Healthcare startups are rushing to sell AI to hospital systems. But a new survey suggests many simply aren't ready for it.

• Investors and startups are eager to incorporate AI into the healthcare industry.
• But even as AI innovation in healthcare booms, the space is sorely lacking in regulation.
• A new survey found the majority of health systems have no policies in place to govern AI use.

As healthcare startups dive headfirst into building artificial intelligence products to sell to hospitals, a new report suggests many health systems don't yet have policies to support the tech.

In a survey of 34 US health systems leaders, only 16% reported having systemwide policies for AI usage and data access. And while some leaders noted having broader guidelines in place that could also apply to AI, the majority — 65% — said they had no policies for AI at all.

The survey, conducted by the Center for Connected Medicine at UPMC and KLAS Research in October and November with health systems of varying sizes, is a nod to the roadblocks healthcare is running up against as more companies build and sell AI-powered software.

Healthcare has historically lagged behind other fields in adopting new technologies, though events like the COVID-19 pandemic have occasionally forced the industry's hand. However, investors and doctors alike are getting excited about AI's potential to make healthcare delivery more efficient, reduce burnout among medical professionals, and improve patient outcomes.

Still, many healthcare leaders aren't jumping on the AI bandwagon just yet. Some health system leaders said they haven't developed policies because the industry is in the early stages of AI adoption. Others said they're waiting for federal regulations on AI before issuing their own guidelines.

While the Food and Drug Administration has developed AI guidelines for medical device makers, the agency hasn't provided a broader framework for AI adoption or evaluation in healthcare. It isn't likely to offer one any time soon. FDA commissioner Robert Califf said in January that the agency doesn't have the resources to monitor the ever-changing technologies.

The road ahead for healthcare AI startups

Even as the public sector struggles to figure out how to regulate AI in healthcare, many startups hope to harness the tech to solve some of the industry's biggest problems. Venture investors are also bullish about the market.

Amid a labor crisis and rising levels of burnout that are driving some providers out of healthcare, many hospitals are feeling pressure on their profit margins. Medical-scribe startups — which typically use AI to record patient-doctor conversations and make notes in the patient's electronic medical record — have received lots of attention from investors and health systems alike. They offer the potential to expedite administrative tasks and reduce burnout.

Abridge, which sells AI-powered software to ease clinical documentation and has been working with the University of Pittsburgh Medical Center and the University of Kansas Health, is in talks to raise at least $50 million in venture funding, Business Insider reported in February. That startup is competing with medical-scribe startups like Ambience Healthcare and Nabla — which have already grabbed cash this year — to steal market share from Microsoft's Nuance.

Nuance, for its part, is the dominant player in the space, claiming to provide its AI-powered software to 77% of US hospitals.

Many health system leaders surveyed by KLAS expressed excitement about AI software for clinical documentation. A major limiting factor could be the depth of startups' integrations with electronic health records systems. With its long-standing collaboration with Epic, Microsoft has an edge in this area. Seventy percent of health system leaders surveyed by KLAS said their organizations planned to adopt AI software integrated with their EHRs.

Industry watchers say we're heading into a critical phase for AI in healthcare, in which we'll find out which startups rise and fall. "Every big health system is piloting one or two of these, so the next 18 months or so will be a sorting out of these players," said Bryan Roberts, a partner at the VC firm Venrock.