Part 1 of Pen & Paper to Processors: nvp capital’s Series on Vertical AI
In our recent post on Investing in Vertical AI, we outlined nvp capital’s framework for evaluating AI companies targeting pen and paper industries. But vertical AI is nothing without verticals, so we’re diving into different sectors to share a bit about how we are thinking about them and what we are excited about.
First up…healthcare! An industry where systemic challenges and vast data reservoirs are converging to create an unprecedented environment for innovation.
At nvp capital, we have been passionate about healthcare for a while now. We’ve been investing in alternative care models such as Vitable and Handspring, companies modernizing healthcare payments from claims acceleration to revenue intelligence like Arrow, and net new child disability insurance at Juno. We believe that there is a perfect storm of market headwinds and technology tailwinds that make this an excellent time to build in healthcare.
Why Healthcare, and Why Now?
Skyrocketing Costs & Operational Chaos
We’re all too aware of the pressures facing healthcare today. Rising service prices, propelled by technological advances, an aging population (with over 54 million Americans over 65), and the fact that nearly 60% of adults live with at least one chronic condition, have driven demand for more complex and expensive care.
The operational side of managing healthcare is messy: the U.S. healthcare system allocates roughly 25% of every healthcare dollar to administrative costs due to the complex billing, insurance negotiations, and regulatory requirements involved.
Staffing Squeeze Spurs Innovation
The U.S. healthcare system is grappling with a critical workforce shortage, as high rates of burnout, early retirements, and increasing patient demand have left many hospitals and clinics understaffed. This shortage results in longer wait times and additional pressure on remaining clinicians, which can further exacerbate burnout and potentially compromise the quality of patient care. Roughly one‐third of physicians have seriously considered leaving clinical practice due to factors like burnout and administrative burdens.
Data Powerhouse: Driving Transformation
Healthcare is overflowing with structured unstructured multimodal data (~30% of all digital data in the US comes from healthcare):
- Expanded EHR Data: Captures clinical records—patient histories, diagnoses, treatments, lab results, imaging, and genomic data—for a comprehensive health view.
- Insurance Claims Data: Documents billing and administrative details to reveal healthcare utilization, cost patterns, and reimbursement information.
- Operational Data: Monitors real-time non-clinical metrics like hospital occupancy, patient flow, environmental readings, equipment usage, and supply chain tracking.
These data sets offer a vast resource pool to use to transform the healthcare value chain. The 21st Century Cures Act requires EHR systems to offer standardized, open APIs for interoperable data exchange, while ensuring robust security through authentication, patient consent, and role-based permissions. This regulatory push, combined with existing frameworks like HIPAA and CMS rules, is creating a tailwind for innovation by making vast healthcare data both accessible and securely managed.
What We Look for in Healthcare AI Investments
Delivering measurable ROI
We’re focused on solutions that deliver tangible cost savings or revenue generation quickly—showing clear results in a short pilot period. Achieving early impact with a measurable ROI is essential in navigating tough sales cycles and the tight margins many health systems face. In our view, tools that integrate directly into major hospital budget lines, such as labor, and help reduce costs are far more compelling than entirely new offerings that promise ‘long term’ outcomes.
Defensibility Through Proprietary Data and Integration
Companies in the space can secure a competitive edge through gaining access to and making sense of niche, high-quality datasets and robust integrations. Successful companies in the space can navigate complex regulatory landscapes and stringent security requirements, clean and provide insights from multiple different types of data from disparate sources, and build integrations that create high barriers to entry for competitors.
Deeply Understanding Use Cases: building trust and scaling seamlessly
Successful healthcare companies meet the core needs of clinicians and healthcare administrative workers and integrate seamlessly into existing clinical and non-clinical workflows. They are able to build trust by building in human-in-the loop touchpoints and non-LLM confirmatory technologies that help prevent hallucinations and ensure their outputs are reliable. Additionally, they develop solutions that find common elements that work across different organizations and settings so that the product can scale at large.
Companies that start by solving sticky, hair on fire problems and build trust start to see a pull from customers to expand and take over more of the end to end work flow, setting themselves apart from the multitude of point solutions.
Areas of Opportunity
Making Clinicians’ Lives Easier in administering care
One of the most compelling opportunities lies in leveraging AI to relieve clinicians from the burden of redundant work. Products that make clinicians the super hero, from automating routine administrative tasks to aggregating data from multiple sources to holistically understand their patients, empower clinicians and focus on what matters most and what they do best—delivering high-quality patient care.
Empowering Clinicians as Business Owners
We see opportunities for companies that give healthcare professionals more control, education, and flexibility to work on their own terms—whether launching new practices, expanding existing ones, or accessing new types of jobs.
Provider Operations: Front & Back Office
This has been a space that there has been a fair amount of activity, but we still see opportunity for companies to unlock the difficulties of front office operations in niche verticals as well as untangle the complexities of billing and coding all the way to adhering to rapidly changing regulation around compliance and adherence to payer requirements.
Movement of Money
With trends moving towards the consumerization of healthcare, we’re increasingly focused on how patients are spending money. There are significant opportunities not only in HSAs and pre-tax payment options but also in addressing issues such as patient claim denials, and enhancing bill transparency and education—creating more efficient and empowering financial tools for providers, employers, and patients alike.
In conclusion, healthcare stands at the intersection of unprecedented challenges and equally unprecedented opportunities. As rising costs, operational complexities, and staffing shortages continue to strain the system, innovative AI-driven solutions offer a pathway to transformation—streamlining administrative processes, empowering clinicians, and ultimately, enhancing patient care.
At nvp capital, our commitment to investing in breakthrough technologies reflects our belief that solving today’s “hair on fire” problems paves the way for a smarter, more resilient healthcare ecosystem.
Stay tuned for our next installment in Pen & Paper to Processors, our Vertical AI Deep Dive Series as we explore additional sectors where technology is redefining industries, one breakthrough at a time.
