Health systems will continue to roll out artificial intelligence products in 2026, buoyed by hopes the technology will automate tasks and lower expenses — a significant concern as financial pressures loom, experts say.
Over the past two years, providers have largely focused on implementing AI tools for administrative and back-office work, like ambient scribes for documentation and products to speed revenue cycle management and prior authorization.
Health systems will likely stay on that path this year, motivated in part by financial risks coming down the pike from significant cuts to Medicaid, experts say.
Meanwhile, health AI companies could receive an even larger share of digital health funding in 2026, as investors pour money into in-demand startups. Some of these firms could explore mergers and acquisitions, aiming to add new AI capabilities and provide a more complete offering to buyers, experts say.
Increasing AI use and investment comes amid a fragmented regulatory regime, creating a complex environment for health systems looking to deploy AI tools this year. The Trump administration has pursued a deregulatory posture toward AI in general.
“It’s a perfect storm because there’s an economic necessity by the healthcare industry to go in a big way to artificial intelligence,” said Sharon Klein, partner and co-chair of privacy, security and data protection at law firm Blank Rome. “There’s no real guidelines about that from the regulators. In fact, it’s the opposite.”
States take the lead on regulation
Healthcare organizations may have to keep waiting for clear federal guidelines around AI this year, while states are increasingly taking the wheel and creating a patchwork of laws that can be challenging for healthcare organizations to follow, experts say.
“We’re still waiting for action from the federal government to define the limits to which AI can be utilized in healthcare,” said Dan Silverboard, partner at law firm Holland & Knight. “In the interim, the states really have been taking the lead in making these decisions.”
In 2025, the Trump administration signaled it would reduce oversight of AI in an aim to spur implementation of the technology. An action plan released last summer said the government would remove “onerous” regulations that could slow down AI development and deployment.
So far, the Trump administration has made good on that promise. In December, President Donald Trump signed an executive order that could challenge some state AI laws and called for a national framework that would preempt state regulations. In the healthcare sector, the Assistant Secretary for Technology Policy/Office of the National Coordinator for Health Information Technology proposed a rule last month that would remove AI “model card” certification requirements.
In the absence of federal AI laws, states have attempted to pass laws regulating the technology — and they could continue to propose legislation this year, experts say.
During last year’s legislative session, all 50 states, as well as Puerto Rico, the Virgin Islands and Washington, D.C., introduced AI legislation, according to the National Conference of State Legislatures. Nearly 40 states adopted or enacted around 100 measures.
Many AI laws aren’t specific to the healthcare sector, though some states have put legislation in place that requires providers to disclose AI use to patients or restricts insurers’ use of AI in utilization management decisions, according to a tracker by law firm Ropes & Gray.
The different AI laws across states can add complexity for healthcare organizations, Klein said. Some states have adopted more general AI regulation — like Colorado’s AI Act — while other legislation focuses on specific sectors or uses, such as laws on education or children.
“It’s very twisted for organizations to understand all of their requirements,” Klein said. “It took us years to understand how the patchwork of state privacy laws for [personally identifiable information and protected health information] worked with the federal laws and regulations and how they could all live together. And now that’s accelerated in artificial intelligence.”
Trump’s move to override state laws also creates new uncertainty and confusion for companies, and his executive order might not hold up in court.
Some states are moving ahead with their plans for AI legislation anyway: New York Gov. Kathy Hochul signed an AI bill into law shortly after the executive order was released last month, while a Republican lawmaker in Florida introduced AI legislation at the end of December.
Rising M&A opportunities
AI companies could start to combine in 2026 in a bid to offer a more comprehensive product to healthcare organizations, experts say.
Right now, many health systems are willing to experiment with AI tools and narrow use cases, said Tom Kiesau, managing partner and chief AI and digital officer at consultancy Chartis.
But over the next few years, more organizations could be interested in larger AI platforms, he said. Concerns among health systems and other technology buyers about managing a host of point solutions aren’t new, given the challenges linked to overseeing relationships with multiple vendors.
“People say, ‘We’ve got a lot of vendors, lots of point solutions. There’s a lot of cost. Who can consolidate? We may be able to reapply some savings here,’” Kiesau said.
AI vendors could see benefits from merging. For example, there are a number of companies offering AI documentation products, or scribes that typically record doctors’ conversations with patients and draft clinical notes.
“There are over 100 funded AI scribe companies that all basically have the same product, all going after the same market,” said Dr. Sunny Kumar, partner at venture capital firm Informed Ventures. “Realistically, you’re probably not going to have 100-plus […] being out there as successful companies two, three, five, 10 years from now.”
Smaller competitors that haven’t grabbed as much market share may have valuable technology that could make them ripe for acquisition, said Brian Wright, lead research analyst for healthcare at PitchBook.
Private equity firms could be one buyer interested in acquiring AI firms and rolling them up into a platform offering, said Beth Mosier, a director on consultancy West Monroe’s healthcare M&A team.
“It’s a very predictable, scalable investment that they can see a return on investment without taking a huge risk,” Mosier said.
AI startups face competition from EHRs
Electronic health record vendors — including major players like Epic and Oracle Health — have increasingly looked to integrate AI into their offerings. The integration of the technology among large, entrenched healthcare companies could be a competitive threat to startups this year, experts say.
EHR vendors have a few advantages over AI startups, including familiarity in the market. EHRs are already critical to care delivery, so using AI tools alongside the records is likely an attractive option for providers.
“It’s kind of the path of least resistance, and that will be at least a starting point as to where health systems will go,” Holland & Knight’s Silverboard said.
Although AI tools offered by EHR firms could be enticing, that doesn’t necessarily spell doom for smaller vendors in 2026, experts say. Even large EHR vendors can only focus on so many different products, Kumar said. An EHR firm might want to offer a scribe, revenue cycle management tools and scheduling, but they might only be able to invest in a handful of products.
Smaller AI startups also might be more willing to work with healthcare organizations to tailor their offerings toward their specific needs, said Peter Jackson, counsel at law firm Greenberg Glusker.
“New entrants are more willing to do customizations, work more directly with clients,” he said. “The legacy providers don’t do that. They provide a one-size-fits-all solution for everybody, for the most part.”
Funding for AI startups could rise again
AI startups received a significant share of overall digital health funding last year, and the technology could make up an even larger portion of investment in 2026, experts say.
Last year, 54% of investment in the sector went to AI-enabled companies, according to venture capital firm and consultancy Rock Health. That’s an increase from 2024, when AI startups scooped up 37% of overall digital health funding.
In 2026, the sector will likely see money invested in a smaller number of scaled platforms, similar to last year, said Megan Zweig, president and CEO of Rock Health Advisory.
“We saw those companies that were able to start getting from pilot into that scaled mode, and showed that they could secure user trust, that they could kind of overcome some of the challenges of the implementation science of it all — they were raising very, very large rounds,” she said.
More funding could flow toward companies offering tools that automate work surrounding clinical care, like scheduling appointments and billing, Informed Ventures’ Kumar said.
“You can drive the efficiency of a clinician up by 3x, 4x so that you don’t need as many support staff per clinician,” he said. “That can significantly reduce the overall healthcare costs.”
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