Across the past few months, we’ve been seeing a number of news articles make a consistent claim: that health system venture capital arms have been quietly closing up shop amidst the recent financial environment. A recent STAT piece, for instance, interviewed over a dozen former health system venture leaders and experts and noted that, “systems [are] either dissolving those offices, putting a halt on new investments, or turning to private equity instead.”

These pieces have painted these shifts as quiet and largely passive due to a shift in priorities or executive turnover. As Tom Cassels, the CEO of Rock Health’s Advisory group told STAT, “Pulling back is a silent trend. It’s simply the lack of action rather than an announcement that they’re pulling back.”

We were curious if this was true.

Certainly, we’ve heard fewer conversations amongst LHS leaders about venture investments in recent months, especially given the dozens of other pressing topics on the minds of the C-suite at THMA forums. But what does the data say? And how much is any slowdown indicative of the broader economy as opposed to an actual trend?

In this Key Market Dive, we’ll be looking at the extent of that slowdown, what’s driving it, and how LHS strategists should respond moving forward. Ultimately, we’ve found that there has indeed been a slowdown in LHS venture activity across 2023, with fewer and smaller deals compared to 2022 and especially to the recent high-water mark of 2021. With that being said, this slowdown was actually less than the market as a whole. Further, there were still dozens of major deals pursued this year, and we think venture arms are potentially poised for a comeback as market conditions normalize and new innovations like generative AI spur a new wave of investments.