The State of Healthcare AI: May 2025's Latest Brief

Welcome back to this month’s AI in Healthcare Brief!

These briefs are still evolving, and I’m still deciding on how to deliver the most critical information. So again, this month’s format will be a bit different. We will keep our standard funding review, which is based on our own manual review of startup funding.

What’s new is our pick of the top 3 key milestones, followed by the top 3 news that you may overlook, and finally a quick snapshot of any new policies or regulations around AI in healthcare.

With that said, we saw a massive recovery of $1.72 billion raised in May, up from April’s $808 million. Investors and industry sentiment remain broadly optimistic, with funding still pouring in despite some regulatory headwinds.

As always, if you missed my review last month, you can catch up here in the April’s Report.

May’s Funding Overview

In May, AI healthcare startups secured $1.72B across 62 deals, a strong recovery from April’s $808M. A big part of that number came from an IPO by Hinge Health at $437.3M, which also made it the second-largest raise for a startup this year. Just to note, our cut-off for what we consider a startup ends at IPO. Which means, from here on out, we will not be following any funds raised with Hinge Health.

Top Funded AI Healthcare Companies:

• Hinge Health led with a major raise of $437.3M. Known for its digital musculoskeletal clinic, Hinge Health is using AI to deliver personalized care plans aimed at reducing chronic pain and avoiding unnecessary surgeries.

• NewLimit raised a substantial $130M, emphasizing the continued interest in AI-driven longevity research, specifically through epigenetic reprogramming aimed at reversing aging.

• Persivia attracted $82.2M for its integrated AI-powered healthcare analytics and population health management platform, highlighting the growing demand for solutions that enhance patient outcomes and streamline care delivery.

Funding Breakdown by Application

Patient Monitoring & Care Technologies led strongly at $507M, highlighting investors' ongoing confidence in continuous care and patient-centered technologies.

Drug Discovery & Development rose back significantly to $456M, while Administrative & Operational Efficiency continued its momentum with $393M.

Diagnostics & Treatment Planning attracted $307M, reflecting steady interest.

Surgical Assistance saw modest engagement with $37M, while AI-Enhanced Scientific Research was minimal at $18M.

At least this month, surgical assistance was not last!

Geographic Funding Trends

The U.S. dominated again, raising $1.36B, vastly outpacing other countries. Switzerland emerged strongly with $124M, while the UK also maintained substantial activity at $79M.

Other notable raises occurred in Spain ($54M), France ($45M), China and Canada each at $34M. Overall, the global investment landscape remains strongly concentrated in the U.S., but Europe continues to show significant and steady interest.

Investor confidence is clearly strong, though the emphasis is shifting slightly towards sustainable, practical healthcare technologies rather than speculative bets. Regulatory concerns remain a consideration, but enthusiasm for evidence-backed AI healthcare solutions is evidently high.

Top 3 Key Milestones in Healthcare AI

1. UK Nationwide Health Data AI Pilot

Researchers in England have launched the world’s first AI model trained on 57 million de-identified NHS patient records to predict diseases and complications before they happen. Officials are calling it a step towards personalised, preventative care but experts have raised privacy and ethics concerns about using millions of medical records in this way

2. Japan’s Pro-innovation AI Law

Japan has passed a new AI Promotion Act, a landmark law that goes for light-touch, innovation-first policies over EU-style risk regulation. The law is all about voluntary cooperation and ethical guidelines rather than penalties, reflecting Japan’s approach to boost AI growth (including in healthcare) while ensuring responsible use.

This is in contrast to stricter regulation elsewhere and positions Japan as a unique model in the global AI policy landscape.

3. Tech Giants Dive Deeper into Healthcare AI

Big tech companies are pushing further into health AI. At Google I/O 2025, Google announced “MedGemma”, an open-source AI model for multimodal medical text and image analysis to encourage new healthcare use cases.

Google and others also announced high profile partnerships with hospitals and pharma companies to embed generative AI into clinical workflows, indicating large scale commercial commitment to AI healthcare solutions. (For example, India’s Apollo Hospitals and several US providers are working with Big Tech on AI copilots and decision support tools.)

Top 3 Highlights You Might Have Missed This Month

1. Focus on AI Evaluation and Safety Benchmarks

Behind the scenes there’s a growing emphasis on validating AI in healthcare. OpenAI’s release of HealthBench, an open-source benchmark with 5,000 real-world medical scenarios, is a push to measure model accuracy and safety against expert standards.

Similarly, agencies are issuing guidance on AI-derived evidence. Canada’s Drug Agency for example has published a position statement on handling AI-generated data in health technology assessments.

This is a trend towards standardising how AI performance and risks are assessed before clinical use.

2. Back-Office AI and Industry Consolidation

Behind the clinical headlines AI is changing healthcare operations. In May private equity firm New Mountain Capital merged three companies to form “Smarter Technologies”, an AI-based revenue cycle management platform for hospitals. The combined entity (with over 27,000 employees) uses AI to automate billing, claims and administrative workflows. This under-the-radar development suggests investors see value in scaling AI for healthcare administration and potentially better outcomes for providers.

3. Global Expansion of AI Health Startups

Several signs in May showed AI in healthcare is moving beyond traditional hubs. Notably India’s Qure.ai, known for its AI radiology tools, announced it’s on track for profitability and planning an IPO by 2027. Having already raised significant funding from global investors, Qure.ai’s trajectory indicates emerging market health AI players are reaching a new level of maturity and competing on the global stage. This is a trend of AI innovation spreading globally with rising investor interest in Asia-Pacific and Middle East not just in US/EU.

Global Policy Snapshot

1. United States

• A House tax bill proposes a 10-year federal preemption on state AI laws, aiming to centralize AI governance.

• The Senate’s Health Tech Investment Act would enable Medicare to reimburse AI-powered medical devices through new payment codes.

• The White House issued guidance for federal agencies to speed up AI adoption and purchasing across programs.

2. European Union

• The EU AI Act classifies most medical AI as “high-risk,” setting strict compliance deadlines for 2027.

• New oversight bodies are being prepared to enforce AI device assessments by August 2025.

• Industry leaders warn that overlapping rules may delay product launches and raise costs, especially for startups.

3. United Kingdom

• The UK is adapting existing health regulations for AI instead of enacting broad new AI laws.

• MHRA’s “AI Airlock” sandbox and NICE guidelines target evidence standards and approval processes for AI in health.

• Commentators question if this lighter-touch, adaptive approach can keep pace with more rigorous EU regulations.

4. Asia-Pacific (Japan)

• Japan passed the Act on AI R&D and Utilization, promoting healthcare AI under voluntary guidelines focused on innovation and ethics.

• Other major APAC economies reported no new binding healthcare AI regulations in May, with regional attention on Japan’s model.

5. Canada

• Canada’s draft AI law would require risk classification, bias audits, and pre-approval for high-risk health AI, aligning with Europe’s direction.

• New rules would mandate technical documentation, real-world testing, and patient notification when AI is used in clinical care.

• A public registry for approved high-risk AI systems is proposed, but industry warns of possible impacts on innovation.

Final Thoughts

Looks like I was completely wrong about investors taking a bit of a break. Capital seriously picked back up from April’s low. But it’s not just the funding that bounced back. What we’re also starting to see is the general acknowledgement and government activity on an international level.

We are definitely seeing more activity outside the US. The question is, with all that’s going on with the US administration now, will it be left behind as other countries take a much more aggressive approach to AI adoption with the support of their respective governments? We’ll have to wait and see here.

Hope you enjoyed this month’s brief, as always, any feedback will only help me build the content you want to read!

See you back next month.