VCs Take to Health IT

Health information technology grabbed more than a half-billion dollars in venture capital investment last year.

Health services and health information technology garnered about 11 percent of venture capital investment last year, or $687 million, according to a new report from PricewaterhouseCoopers Health Research Institute. Thats up 43 percent from 2003, a much faster rate of growth than other, larger life sciences segments such as biopharmaceuticals and medical devices.

Despite the banner year overall, fourth-quarter investment dragged. Only $167 million went to health care services and technology, thats down by 8 percent from the fourth quarter in 2003.

Health information technology comprises about two-thirds of this category, with the remainder going to health care services companies that manage hospitals, treatment centers and elder care facilities.

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The largest health information technology deals for 2004 went to Genomic Health, a medical diagnostic genomic information company that received a total of $50 million in two rounds, and ChartOne, an electronic medical records firm that got $26 million.

The report concludes that health care technology firms that provide "software for electronic medical records, physician and hospital management, billing and claims processing software received a large share of healthcare venture capital dollars."

Other companies providing "ehealth information, consumer-directed programs, and offering or developing clinical products" also managed to attract VC dollars.

Overall, 31 percent of the health services and health information technology funding went to health care technology. An additional 25 percent went to clinical products and solutions. E-health information and consumer-directed companies got another 8 percent, while the remaining 37 percent went to the management of hospitals and clinics.

And this may be just the beginning for health information technology. "Even with the remarkable progress in medicine during the 20th century, there is significant opportunity for improving the diagnosis and treatment of disease and the delivery of health services," said Sandy Lutz, director of PricewaterhouseCoopers Health Research Institute.

"With an aging global population and push for improved health care worldwide, there is unprecedented demand for new categories of products, services and technology to help improve cost, operational efficiency, clinical decision-making and service quality."

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