The health tech sector remains a dynamic space, but a shifting economic landscape is forcing startups to reassess strategies for growth and sustainability. Investors are increasingly focused on demonstrable value, efficient operations, and realistic pathways to profitability. Recent discussions at the ViVE conference in Los Angeles highlighted key trends that health tech startups can’t afford to ignore, according to Vig Chandramouli, a partner at Oak HC/FT.
Chandramouli’s insights, shared during an interview on Tuesday, February 24, 2026, center around four critical areas: optimizing labor management, scrutinizing margins beyond compute costs, structuring contracts carefully to avoid pitfalls, and navigating the pervasive influence of Epic Systems. These aren’t merely tactical adjustments; they represent a fundamental recalibration of expectations in a market demanding both innovation and fiscal responsibility. The pressure to demonstrate return on investment is intensifying, and startups that fail to adapt risk being left behind.
The healthcare industry is facing significant workforce challenges, and the financial implications are substantial. According to a 2023 report by McKinsey, the U.S. Healthcare industry faces a potential shortage of up to 3 million workers by 2032. McKinsey & Company notes that burnout, early retirement, and career changes are contributing factors. This labor crunch is driving up costs and impacting patient care, making efficient workforce management a top priority for healthcare organizations and, for the startups serving them.
Addressing the Underinvestment in Nursing and Allied Health Staff
For years, health tech innovation has largely focused on solutions for physicians, often overlooking the significant portion of the healthcare workforce comprised of nurses and allied health professionals. Chandramouli points out that approximately 70% of the healthcare system’s labor force consists of these critical roles. This disparity represents a major underinvestment opportunity. Burnout rates are high among nurses, and challenges related to staffing flow, scheduling, and unit coverage remain largely unaddressed. Historically, these employees haven’t been direct revenue generators – unlike physicians who are reimbursed for services rendered – leading to a lack of focus on solutions to improve their working conditions.
However, Chandramouli believes this is poised to change. “But I think this year, with all the margin pressure, that feels like a ripe area for focus,” he stated. The increasing financial strain on healthcare systems is forcing organizations to look for efficiencies across the board, including optimizing the performance and well-being of their largest employee segment. Startups that can offer solutions to address these challenges – such as AI-powered scheduling tools, burnout prevention programs, or streamlined communication platforms – are likely to attract significant investment and market traction.
Margins Under Scrutiny: People, Not Compute, Drive Costs
The hype surrounding artificial intelligence (AI) has led to a certain leniency in evaluating the margins of AI-focused startups. However, Chandramouli emphasizes that investors are now paying much closer attention to margin durability. While compute costs are often cited as a major concern, he argues that the real cost drivers are often related to personnel. “We’re certainly scrutinizing it a bit more to understand what’s driving that margin deterioration — and it’s actually not really compute cost, like you would think,” he explained.
The biggest expenses frequently turn out to be related to customer success, onboarding labor, and the deployment of forward-deployed engineers. These costs can be substantial, and it’s crucial to determine whether they are temporary – associated with initial implementation – or structural – indicative of ongoing operational expenses. Startups need to demonstrate a clear path to profitability, and that requires a realistic assessment of all cost components, not just the highly publicized compute costs. The ability to scale efficiently, without incurring unsustainable personnel expenses, will be a key differentiator for successful health tech companies.
The Risks of Underpricing and Poor Contract Structure
Some startups are experimenting with alternative pricing models, moving away from traditional Software-as-a-Service (SaaS) subscriptions towards transaction-based or success-based pricing. While these models can be attractive to customers, Chandramouli cautions that they can as well backfire if not carefully designed. The key lies in understanding the unit economics and avoiding scenarios where costs outweigh revenue. “If they price, for example, on a success basis, and they’re doing 10 actions and one of them is successful, that’s where you get screwed in the unit economics,” he warned.
A success-based model can be profitable if only a small percentage of actions require significant effort, but if the success rate is low, the costs associated with the unsuccessful attempts can quickly erode margins. Poorly defined contracts, particularly those with ambiguous ROI metrics, variable payments, or unrealistic volume assumptions, can swiftly destroy a startup’s financial viability, especially when dealing with large, high-profile contracts. Careful contract negotiation and a thorough understanding of unit economics are essential for sustainable growth.
Epic’s Influence and the Shortening of Commitment Cycles
Epic Systems, a dominant player in the electronic health record (EHR) market, exerts significant influence over the entire health tech landscape. Chandramouli notes that Epic’s potential product roadmap is a major consideration for any health tech startup. “The first question is, is Epic releasing something in 12 months? And if it’s not, then the customer is willing to try, but customers are not willing to sign long-term deals with anybody,” he stated.
Healthcare providers are hesitant to commit to long-term partnerships with startups if there’s a risk that Epic will release a competing solution in the near future. This dynamic has led to shorter commitment cycles, typically one to two years, making it more challenging for startups to recoup their investment and achieve sustainable growth. Startups must demonstrate rapid value and establish a strong competitive advantage to justify continued investment from their clients. Epic’s market dominance necessitates a strategic approach to product development and customer engagement.
Epic Systems reported a revenue of $3.88 billion in 2023, according to a press release issued on February 29, 2024. Epic continues to invest heavily in research and development, further solidifying its position as a key player in the healthcare technology market.
Key Takeaways
- Focus on the Entire Workforce: Expand solutions beyond physicians to address the needs of nurses and allied health professionals, who comprise 70% of the healthcare labor force.
- Prioritize People Over Compute: Recognize that personnel costs – customer success, onboarding, and engineering – are often the biggest drivers of margin deterioration, not compute costs.
- Structure Contracts Carefully: Avoid pitfalls associated with transaction-based or success-based pricing by ensuring clear ROI metrics and realistic volume assumptions.
- Navigate Epic’s Influence: Be aware of Epic’s product roadmap and prepare for shorter commitment cycles, emphasizing rapid value delivery and competitive differentiation.
The health tech landscape is evolving rapidly, and startups that can adapt to these changing dynamics will be best positioned for success. The insights shared by Vig Chandramouli at ViVE 2026 provide a valuable roadmap for navigating the challenges and capitalizing on the opportunities that lie ahead. The next key event to watch will be the HIMSS Global Health Conference & Exhibition, scheduled for April 2026 in New Orleans, where further trends and investment strategies are likely to be unveiled.
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