SPACs & Healthcare AI: A Costly Shortcut to Market?

How a healthcare AI company goes public is a strategic bet that dictates its path to actual market adoption and paid clinical use. In the fast-moving digital health world, the listing mechanism you choose can determine how quickly a new technology goes from a concept to a tool doctors use every day, especially when you have to wrestle with regulatory approvals and reimbursement. We’ll look at how different public listing routes have affected the real-world adoption of healthcare AI devices and platforms by examining a few key examples.

The SPAC Route and Its Aftermath: Butterfly Network’s Experience

Butterfly Network’s SPAC merger in February 2021 is a perfect example of that moment’s go-public frenzy. The company had already pulled in over $530 million pre-IPO from big names like Khosla Ventures, and a SPAC looked like a shortcut to the public markets, fast cash with fewer regulatory hurdles. The plan was to use that capital to accelerate development and market expansion for its portable ultrasound device, which uses AI to help with image capture and analysis. The digital health market, however, has since had a major reality check, and investors now look at these promotion-heavy listings very differently. While Butterfly’s tech generated plenty of buzz, its own projections tell the story: forecasted FY2026 revenue of $119 million to $123 million, which is only 22-26% year-over-year growth. That figure shows just how hard it is to convert exciting technology and initial market enthusiasm into consistent, high-volume sales inside the healthcare machine. The SPAC route provided quick liquidity, but it didn’t solve the slow, grinding work of healthcare adoption.

Contrasting Pathways: HeartFlow’s Traditional Listing Route

To really get the picture, contrast Butterfly’s experience with a company that took the old-fashioned road. HeartFlow, which has an AI platform for diagnosing coronary artery disease, completed a traditional initial public offering (IPO) on August 8, 2025, raising roughly $364.2 million on the Nasdaq under the ticker HTFL. What’s telling is that they had already walked away from a planned SPAC deal in mid-2021. The traditional IPO is a much longer and more grueling process, involving extensive roadshows and intense due diligence from institutional investors who will scrutinize every detail of your financials, market strategy, and commercial plan. It’s slower, sure, but that process can build a much more solid base of investor confidence that’s founded on proven traction and a clear shot at profitability. For healthcare AI companies, especially those with SaMD solutions requiring years of clinical validation and a complex reimbursement strategy, the discipline of a traditional IPO forces a company to mature its business plan before facing public scrutiny. These are two very different philosophies for achieving market penetration in AI-driven imaging.

Market Penetration in Imaging: Distribution and the Underlying Model

In AI imaging, success depends far more on effective distribution than on the technical elegance of the AI model itself. You can have the best algorithm in the world, but if you don’t have a clear plan for getting it to clinicians and plugging it into their daily workflow, you will not generate significant billed volume. The type of listing you choose, SPAC vs. traditional IPO, has a huge impact on how quickly your product gets into doctors’ hands by dictating the resources you have for sales, marketing, and partnerships. For a device company like Butterfly, this means building out strong distribution networks, which often means cutting deals with established medical device companies or hiring a direct sales force. For a platform company like HeartFlow, it means getting their software properly integrated with hospital electronic health records (EHRs) and clinical imaging systems, all while maintaining tough data security protocols like HIPAA compliance and SOC 2 Type II certification. The initial capital and investor perception you gain from a listing can either fuel or choke these distribution efforts.

The Critical Role of the CMS Coverage Decision

No matter how you go public, the one signal that truly matters for any healthcare AI business is a coverage decision from the Centers for Medicare & Medicaid Services (CMS). For any medical tech, particularly one using AI, getting reimbursement is what separates a real business from a science project. Without a clear path to getting paid, even the most amazing solutions will fail commercially. For Butterfly Network, getting broad payer coverage for its AI-assisted ultrasound would be the thing that scales its revenue beyond just early adopters. HeartFlow’s success, likewise, is tied directly to its ability to secure CPT codes and prove the clinical utility needed to justify reimbursement for its CT-FFR analysis. Why? The CMS coverage decision is what turns interest into actual billed volume because it gives providers a financial reason to buy and use the technology. CMS National Coverage Determinations database This coverage is the trigger for growth, as hospitals are rightly skeptical of investing in anything that lacks a clear payment pathway. The two listing routes put companies in front of this reimbursement hurdle from very different starting blocks. A company that went public via SPAC might have a ton of cash to fund the clinical trials needed to get a coverage decision, but it’s also under tremendous pressure from public investors to show sales growth now, often before reimbursement is fully secured. On the other hand, a company that survived the tougher diligence of a traditional IPO likely already built a stronger case with clinical evidence and a clearer reimbursement strategy just to get the deal done, which can make the path to widespread coverage much smoother. SEC EDGAR filings for public digital health companies

Conclusion

The experience of companies like Butterfly Network shows that while a SPAC merger offers a fast lane to the public markets and a quick injection of capital, it doesn’t guarantee you’ll win over the complex healthcare field. The digital health market has grown up, and investors now demand to see a direct line from a public listing to real, sustained revenue, a line that must be supported by strong clinical evidence and established reimbursement. Comparing this to companies that took the traditional IPO route shows that the discipline and scrutiny of that process can build a more resilient company for the long haul. For healthcare AI device and platform companies, the choice of how to go public is a strategic decision that has massive implications for how quickly their products actually get used in a clinical setting and, in the end, improve patient care. FDA 510(k) database for medical devices