most workflows are still ripe for reinvention.
“The interesting thing about this phase of AI in healthcare is that the hard problems aren’t model problems anymore,” said Derek Xiao, Principal at Menlo Ventures. “They’re product and workflow problems, whether that’s integrating AI into a busy hospital or embedding agents in wet lab processes for drug discovery. The companies that figure that out are poised to redefine how care and science move forward.”
About Menlo Ventures’ 2025 State of AI in Healthcare Report
Menlo Ventures’ inaugural State of AI in Healthcare Report expands the firm’s series of State of AI reports featuring proprietary data and analysis on how artificial intelligence is reshaping key industries. Building on Menlo’s flagship State of Generative AI in the Enterprise (published annually since 2023) and State of Consumer AI (published in June 2025), the report draws on proprietary survey data conducted by an independent research firm in partnership with Menlo Ventures. The survey captured insights from more than 700 senior healthcare executives (CxOs and SVPs/VPs) directly involved in AI decision-making, including 410+ technology leaders at provider organizations, 120+ senior insurance and benefits executives , and 170+ pharma and biotech executives , offering a cross-sector view of how AI is being adopted and operationalized across the entire healthcare ecosystem.
Combining Menlo’s proprietary survey findings with market analysis and firsthand insights as investors at the forefront of the AI transformation, Menlo Ventures’ 2025 State of AI in Healthcare Report provides a data-backed lens on where AI is gaining traction, how value is being created, and which signals matter most for the next wave of innovation.
For more detail on the methodology and data sources, see Menlo Ventures’ full report.
About Menlo Ventures
Menlo Ventures is a leading early-stage venture capital firm investing at the forefront of AI. Our portfolio includes more than 80 public companies and over 165 exits through mergers and acquisitions. Currently managing more than $6.8 billion in assets, we invest at every stage across consumer, enterprise, and healthcare. Our portfolio companies include Abnormal AI, Anthropic, Benchling, Carta, Chime, Harness, Poshmark, Recursion, Roku, Siri, Typeface, and Uber. We strive to have a positive impact on everything we do. When we’re in, we’re ALL IN, and we are ALL IN on AI.
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