Electronic Health Records

Selection & Replacement News

2012 was “spectacular year” with $7B in health IT investment

By Jennifer Bresnick

Between huge venture capital investment and a series of major mergers and acquisitions (M&A), the health IT market saw an investment of $7 billion in 2012, according to data from Mercom Capital Group.  The fourth quarter of 2012 saw the most number of venture capital deals since 2010, with nearly $1.2 billion invested in 163 companies.  mHealth saw a huge boost as healthcare organizations focus on patient engagement and consumers develop interest in remote monitoring and wearable health tech, as did online portals allowing consumers to compare physicians and other health services.

“While the focus of funding has been in the Health Information Management [HIM] category, which covers technologies on the Healthcare Practice side, there is significant investment and funding going into companies that engage the consumers,” said Raj Prabhu, managing partner of Mercom Capital Group. “The HIT sector really took off in 2012; the deal count tripled and number of investments doubled compared to 2011.”

Castlight Health, which provides a service that allows patients to compare physicians and hospitals based on price and quality data, was the biggest winner for venture capital investment, raising $100 million in 2012.  Following close behind were personal genetics company 23amdMe, with $58 million, GoHealth, an online health insurance marketplace, with $50 million, and EHR vendor Practice Fusion, which raised $34 million.

Acquisitions and mergers were also popular among health information management (HIM) organizations, with the biggest deals topping $1 billion.  Sixteen practice management companies, fifteen clinical decision support vendors, and 16 EHR providers were involved in M&A, bearing out predictions that the EHR software market would see a great deal of consolidation as physicians become more knowledgeable and more selective when it comes to EHR packages.

McKesson Health Solutions was very active in the space in 2012, with four M&A transactions.  Other notable deals included the $1.4 billion acquisition of Sunquest Information Systems by Roper Industries, the $1.25 billion acquisition of Thomson Reuters’ healthcare data and analytical solutions by Veritas Capital, and the sale of M*Modal to One Equity Partners  for $1.1 billion.

2013 is on track to see even more investment activity, with $500 million in mHealth and telehealth investment in the first three months of 2013 alone.  Cloud services and data warehousing and analytics companies are hot tickets this year, splitting $100 million in investments among just three companies.  Acquisitions among notable names like Allscripts and athenahealth are becoming increasingly popular as EHR-focused companies expand their portfolio of services.

“The trend we began to see last year of venture capital investing in consumer-focused companies like mobile health, telehealth, personal health, social health, and scheduling, rating and shopping has become much more pronounced,” Prabhu said. “The enormous market opportunity in consumer-focused health has appeared to pique the interest of investors and is likely to continue to grow as witnessed by the surge in venture capital activity.”

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