Opinion
Why Israeli life-saving health tech stumbles in the U.S.
As health systems face mounting operational pressures, Israeli innovators must prove not only that their products work, but that they fit seamlessly into clinical and organizational workflows.
Israeli health innovators have learned the U.S. reimbursement challenge. Now they must solve the institutional friction that determines whether health systems adopt what works.
For years, when I met with Israeli health innovators thinking about the American market, the first question was almost always funding. Could the company raise enough capital to cross the ocean, open doors and stay in the market long enough to matter? That question was never missing.
What was often missing, especially a decade ago, was a full appreciation of the complex United States reimbursement system. Many innovators understood that someone had to pay. Far fewer understood the maze of public and private payers, coding, coverage decisions, evidence demands and contracting. Clinical value mattered. It was not enough. Commercial adoption had its own rules.
That has changed. Israeli founders are sharper today. They ask better questions about FDA pathways, CPT codes, CMS policy, payer evidence, hospital economics and value-based care. They understand that “FDA approved” does not offer am express path to sales and that “effective” does not mean coverage. This is real progress and it should be recognized.
The progress is backed by serious capital. Startup Nation Central reports that health tech is Israel’s largest tech sector, with more than 1,600 companies. Its 2024 health tech landscape reported about $1.2 billion in private funding, led by digital health, medical devices and pharma-biotech. The IATI, Israel Innovation Authority, and PwC Life Sciences report also pointed to renewed life sciences investment in 2024, including four U.S. IPOs after none in 2023. Israeli health innovation is not small, local or experimental. It is built for markets beyond Israel.
For many companies, that market is the U.S. There is no respected public dataset that tells us exactly how many Israeli health companies are actively targeting U.S. customers at any given moment. The number changes as companies raise capital, pivot, partner, fail, merge or prepare for acquisition. Yet the direction is unmistakable. The U.S. is where many Israeli health innovators look for customers, strategic validation, later-stage capital, public-market visibility and the exit that investors expect.
Acquisition is part of that story. In health innovation, especially in medtech, diagnostics and digital health, a U.S. buyer is often not an accident. It is the planned path. Edwards Lifesciences moved to acquire Innovalve Bio Medical, Johnson & Johnson acquired V-Wave and Veracyte acquired start-up C2i Genomics. These transactions show how Israeli innovation often reaches scale through global companies with U.S. commercial infrastructure, regulatory experience, reimbursement capability and institutional access.
Friction Is the New Market Barrier
That is why the next market conversation cannot stop at capital, FDA strategy or reimbursement. Those remain essential. They are no longer the full test. The harder barrier is institutional friction.
Friction is the operational resistance that slows or stops innovation after the science works, once investors are interested and when payment pathways come into view. It lives inside institutions. It shows up in cybersecurity reviews, data-use agreements, procurement delays, integration requirements, training needs, workflow disruption, clinical skepticism, legal review and budget pressure. It is not glamorous. It is also where many promising technologies lose momentum.
The U.S. health system is not one system. It is a patchwork of payers, providers, benefit designs, purchasing committees, security standards, contracting rules and local workflows. A product can look brilliant in a pilot and still stumble in deployment. It may require too much staff training. It may not fit the EHR workflow. It may create duplicate documentation. It may raise cybersecurity concerns. It may depend on incomplete, delayed, or untrustworthy data. It may ask clinicians to change behavior without giving the institution a realistic way to manage that change.
“Entrepreneurs embarking on their first attempt at the clinical healthcare market often underestimate the challenge of integrating with physician workflow, and these workflows vary considerably by country and clinical profession,” share Ran Balicer, MD, Chief Innovation Officer and Deputy Director General at Clalit Health Services. “Any tool that does not reach near-seamless integration or increases mental burden, will likely be rejected by practitioners, even if the promised benefits for care quality and safety are meaningful.”
This is where many innovators misunderstand the customer. The “user” is not always the patient or consumer. Often, the user is an institution. More precisely, it is a series of institutional decision-makers who each hold a piece of the adoption process. The chief medical officer may care about clinical value. The CIO may worry about integration. The chief information security officer may focus on risk. The CFO may ask whether the savings are real and who receives them. Compliance may worry about liability. Department leaders may ask who trains staff and what happens when the system fails on a Thursday afternoon.
A physician champion matters. A pilot champion matters. Neither is enough. In the U.S. market, adoption increasingly requires operational leadership. It requires governance, not enthusiasm alone. It requires a clear answer to the question every institution asks in some form: Will this make our work better, or will it add another burden to people already carrying too much?
Adoption Depends on Institutional Trust
Cybersecurity is now one of the clearest examples. Health systems live under constant threat. A promising technology can spend months in review because the institution must protect data, operations, reputation and patient safety. Israeli innovators, many of whom come from a culture that moves fast and solves problems quickly, and come from a high-tech military background, can underestimate this gate. The security review is not a side issue. It is central to the product experience.
Data integrity is just as important. If clinicians do not trust the information on the screen, they create their own workarounds. They check manually. They ask staff to verify. They build parallel processes. Soon, the innovation that promised efficiency creates more work. That is not adoption. That is institutional self-defense.
This is the danger of technology moving faster than governance. Departments act on their own. Clinicians create informal rules. Teams use different tools for the same problem. The organization becomes more fragmented, not less. Innovation succeeds only when leadership, workflow, data, training and accountability move together.
Israeli innovators should hear this as counsel, not criticism. The strength of Israel’s ecosystem lies in speed, ingenuity, persistence, and a refusal to be intimidated by large problems. Those qualities remain essential. They need to be aligned with the institutional realities of the U.S. market.
That match begins with better questions. Who must say yes before the first contract is signed? Who can slow implementation after the contract is signed? What workflow changes are required? What data must be trusted? What training burden is created? What evidence does the payer need? What evidence does the hospital need? What does the CFO need to believe? What does the clinician need to stop doing for the new solution to matter?
Communication belongs inside this strategy. Not promotion. Communication. The company must explain the problem, evidence, workflow process, risks, governance plan and operational gain in language each stakeholder understands. A hospital does not adopt a deck. It adopts a process and platform integrated into its system.
The next generation of Israeli health innovation leaders will still need capital. They will still need a regulatory strategy, reimbursement insight and ample clinical evidence. Yet those are no longer the full test. U.S. market entry will be won or lost by the ability to reduce friction inside the institutions they hope to serve. Not in the promise of technology alone; rather, in the ability to make innovation easier to adopt, safer to trust and clearer to sustain.
Gil Bashe serves as managing partner and Chair Global Health and Purpose at FINN Partners.
