The healing sprout is a new item in the game that actually heals you constantly. It's unique to the Smash universe alone, so it did not appear in any other Nintendo games.
But yeah, having it in yours hands can easily wipe away all the damage you had receive before.
The only downside is that it can be easily transferred to another fighter, friend or foe. Players who don't know what it is are probably going to throw it at an opponent by accident. Your best bet is to heal as much as you can and toss it into the abyss.