$3 billion startup Sword Health cuts some physical therapists as it ramps up AI to treat more patients

• Sword Health cut a portion of physical therapists last month, the company confirmed to BI.
• The startup is working to increase the number of patients its physical therapists care for using AI.

Sword Health has made cuts to its clinical workforce as the $3 billion startup seeks to manage more patients with the help of AI, Business Insider has learned.

The startup, which provides virtual care for conditions like muscle and joint pain, let go of 13 of its physical therapists treating patients in October, Sword confirmed to Business Insider.

Three former employees who spoke with BI on the condition of anonymity said Sword previously had around 75 physical therapists actively caring for patients, putting the October cuts at around 17% of Sword's treatment-facing clinicians.

The layoffs come as Sword seeks to enable its PTs to treat more patients using AI. Sword aims to have its physical therapists manage an average of 700 patients at any given time by the end of 2024, according to documents reviewed by BI.

That's a significant jump from the caseload previously allotted to Sword's clinicians, according to three former employees, who said a high caseload at the beginning of 2024 would've been around 200 to 300 patients per therapist. These numbers could include patients who aren't actively engaged in therapy, according to the company.

In a statement to BI, a Sword spokesperson said the cuts were "all performance-based decisions, made on clinical engagement data." The spokesperson said Sword currently has open positions for more than 30 physical therapists.

Sword, which hit a $3 billion valuation in June after pulling in $130 million in fresh financing, has been vocal about its ambitions to scale its business using AI while keeping clinicians in the loop.

"What we're looking to do internally is to have AI as one master expert, but at the same time, everything gets vetted and validated by a human person," CEO Virgilio Bento told BI in September 2023.

Three former employees said that Sword began using AI-generated messages for patient conversations in the spring. The technology allows the physical therapists to accept an AI-generated message, edit it, or reject it, before sending the message to patients, the former employees said. The AI also helps PTs prioritize the most critical patients who might need more attention, according to the company.

Following its $130 million financing round, Sword announced an expansion of its AI platform with a new product that the company said can converse with patients during their virtual physical therapy sessions and give them feedback in real time.

It's also hoping to land more employer contracts with an outcomes-based pricing model, unveiled in September. In those contracts, Sword will get paid based on how much progress its patients make.

Sword's recent technology and pricing pushes also point to an approaching IPO. Bento told BI in 2023 that he'd only be interested in taking Sword public if it's profitable. The startup said in June that it expects to be profitable by the end of 2024, and could go public as soon as the second half of 2025.

It's not the only digital health startup waiting at the IPO gates. Its biggest competitor, musculoskeletal startup Hinge Health, has hired banks, including Morgan Stanley, to file its S-1 in anticipation of a public market debut, Business Insider first reported in September.

Omada Health is also expected to test the IPO waters. BI first reported in October that Omada filed its S-1 this summer.