Israel’s biomedical industry is undergoing among its most difficult periods, but two sub-sectors are still managing to keep their heads above water. One is the classic medical device sector, which has even experienced some nice exits in the past two years. The other is software for streamlining the US healthcare system.
The US healthcare system is one of the most complex and most maligned in the world, but also the most attractive, by a long shot, in terms of the amount of money it turns over. Israeli companies entered this arena as big data pioneers, and encountered a fragmented system, with many of players: employers who are insurers, intermediaries between employers and insurers, clinics of insurance companies, and others with conflicting interests. The true interests are not always clear. But Israeli chutzpah paid off, tangles were untangled, and today a long list of companies are winners in their category in the US healthcare system.
A system hungry for technology
Demetrios Kouzoukas, previously the head of Medicare, the US government health insurance scheme for those aged 65 and over, is now a partner in VC fund Team8 Health, which invests in digital health companies with an Israeli connection. "When the information revolution happened, we resisted it, hung on to paper and ownership of data. Then, because of the load from Covid 19, and the leap in innovative solutions we had to adopt for telemedicine, we saw it was good, and we developed an appetite," he says. "Today, the system is ravenous for technology in areas like streamlining administration, integrating patient data, smart management of appointment scheduling, collecting payments, and anything else that saves money and increases convenience in patient care."
Initially, Israeli digital health companies were firing in all directions. At the beginning of the previous decade, they offered products to patients and doctors, but had difficulty in demonstrating to hospital administrators or insurance companies how they could save them money.
Dr. Varda Shalev, also of Team8, presents the example of K-Health, a company co-founded in her previous role as head of KSM, the Research and Innovation Center of Maccabi Health Services. Today, K-Health is considered one of the successes of the sector, and about a year ago raised $50 million at a $900 million valuation. "Initially, they developed a tool for automatic initial screening of patients at the family doctor," she says. "After the company found it difficult to get the tool adopted, it decided to establish a kind of health insurance fund for family medicine, based on the Israeli model. This model has been integrated into the health services offered by large hospitals."
"To start a company, you must understand exactly where the money flows," emphasizes Allon Bloch, CEO of K-Health. "The American healthcare system is super-complicated to understand. The only way to crack the value model in this area is to be obsessed with the topic. You have to understand that you face people who are extremely conservative and aren’t looking for a revolution, but rather for incremental solutions, and that you are about to have a conversation with them that is not always pleasant; about mistakes that doctors make, about technology that may perhaps partly replace them. In this respect, there is a great advantage to having an outside perspective from someone who is not a frog stewing in the status quo pot."
TailorMed is another pioneer, founded in 2016 to help patients find funding sources to pay their share for their medical care. The company identified an increase in the out-of-pocket payments required from patients, and an interest in helping them find financing on the part of pharmaceutical companies and hospitals. If patients forego treatment, the companies and hospitals cannot collect their share from the insurance companies. Another company called Payzen, which made the "Globes" list of most-promising startups this year, addresses this with smart payment solutions.
New players in the picture
"Israelis have certainly succeeded in establishing leading companies in handling the financial side of the healthcare system," says Israel "Srulik" Dvorsky, CEO and co-founder of TailorMed. "There’s a lot of room for improvement in this area, it has a clear economic value, and mistakes are not fatal. The system is therefore less conservative about it." However, Dvorsky warns that it is not foolproof. "Our DNA allows us to innovate very quickly and we also work very hard; the American team is fascinated by this. But sometimes, Israelis are so innovative that they are liable to be perceived as failing to understanding the system’s challenges. Israeli chutzpah, in this case, may be a bit too much chutzpah."
Dvorsky also believes that it will be very challenging to maintain the Israeli advantage. "US companies have targeted the field, raised a great deal of money, and a process of consolidation is beginning," he says.
At the same time, economic instability in the US market, cuts to science budgets, and the tariffs policy have made hospital profit margins all but disappear. "This comes up in discussions with hospitals. I fear that many companies will get stuck, because the hospitals will not be able to pay for their technologies, no matter how good they are," says Dvorsky. "The advantage, of course, is that if you have demonstrated that you do provide the hospital with significant savings, then they not only want you now, they need you."
Or Peles, CEO of Nym, developer of an automated system to help hospitals write payment claims to insurance companies, agrees that, in the US healthcare system, cash is king. "My Israeli customer doesn't expect to see exactly where the return is on every shekel invested; the American does," he says. He also has a tip: "You have to recruit people from within the American system. The combination of an outsider and an insider works very well."
"To restore justice to the market"
Bluespine, founded just in 2023 and already with dozens of customers, came to market equipped with insights from its predecessors. The company identified a very specific breach in US healthcare system finances: health insurance fraud. Says CEO David Talinovsky, "This phenomenon is estimated at 10% of the healthcare market, which is estimated at $4 trillion. The phenomenon includes deliberate fraud in insurance reports, performing unnecessary tests and procedures, or taking advantage of coverage for tests or medical procedures that the insurance was not actually intended to cover."
Customers relevant to the company are employers who insure their employees. The system contains each employee's policies, the actual billing, plus other information that only recently became public: prices. "People go in for medical treatment and have no idea how much it will cost, and suddenly they owe $100,000. We know how to tell the employer how much the specific treatment was supposed to cost for a particular employee, and how that number looks compared with the invoice that came in. We have people who used to work for insurance companies who know how they screw people over. They want to restore justice to this market."
Dr. Varda Shalev believes these disparities will not last forever. "Consumers will eventually expect a similar level of service to what they receive everywhere else: simple price comparison, and information about what they’re receiving. The change will come, not from the companies or the government, but only from the patients."
Are these Israeli innovations also relevant to the Israeli system? Unlike Dvorsky, who recommends skipping the local market altogether because it is so different, and could be confusing to companies, Bloch thinks there is definitely something to be done here. "We're putting this to one side for now, but ultimately, most heart attacks in Israel should not have happened."
Published by Globes, Israel business news – en.globes.co.il – on May 13, 2025.
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