Funding for medical technology companies increased in the first quarter of 2013, according to 2013 article by Venture Beat. With the United States having the highest costs for health care in the world, private equity investors, venture capitalists, and hedge funds are betting on health-related innovations as a source for future capital gains and dividends.
There were 37 funding or M&A deals in medical-related startups in Q1 2013 worth $365 million. That figure represents a 35 percent increase for the same period in 2012, according to tech incubator Rock Health.
Based on the profiles of start-ups receiving early funding, investor interest in healthcare technology is being aimed towards the following areas (in order):
1. Remote patient monitoring
2. Hospital administration
3. Personalized medicine
4. EMR / EHR
5. Analytics / data warehousing
Most medical start-ups aim to either lower costs and/or provide better technologies for hospitals and patients. HealthCatalyst, which provides data warehousing solutions, was among the recipients of investor funds in Q1 2013. The Salt Lake City-based company raised $41 million from Kaiser Permanente Ventures, Norwest Venture Partners, and Sequoia Capital.
The deal shows investors are showing interest in the value proposition of digitizing healthcare as a way to create efficiencies. The areas of remote patient monitoring and hospital administration attracted 15 of the 37 deals in Q1 2013.
Venture startups have been adjusting to healthcare’s evolving demands for a paperless environment. For instance, New Jersey-based PSKW uses virtual platforms (such as the Internet, mobile apps, and bar codes) to manage co-pay solutions for doctors and pharmacists. In digitizing the doctor-patient relationship, the effort mirrors how a big box store would manage its loyalty program with retail shoppers.
Digitization not only brings efficiencies, it can also avoid costly and frustrating errors stemming from traditional invoices. ABC News reported about a San Francisco couple that recently spent an entire year fighting an erroneous co-pay bill for $993. The couple was eventually refunded the full amount after California Pacific Medical Center looked into the matter. Yet, the ordeal took an entire year.
Prior to Obamacare taking effect, physicians are also making a push to ensure co-pays don’t skyrocket. Last month, the New York Physical Therapy Association called on the New York State Legislature to prohibit health insurers from applying high co-pays to physical therapy care, according to readMedia.
The Q1 2013 funding trend may mean that investors view Obamacare as a time for innovative solutions for a regulatory environment that is expected to increase health expenses for consumers and government agencies. The Society of Actuaries published a report that predicts claims costs in individual health plans will rise by an average of 32 percent in 2014. In 2013, a similar study commissioned by California expects premiums to increase by an average of 30 percent for people (in the state) who do not qualify for federal subsidies.
Last year, Patientsafe Solutions received $20 million from giant pharmaceutical company Merck. The San Diego-based company leverages mobile devices, such as android and Apple tablets, to orchestrate healthcare providers, medical data, and hospital processes in real-time.
Young entrepreneurs are providing sources of medical-related innovation. For instance, Northeastern University senior Nathaniel Bessa developed an application to monitor a new physician productivity incentive program at Brigham and Women’s Hospital in Boston.
Bessa, who is studying computer science and business, developed a web app that allows physicians to monitor their patient’s insurance bills. By digitizing records, health administrators at Brigham and Women’s Hospital are better able to track a patient’s flow through various caretakers.
Remote patient monitoring was the most popular deal for financiers in the first quarter of 2013. What might be in store for Q2 2013 and beyond? Digitization of healthcare should be a consistent investment thesis for the rest of the year.