Funding for the health IT sector zoomed to $493 million in the first quarter of 2013, according to a report by global communications firm Mercom Capital Group.
Health IT (HIT) is a part of information technology that focuses on information management systems in the health care sector, and it’s expected to receive a record amount of funding this year. More than 100 investors participated in deals during the first quarter of this year, with 10 investors making multiple funding rounds.
Raj Prabhu, CEO of Mercom Capital Group, said venture capitalists have begun in the last year to invest in consumer-focused HIT companies that deal with activities such as scheduling, personal health and telehealth (the remote delivery of health care services using electronic telecommunications).
Prabhu credited the “enormous market opportunity” presented by consumer-focused health care for the impressive jump in investment activity over the last year.
Some of those first-quarter health IT deals saw massive investments, with five deals of $30 million or more. The biggest investment went to Health Catalyst, which received $41 million in funding for its health care data warehousing. One Medical Group, which provides primary care services in an online format, raised $30 million in the quarter.
Among health IT companies, those dedicated to improving health information management (HIM) saw the most acquisition activity, reflecting huge interest in the sector. Out of the 46 acquisitions in health IT for the quarter, 22 were for companies devoted to HIM. One of the largest acquisitions was Allscripts’ $235 million purchase of dbMotion, a platform developed to enhance health information exchanges. DbMotion specializes in health “interoperability,” which means that it helps connect different health care organizations to leverage information assets.
This fast-paced quarter caps a strong run for HIT investments: the number of deals doubled from the fourth quarter of 2012 to the first quarter of this year, going from 51 to 104. The number of early-stage deals went up from 14 to 42 in that period. The HIT sector received only $211 million from 22 deals in 2010, then received $480 million in 2011 and $1.2 billion last year. The sector is on target to getting nearly $2 billion from investors this year.
All this growth is leading to new employment opportunities for information technology professionals. The Centers for Medicare and Medicaid Services, for example, recently reported that 50,000 new health IT jobs have been created since the passage of the Health Information Technology for Economic and Clinical Health (HITECH) Act in 2009. Researcher Towers Watson also reported in April that health IT leaders across the country are seeing talent shortages, with 67 percent reporting difficulty hiring experienced IT employees, and 38 percent saying they had difficulty retaining top talent.
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