How Diagnostics are Moving from Labs to Living Rooms

October 28, 2025

By The Artemis Fund
The Artemis Fund believes technology can create prosperity for all. With offices in New York, Texas, Massachusetts, and Nevada, Artemis leads seed rounds for companies creating resilient families, individuals, and businesses across the US.
Diagnostics don’t make headlines the way breakthrough therapies do, but they quietly shape the entire healthcare journey. Every cancer caught early, every pregnancy confirmed, every chronic disease managed begins with a diagnostic tool or test.
At their most basic, diagnostics follow a sequence: initiation, sample collection, processing, results, and interpretation. That pathway can play out in a hospital lab, an urgent care clinic, or increasingly, in the comfort of one’s own home. What remains constant is their role: to move from suspicion to confirmation, to replace uncertainty with knowledge. Traditional diagnostics in the doctor’s office remain high in volume but low in margins, increasingly commoditized, and constrained by payer fee schedules.

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The Shift From Labs to Living Rooms
Over the past five years, diagnostics have started to move closer to patients themselves. People overwhelmingly prefer the option to test at home, mail in a sample, and get results with the same ease as ordering groceries. This shift is still small in absolute terms ($2–3B for at-home kits and $5–7B for hybrid mail-in models compared to the $120B traditional market) but it is growing nearly twice as fast as in-office tests.
Exact Sciences’ Cologuard began as a mail-in stool kit and is now recognized as a standard preventive colorectal cancer screening covered by insurers, at no cost to patients. Accessibility drives uptake, and when consumer adoption reaches a tipping point, payers move quickly to support it.
Business Models in Flux
The economics of diagnostics are evolving alongside patient behavior. Traditional labs depend on scale and payer contracts, delivering consistent but pressured margins.
Direct-to-consumer diagnostic players like Everlywell and Modern Fertility offer an alternative: high-margin, cash-pay kits sold online or through retail. But this model is fragile. Customer acquisition costs are high, brand loyalty is thin, and physicians often question the validity of wellness-oriented results.
The most compelling model sits somewhere in between. Hybrid diagnostics begin with consumer initiation but are paired with clinical oversight and payer support. These models are meeting patients where they are and payers where they need to be.
Why Regulation Matters
FDA approval allows disease-specific claims and opens the door to payer reimbursement. CLIA (Clinical Laboratory Improvement Amendments) certification alone ensures lab quality but can limit marketing and reimbursement. Wellness diagnostics, like ancestry tests, hormone panels, and wearables, operate outside the system: profitable in consumer markets while providing the patient with personal information, but clinically marginal to date.
The FDA’s 2024 decision to bring most lab-developed tests (LDTs) under its purview has raised the bar. Startups now face higher costs and longer timelines for approval, but they also gain something priceless: credibility in the eyes of the medical community. For insurers, FDA clearance is often the tipping point from cash-pay to covered benefit with clinical validity.
AI as Enabler, Not Add-On
In traditional settings, AI improves efficiency in the testing and results validation. Adoption is real, but the economics are tied to hospital procurement cycles and payer reimbursement, limiting upside to acquisition-style exits. In direct-to-consumer testing, AI simplifies the user experience, turning smartphones into diagnostic readers. Healthy.io enables urinalysis via a camera, while Oova helps women interpret hormone fluctuations. These applications are helpful, but consumer willingness to pay caps growth.
Multiomic blood tests, genomic sequencing, and liquid biopsies produce vast, complex data that humans alone cannot parse. Grail’s Galleri, Tempus, and Sophia Genetics all rely on AI to make sense of signals that would otherwise be unreadable. Without AI, these businesses do not exist. With it, they unlock billion-dollar markets backed by payer reimbursement.
Diagnostics as an Equity Lever
Nearly 20% of Americans live in rural areas, but only 10% of physicians practice there. At-home kits bypass this infrastructure gap: mailed colorectal cancer tests have increased screening completion by 15–20% in underserved communities.
Cost barriers fall as well. A $25–100 at-home test can replace a $200 urgent care visit. Under the Affordable Care Act, preventive diagnostics are fully reimbursed. Privacy and stigma matter, too. The FDA’s approval of the first over-the-counter HIV test significantly boosted adoption among populations reluctant to seek in-person care.
By lowering barriers to preventive care, diagnostics capture populations historically excluded from screening, reducing late-stage disease costs and aligning with value-based care.
Women’s Health as a Case Study
Long underfunded and underserved, women’s health is now one of the fastest-growing diagnostic markets, expected to expand from ~$10B in 2024 to $15B by 2029.
The FDA’s 2024 approval of HPV self-collection was a watershed moment. Teal Health is pioneering this model with its at-home cervical cancer screening wand, expanding access for women who are often screened too late or not at all.
Prenatal testing is also shifting. Non-invasive prenatal testing (NIPT), once reserved for high-risk pregnancies, is now widely reimbursed for average-risk women as costs decline. Fertility and hormone testing is expanding rapidly, driven by consumer demand. Urinary health, often dismissed as routine, is a high-volume, recurring need that digital-first tools like Healthy.io are beginning to address.
Women’s health self-collection is a system-level shift, expanding equity while unlocking payer-backed scale. These opportunities are about applied innovation: tools that expand access, improve productivity, and align with how payers and patients are actually behaving.
Diagnostics may not capture the spotlight, but they are where transformation begins. The backbone of labs and imaging will remain, but the future will be defined at the edges: tests that move into our homes, AI that makes them intelligible, and regulatory frameworks that make them reimbursable.
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