Health Care IT Venture Capital Deals Double in Q1 2013

Health care IT venture capital showed solid growth in the first quarter, according to the latest report by Mercom Capital Group.

Health care IT venture capital activity continued its robust growth, as the industry closed 104 funding deals in the first quarter of 2013, compared with 51 in the fourth quarter of 2012, according to an April 17 Mercom Capital Group report.

Health technologies for consumers accounted for 59 of the VC deals, and 45 deals were focused on technology for health practices, the report revealed. Venture capitalists invested in areas such as mobile health and telemedicine.

"The trend we began to see last year of VCs investing in consumer-focused companies like mobile health, telehealth, personal health, social health, and scheduling, rating and shopping has become much more pronounced," Raj Prabhu, CEO of Mercom Capital Group, said in a statement. "The enormous market opportunity in consumer-focused health has appeared to pique the interest of investors and is likely to continue to grow as witnessed by the surge in VC activity."

Consumer health care companies have attracted interest in investors following the effort by the U.S. Department of Health and Human Services (HHS) to release health care data to software developers through its Health Data Initiative, Prabhu said.

New applications created using the data could help prevent diseases and allow the health care industry to measure care quality and performance, according to HHS.

Health information management (HIM) companies raised $219 million in 44 deals, with mobile health right behind, at $127 million and 28 deals. Mercom also highlighted HIM deals in its Jan. 28 report, which showed health IT VC funding more than doubling in 2012 from 2011. Health IT companies raised close to $1.2 billion in 2012, compared with $480 in 2011.

Health care data warehousing vendor Health Catalyst raised $41 million in the first quarter of 2013, topping the list of VC funding deals in that period.

Meanwhile, the second-biggest VC deal involved xG Health Solutions, which raised $40 million. On Feb. 4, Geisinger Health System spun off xG, a company that specializes in population health data analytics as well as patient and population-focused care management.

NantHealth raised $31 million in VC funds during the first quarter. The company uses secure fiber networks, cloud computing and wireless mobile technology to advance scientific research and health care. Along with AT&T, Hewlett-Packard, Intel and Verizon, NantHealth in October introduced a supercomputer that can reduce the time needed to analyze genomic data of cancer patients from eight weeks to 47 seconds.

Both online primary care service One Medical Group and health and fitness tracking device company Fitbit raised $30 million. On Jan. 7, Fitbit unveiled its activity tracker FitBit Flex, a Bluetooth Smart-enabled wristband that syncs data on workouts, calories burned and sleeping patterns with Android and iOS devices as well as Microsoft Surface tablets.

As in the fourth quarter of 2012, the first quarter of 2013 brought 46 merger and acquisition (M&A) deals to health care IT. HIM companies comprised the most M&A transactions with 22. Other major deals included acquisitions by two EHR companies: Athenahealth bought Epocrates for $293 million and Allscripts paid $235 million for dbMotion, which offers clinical analytics and population health applications.

Also among the top acquisitions in the first quarter was Lexmark International's $45 million purchase of Acuo Technologies, a medical image archive company. By acquiring Acuo, Lexmark plans to offer a software platform that doctors would access from EHR apps to manage various types of medical content.