Health IT banks record VC cash in 2013

James Park, co-founder and CEO of FitbitJames Park, co-founder and CEO of health tracker company Fitbit, speaking at the DEMO Conference, October 2013. Last year Fitbit brought in $73 million in VC cash. Photo: The DEMO Conference

Big winners include mHealth sector

Health IT is where the money's at -- at least in 2013, which saw venture capital funding nearly double from the previous year, according to a new industry report released Monday.  
 
The Mercom Capital Group report highlighted VC and merger and acquisition activity for the healthcare IT market over the past year, and the numbers did not disappoint. 
 
Venture capital funding in the healthcare IT sector almost doubled, reaching $2.2 billion in 2013 across 571 deals, compared to $1.2 billion across 163 deals in 2012. The biggest recipient of VC dollars was the mobile health sector, which raised some $564 million. 
 
Healthcare IT also raised $648 million in debt and public market financings, bringing total corporate funding raised last year to almost $3 billion. VC funding dropped in Q4 2013 with $337 million in 147 deals compared to $737 million in 151 deals in Q3.
 
[See also: VC funding sets yet another record.]
 
"After record fundraising totals in 2013, healthcare IT companies have now received $4 billion in venture funding since 2010," said Raj Prabhu, CEO and co-founder of Mercom Capital Group, in a Jan. 13 statement. "Mobile health companies led the way in 2013 as the technology transformation of the healthcare industry continues."
 
Overall, consumer-centric companies raised $1.1 billion, and personal health companies also walked away with a hefty sum of VC dollars, receiving $198 million. Social health companies raked in $166 million.
 
Under them $1.1 billion also raised by practice-centric companies last year, population health came out on top, walking away with $179 million. Other honorable mentions include electronic health record companies taking a $166 million piece of the pie, and practice management with $162 million.
 
According to the report, the top five VC funded companies in 2013 were: Evolent Health, a population health management services organization, which raised $100 million; Practice Fusion the Web-based EMR developer, which raised $85 million in two deals; Fitbit, a fitness and health tracker company, which brought in $73 million across two deals; MedSynergies, a provider of revenue and performance management solutions, which raised $65 million; and Proteus Digital Health, a provider of a digital health feedback system, which raised $45 million.  
 
[See also: VC funding sees 'torrid' Q1.]
 
There were 466 investors involved in funding rounds for healthcare IT companies in 2013, officials point out. The heavy hitters included Khosla Ventures and The Social+Capital Partnership with eight deals each, followed by Norwest Venture Partners with seven deals and Kleiner Perkins Caufield & Byers with six deals.
 
With regard to mergers and acquisition activity for 2013, the healthcare IT sector sector was relatively flat, with 165 transactions compared to 163 transactions in 2012. There were 44 M&A transactions in Q4 2013. There were 16 companies that made multiple acquisitions in 2013.
 
Health information management companies saw the most M&A activity in 2013 with 76 transactions, followed by revenue cycle management companies with 25.
 
The Top 5 disclosed M&A transactions included the $850 million acquisition of Passport Health Communications, a provider of technology solutions and services that help hospitals and healthcare organizations streamline business operations and secure payment for their services, by Experian, a global information services company; the acquisition of EHR company Greenway Medical Technologies by Vitera Healthcare Solutions for $644 million; athenahealth’s $293 million acquisition of Epocrates, a developer of a medical application for clinical content, practice tools, and health industry engagement at the point of care; Allscripts' $235 million acquisition of dbMotion, a developer of a data normalization platform for multiple electronic health records; Zotec Partners’ $200 million acquisition of Medical Management Professionals, a medical billing and practice management company; and Medtronic's $200 million acquisition of Cardiocom, a provider of integrated clinical telehealth services.
 
There were two healthcare IT IPOs in 2013, raising a combined total of $195 million: Benefitfocus, a provider of cloud-based benefits software, raised $131 million, and Covisint, provider of a cloud engagement platform for creating and enabling new mission-critical external business processes, raised $64 million.