This piece’s author, Yusuf Sherwani, is the CEO and co-founder of Pelago

If the United States’ healthcare sector were its own country, it would be the third-largest economy in the world. By any rule of capitalism, a market that size should have minted a titan. Software gave us multiple trillion-dollar platforms. Retail, search, advertising, and even payments each produced a generational tech giant. And yet healthcare has not produced a single $100 billion healthtech company. 

Why? The short answer is that technology, for the most part, hasn’t actually created value in healthcare. It shuffled it, bureaucratized it, and in many cases destroyed it. The longer answer is that might all be changing now.

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The money is chasing the wrong layer

In 2025, US digital health startups raised $14.2 billion, up 35% on the year, a roaring rebound that should, in theory, be hunting the biggest prize in the room. But follow the marquee checks, and you find them clustered around the administrative layer of medicine. AI scribes that transcribe the visit, payer, and provider-ops tools waging agent-on-agent warfare, and workflow automation that shuffles tasks between humans a little faster than before. These are real businesses, and some of them are good businesses. But all of them orbit the edges of care rather than advancing care itself.

Meanwhile, AI built to actually diagnose, treat, and manage patients isn't highly valued. This is the strange part, because roughly half of that $5 trillion of annual US healthcare spend is clinical labor; doctors, nurses, therapists, and the hours they spend with patients. That time is the single most expensive and most rationed resource in the entire system.