Practice management sees big investments

By Mike Miliard
10:31 AM
$124 million in VC funding for Q1

In yet another record quarter for venture capital, health information technology companies raked in $858 million since January, across 163 deals -- a 154 percent increase compared to Q4 2013.

Clinically-focused IT firms have attracted $460 million in 60 deals so far this year -- practice management in the lead with $124 million in eight deals. Health information exchange was another attractive sector, with $78 million, and business intelligence and analytics companies got $43 million across seven deals.

Consumer-focused firms received $398 million in 103 deals, meanwhile, with most of them related to mobile health, $198 million in 61 deals, and telehealth, $79 million in 14 deals.

"Funding into the Healthcare IT sector continues at an astonishing pace," said Raj Prabhu, Mercom co-founder and CEO, in a press statement. "Venture capital funding in healthcare IT has reached almost $5 billion in about 1,000 deals since 2010."

The top VC funding deal in Q1 2014 was the $89 million raise by Dedalus Group, a company which develops technology for clinical, general practices and hospitals, from Hutton Collins and other investors.

Other top deals included $77.5 million raised by MedHOK, which offers single platform for care, quality and compliance for health plans, pharmacy benefits managers and other risk-bearing entities, from Bain Capital Ventures and Spectrum Equity; MINDBODY, a provider of scheduling and business management software for health and wellness companies, which raised $50 million from investors including Bessemer Venture Partners, Institutional Venture Partners, Catalyst Investors, W Capital Partners and Montreux Equity Partners.

American companies accounted for the lion's share of all deals at 87 percent, but Mercom reported more healthcare IT activity globally, with 15 other countries recording at least one funding deal.

Merger and acquisition activity for health IT was also at its highest level, totaling 53 transactions, only six of which were disclosed for a combined total of $4.7 billion, compared to 44 transactions in Q4 2013. Health information management companies saw the most M&A activity this quarter with 18 transactions, followed by Service Providers with 13, and Mobile Health companies with eight.

The largest disclosed transaction by far was the $4.4 billion acquisition of MultiPlan, a company that manages claims processing and provides healthcare cost management solutions through its network and analytics-based technology platform, by Starr Investment Holdings, an investment firm focused on long-term investments and Partners Group, a private markets investment management firm.

This was followed by the $130 million divestiture of HealthTronics, a provider of EHR for urology practices, from specialty healthcare company Endo Health Solutions to Altaris Capital Partners, an investment firm focused on the healthcare industry. Intel Corporation acquired Basis Science, a provider of wearable device technologies for health and wellness applications, for nearly $100 million.

Two IPOs in the first quarter raised a combined $304 million, meanwhile: Castlight Health, which develops of healthcare transparency solutions, brought in $204 million through its IPO in March and Everyday Health, which specializes in digital health and wellness tools raked in $100 million with its offering.

Total corporate funding in the healthcare IT sector, including VC, accelerator/incubator, debt and public market financing, in the first quarter 2014 came in at $1.2 billion, according to Mercom.