- Venture capital investors are seeing major opportunities to support innovations that connect patients, providers, and their data more efficiently, says Mercom Capital Group in its annual healthcare IT investment report.
Health information management (HIM) tools, Internet of Things devices and applications, and up-and-coming big data analytics platforms garnered $5.1 billion in venture capital funding during 2016, compared to $4.6 billion in investments the prior year – an increase of nine percent.
"VC funding bounced back after declining in 2015,” said Mercom Capital Group CEO and co-founder Raj Prabhu. More than 620 deals were completed in 2016, while only 574 deals were conducted in 2015, he added.
More than 1000 organizations, including accelerators and incubators, participated in the investment process in 2016.
While provider-focused companies raked in $1.6 billion in capital, consumer-centered tools were significantly more successful in capturing the interest of investors. Sixty-eight percent of VC funding, or approximately $3.5 billion, went to patient-focused tools and applications.
Mobile health applications and technologies, including apps, wearable sensors, and wellness tools, benefitted most from the healthcare industry’s growing interest in patient engagement, the IoT, and patient-generated health data.
Apps and wearable sensors accounted for more than $250 million in VC deals, while companies with telemedicine offerings scooped up just under $100 million.
Source: Mercom Capital Group
The report adds support to the notion that the Internet of Things is likely to explode in popularity and importance over the next few years as providers and vendors work through the growing pains of leveraging patient-generated health data for clinical decision making.
A May report by Grand View Research predicted that the healthcare IoT would be worth $409.9 billion by 2022, driven largely by the aging population’s increasing need for chronic disease management tools and remote monitoring devices.
Disposable and ingestible sensors, smart home devices, wearables, and other innovative data collection devices are likely to see increasing interest over the next five years, market experts have said.
Providers will be challenged to find ways to integrate these new big data sources into their decision-making workflows, the Office of the National Coordinator and Accenture Federal Services said in a draft report outlining the tasks and competencies that will be required to harness the enormous volume of data heading the industry’s way.
In conjunction with IoT sensors and devices, providers will have to implement workflow management and data integration tools that can deliver streamlined, intuitive insights to the point of care while prioritizing the data most important to the individual patient under consideration.
Seventy-one percent of enterprises across multiple industries are currently collecting IoT data that will help them develop these competencies, 451 Research said in December. Over the next twelve months, investment in IoT infrastructure spending may increase by a third.
Data analytics and health information management tools also made a strong showing in 2016, Mercom says, bringing in just under $120 million to companies seeking funding support.
Source: Mercom Capital Group
Health information exchange and electronic health record companies shared about $70 million of the VC pie, while electronic data capture systems pulled in a little more than $20 million in capital.
Somewhat less popular analytics and data management categories included clinical decision support, practice management solutions, and tools for payers. Perhaps surprisingly, companies dedicated to remote patient monitoring came in last on the list by amount raised.
The industry also continued to conduct mergers and acquisitions at a brisk pace, with 205 M&A transactions recorded in 2016. Health information management companies took part in 89 M&A deals, while data analytics organizations followed with just 26 changes in ownership.
The majority of M&A deals were between practice-focused companies as the vendor landscape continues to consolidate in search of optimal strategic positioning, seeking scale and presence to attract providers in an increasingly crowded marketplace.