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VC Funding in Healthcare IT Continues at Record Pace

October 14, 2013
by Gabriel Perna
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Venture capital (VC) funding in healthcare IT continues to set records, as the third quarter saw 151 deals raise a collective $737 million, according to research from the Austin, Texas-based Mercom Capital Group.

The dollar amount of disclosed deals surpassed the second quarter total of $623 million, which was the previous single quarter record holder for health IT VC funding. Year to date, the health IT sector has raised $1.85 billion. The report’s authors say the 2009 HITECH Act has significantly helped the sector through its $17 billion allocation towards the use of electronic health records (EHRs). It’s also seen help through the rise in interest of consumer-focused healthcare technology.

 “Funding into Healthcare IT is on pace to double over last year,” Raj Prabhu, CEO of Mercom Capital Group, said in a statement. “With major parts of the Affordable Care Act on the horizon, the focus is on health insurance exchanges, preventative care, wellness, population health, and a general shift from quantity to quality of care, which is reflected in this quarter’s funding transactions.”

Healthcare practice-focused technology companies received $489 million in 59 deals with population health, EHR/EMR, practice management, and data analytics companies all receiving attention this quarter.  Consumer-focused companies received $248 million in 92 deals, with most funding ($161 million) going to the mobile health (mHealth) category, with mobile health apps and sensors receiving the most funding this quarter.

The top VC funding deal this quarter was to Evolent Health, a population health management organization, which integrates technology to support value-based care and payment models. It raised $100 million from The Advisory Board Company, UPMC Health Plan, and TPG Growth. Other companies that got huge investments included Practice Fusion, a free web-based EHR provider, which raised $70 million from Kleiner Perkins Caufield & Byers, and a few others; MedSynergies, a provider of revenue and performance management solutions for healthcare providers, got $65 million from undisclosed investors; and Fitbit, a fitness and health tracker company, raised $43 million in private equity financing from Qualcomm Ventures, and others.

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