2011 ‘great year’ for HIT venture capital, study finds

January 18, 2012 in Medical Technology

AUSTIN, TX – The Healthcare IT sector raised almost half a billion in venture capital last year, according to Mercom Capital Group, a global communications and consulting firm.

The Mercom study, released on Tuesday, combines its annual and fourth quarter merger and acquisition (MA) and funding report for the healthcare technology sector for 2011.

“2011 was a great year for Healthcare IT companies in terms of financial activity. Almost half a billion dollars came into the sector through venture capital investment compared to $211 million in 2010,” said Raj Prabhu, managing partner of Mercom Capital Group. “Several factors, including strategic acquisitions, consolidation and increasing market share, played a role in the increased MA activity in the sector.”

[See also: U.S. healthcare IT market to surge .]

Health information management companies received most of the disclosed venture capital (VC) funding in 2011, totaling $336 million in 30 deals.  Personal health record companies raised $83.3 million in 12 deals. The top VC funding deal in 2011 was $75 million, in a Series C round, raised by online doctor appointment startup ZocDoc, according to the report.

Other top VC funding deals were $27 million raised by Awarepoint, a provider of real-time location systems; $27 million raised by ABILITY network, a web-based healthcare network; followed by $23 million raised by Humedica, a clinical informatics company; and $23 million raised by Practice Fusion, a web-based EMR company (Practice Fusion also raised another $6 million in additional funding in 2011).

Top VC investors in 2011 were HLM Venture Partners with four deals, followed by Cardinal Partners, Chrysalis Ventures, Founders Fund, Innovation Endeavors and Klein Perkins Caulfield Byers, with three deals each. There were a total of 104 VC investors in 2011, compared to 62 in 2010.

Merger and acquisition (MA) activity was robust in 2011, with 104 recorded transactions totaling $6 billion, compared to $4 billion in 85 transactions in 2010, the study found.

Health information management (HIM) companies accounted for most of the MA transactions with 61 transactions, followed by 19 transactions for revenue cycle management (RCM) companies and 16 transactions for service providers. In terms of dollars, RCM companies accounted for $3.9 billion, followed by HIM companies with $1.9 billion.

The top MA transaction in 2011 was the acquisition of Emdeon, a provider of revenue and payment cycle management and clinical information exchange solutions, by Blackstone Capital Partners for $3 billion. 

[See also: Mostashari: Meaningful use to reach new heights.]

Other top MA transactions were the $960 million acquisition of Vangent, a provider of health information technology and business systems to federal agencies, by General Dynamics, the $400 million acquisition of HealthDataInsights, a healthcare services company that specializes in the identification and recoupment of claim overpayments, by HMS Holdings.

This was followed by the $320 million acquisition of Sage Healthcare, a supplier of business management software solutions by Vista Equity Partners, and the $273 million acquisition of Vital Images, a provider of advanced visualization and analysis software for physicians, by Toshiba Medical Systems.

A copy of Mercom’s 2011 HIT Funding and MA Report can be downloaded here

Follow Diana Manos on Twitter @DManos_IT_News.

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Article source: http://www.healthcareitnews.com/news/2011-great-year-hit-venture-capital-study-finds

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