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Healthcare IT on the verge of big things, StrataRx panelist says

Posted by: Dan Emerson on September 27, 2013

At the third and final day of the 2013 StrataRx conference in Boston, innovators in healthcare and big data assessed a rapidly evolving landscape. One of the key topics discussed was the current state of "deal flow" at the intersection of healthcare, big data and information technology.

Healthcare venture funding is an "incredibly concentrated industry," with five to 10 firms raising 80 percent of the venture capital since 2009, said panelist Bijan Salehizadeh, a managing director and co-founder at NaviMed Capital, a Washington, D.C.-based venture capital firm specializing in later-stage investments in healthcare IT and health services. There are about 25 healthcare venture capital firms in the United States.

Healthcare VCs in general are having difficulty raising money today, Salehizadeh said. "A lot of that has to do with the long holding period for biotech and med tech firms - the perception and the reality that it takes a long time to get to exit."

But healthcare IT is on the verge of big things, he said. "We are at a moment where a lot of IT investors have piled into healthcare IT funds. They think healthcare is a domain they want to have exposure to. In the past, that has been the signal of a 'top,' but it's a trend that really should be taken seriously. The healthcare IT landscape has been growing rapidly, with a number of companies raising very large rounds and getting a lot of attention."

Currently, he said, there are three, venture-funded healthcare IT companies "with billion-dollar exit expectations" when they reach profitability: ZocDoc, Castlight and Practice Fusion. "For this healthcare IT space to be seen as mature, at least one of those will have to exit north of a billion dollars. If they fail to do that, it could be a sentinel event."

Compared to investing in other IT sectors, "everything in healthcare takes longer, but the payoff is greater," Salehizadeh said. "Patient capital is needed."

Michael Greeley, a partner with Boston-based Flybridge Capital Partners, agreed that "capital inflow to the industry has been relatively flat. But, finally, the landscape is improving," he said, citing Sprint's recently announced partnership with Techstars to develop a mobile health startup accelerator, and Verizon partnering with the Blueprint Health accelerator. In the past, "we never would have seen those types of companies 'leaning forward' so aggressively. So, I'm optimistic, finally."

As some of the effects of healthcare reform become clearer in the coming months, "I believe we will see more larger investors looking at this space," Greeley said.

Another panel topic was a new partnership between Mayo Clinic's Center for Health Care Delivery and OptumHealth (a United Healthcare company). They have formed Optum Labs, billed as the first open-innovation center in the healthcare industry. Optum Labs will use claims and clinical data to answer pressing health questions. It will use a database that is unprecedented in size, including 149 million patient records from United Healthcare, electronic medical records covering 5 million lives from Mayo Clinic, and 12 million EMRs from Humedica.

Paul Bleicher of Optum said Cambridge-based Optum Labs will use advanced analytics and data visualization techniques to support research and innovation projects that will improve patient care and lower cost. He said Optum Labs is actively seeking other partners, and is "accepting applications from anybody doing research who is willing to do so with complete transparency, in a non-commercial fashion."

Does he expect new healthcare IT companies to emerge from this effort? "We do. That is one of the goals," Bleicher said. "We want to develop technologies and innovations that could be spun off into companies, in collaboration with venture capitalists."

Panelists also discussed the burgeoning open-data movement in healthcare, and the challenges and opportunities for using data analytics to improve healthcare quality and cost-effectiveness.

"Today is the absolute best time to be an innovator in healthcare," said Aneesh Chopra, of the Advisory Board Co., and a former chief technology officer who was involved in the government effort to provide more access to health data. "We are opening up government data and starting to see the private sector (healthcare providers and payers) opening up as well, which is creating a new wave of products and services. The combination of opening up of data and incentives is leading to incredible inventions we're seeing in healthcare today."

[Photo by - Tax Credits]

Category:  Ideation  Growth  Tags:  Health IT, Healthcare, Lifescience, Venture, Funding

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