By using this site, you agree to the Privacy Policy and Terms of Use.
Accept
Health Works CollectiveHealth Works CollectiveHealth Works Collective
  • Health
    • Mental Health
    Health
    Healthcare organizations are operating on slimmer profit margins than ever. One report in August showed that they are even lower than the beginning of the…
    Show More
    Top News
    Cognitive Psychology and Risk-taking in Extreme Sports
    Theodore Rex Walrond Highlights the Connection between Cognitive Psychology and Healthcare
    April 1, 2025
    stress management for healthcare workers
    3 Tips For Healthcare Professionals: How To Stay Beautiful, Healthy, and Happy
    November 2, 2021
    importance of relaxing on the weekend for your health
    Importance of Relaxing During the Weekend for Optimal Health
    March 25, 2022
    Latest News
    Beyond Nutrition: Everyday Foods That Support Whole-Body Health
    June 15, 2025
    The Wide-Ranging Benefits of Magnesium Supplements
    June 11, 2025
    The Best Home Remedies for Migraines
    June 5, 2025
    The Hidden Impact Of Stress On Your Body’s Alignment And Balance
    May 22, 2025
  • Policy and Law
    • Global Healthcare
    • Medical Ethics
    Policy and Law
    Get the latest updates about Insurance policies and Laws in the Healthcare industry for different geographical locations.
    Show More
    Top News
    Image
    Person-Centered HealthCare: The FDA Gets Patient-Centric
    May 31, 2013
    Does the Supreme Court Understand Health Reform?
    April 12, 2012
    Racial Health Disparities Among People with Chronic Conditions in the US: Facts and Statistics
    July 25, 2013
    Latest News
    Top HIPAA-Compliant Messaging Apps for Healthcare Teams
    June 25, 2025
    When Healthcare Ends, the Legal Process Begins: What Families Should Know About Probate and Medical Estates
    June 20, 2025
    Preventing Contamination In Healthcare Facilities Starts With Hygiene
    June 15, 2025
    Strengthening Healthcare Systems Through Clinical and Administrative Career Development
    June 13, 2025
  • Medical Innovations
  • News
  • Wellness
  • Tech
Search
© 2023 HealthWorks Collective. All Rights Reserved.
Reading: Dispelling the Myths of a Healthcare IT Investment ‘Bubble’
Share
Notification Show More
Font ResizerAa
Health Works CollectiveHealth Works Collective
Font ResizerAa
Search
Follow US
  • About
  • Contact
  • Privacy
© 2023 HealthWorks Collective. All Rights Reserved.
Health Works Collective > eHealth > Medical Records > Dispelling the Myths of a Healthcare IT Investment ‘Bubble’
eHealthMedical Records

Dispelling the Myths of a Healthcare IT Investment ‘Bubble’

Chris Hoffman
Last updated: July 16, 2011 8:53 am
Chris Hoffman
Share
7 Min Read
SHARE

The U.S. healthcare industry is undoubtedly going through one of the most pronounced transformations in its history.  At the most fundamental level, the means and methods by which patients, providers, and payers interact is changing dramatically.

The U.S. healthcare industry is undoubtedly going through one of the most pronounced transformations in its history.  At the most fundamental level, the means and methods by which patients, providers, and payers interact is changing dramatically.

  • Consumers (patients) are increasingly at the epicenter of the healthcare delivery and decision making processes.
  • Providers (hospitals, clinics) are mobilizing to take advantage of new delivery models that assume the accountability for the quality and cost of healthcare for a defined population, the long-term goal of the ARRA legislation (health reform).
  • Payers (health plans) are expanding their focus beyond a traditional coverage and benefits orientation to include advanced health management and decision support capabilities.

For innovators and investors, these structural changes in conjunction with the ongoing trend toward more granular clinical documentation and code sets (i.e., the new HIPAA 5010 standards and transition from ICD-9 to ICD-10) as well as the lure of billions in financial incentives related to complying with HITECH/Meaningful Use rules are creating brittle calculus for valuing technological advancement and innovation.

In many respects the U.S. health system has been caught flat-footed by a wave of long-overdue regulatory mandates aimed at dragging an industry long resistant to change into the twenty-first century.  The impending need for innovative healthcare IT solutions has created substantial demand for forward-looking vendors with the capability to provide greater efficiency and quality within the care delivery continuum and/or improve transparency within healthcare’s convoluted reimbursement system.  Companies with these general characteristics are rare and truly valuable.

More Read

making mhealth addictive
Making Health Addictive: Make It About Life
3 Reasons Why Social Networking Is Not a Waste of Time for Health Professionals
Beyond the Buzz: Doctors Who Blog – An Interview with Dr. Brian Stork
5 CDC Social Media Activities That Influenced Online Conversations About Ebola
How Do We Search For Health Information?

When taken together, the combination of pent-up demand and a scarcity of viable alternatives create a “bubble-like” atmosphere where valuations have crept well outside their historical bounds.  Leading healthcare IT vendors are experiencing unprecedented interest from a range of potential acquirers that fall into three broad categories:

  • Traditional Healthcare-Focused Companiesare uncharacteristically entering new, adjacent domains and paying high prices for healthcare assets deemed strategically significant in the context of a long-term strategy.  Here are a few examples of firms that are paying up to remain innovative, out-front, and relevant to their healthcare constituency:
    • Aetna’s acquisition of Medicity
    • UnitedHealth’s acquisition of Axolotl
    • McKesson’s acquisition of Portico
    • IMS Health’s acquisition of Med-Vantage
    • Verisk Health’s acquisition of Bloodhound Technologies
    • Wolter Kluwer’s acquisition of Lexi-Comp and Pharmacy OneSource
    • TriZetto’s acquisition of GatewayEDI
  • A host of New Global Entrantsview healthcare as a big opportunity and are aggressively pursuing the best-in-class assets that provide a platform for growth or fill out their existing, complementary capabilities.  The following new entrants have made aggressive moves in the past few months:
    • Experian’s acquisition of Medical Present Value – complementing its existing investment in SearchAmerica
    • ADP’s acquisition of AdvancedMD
    • Harris Corp’s acquisition of CareFx
    • Stanley Black & Decker’s acquisition of Infologix – extending Stanley’s alerts and tracking capabilities
    • Capgemini’s recent announcement that it is looking to build out a significant presence in the U.S. healthcare IT market via a string of acquisitions
  • Meanwhile, Private Equity Firms have begun to reemerge following an ’08-’10 hiatus to compete aggressively against strategic acquirers for some of healthcare’s best positioned assets.  Generous option programs and new operating partner structures comprised of experts with decades of experience are viewed as highly attractive by business owners/founders.  Additionally, due to a stockpile of committed and uncalled capital as well as a preponderance of cheap debt, private equity firms are eager and willing to compete aggressively on M&A opportunities:
    • Parthenon’s investment in Eliza
    • Founders Fund series B investment in Practice Fusion
    • Golden Gate’s and Infor’s acquisition of Lawson Software
    • JMI Equity’s investment in PointClickCare
    • Norwest Equity Partner’s investment in Surgical Information Systems

The flurry of activity has resulted in a sellers’ market in which revenue multiples (computed as enterprise value divided by trailing twelve months revenue) have exceeded 8-9x.  This begs the question: is healthcare IT in a bubble?  The answer would be unequivocally “yes” if it weren’t for a range of trends that will persist for the next 10-20 years:

  • 78 million Baby Boomers are reaching retirement age
  • Over-utilization and high cost prescription drugs and medical procedures are not proving to be cost-effective
  • Increasing incidence and complexity of chronic and co-morbid conditions.
  • Healthcare, as compared to most other industries is in infancy in terms of technology adoption – creating a long-standing demand for IT implementation, integration, and optimization
  • Need for new and creative approaches to funding the rising cost of healthcare in light of the strain put on the Medicare and Medicaid entitlement programs
  • Prevalence of fraud, waste, and abuse within the administration and reimbursement processes

A constantly replenishing pipeline of new, entrepreneurial companies is fueling the pioneering spirit and innovation required to advance and redefine the U.S. healthcare system.  Any resemblance to a “bubble” is snuffed out by the sustainability of the current demand and expanding interest from the nation’s leading entrepreneurs, business builders, investors, and advisors that will continue to be attracted to solving healthcare’s complex, long-standing problems.  All in all, it’s a great time to be an innovator in healthcare.

Let us know what you think.

Seth Kneller

Seth Kneller is an Associate at TripleTree covering the healthcare industry, specializing in revenue cycle management, clinical software solutions, geriatric care and healthcare analytics. Follow Seth on Twitter or e-mail him at skneller@triple-tree.com.

TAGGED:EHRsHITmedical records
Share This Article
Facebook Copy Link Print
Share

Stay Connected

1.5kFollowersLike
4.5kFollowersFollow
2.8kFollowersPin
136kSubscribersSubscribe

Latest News

women dental care
What Is a Smile Makeover and How Much Does It Cost?
Dental health
June 30, 2025
HIPAA-Compliant Messaging Apps
Top HIPAA-Compliant Messaging Apps for Healthcare Teams
Global Healthcare Policy & Law Technology
June 25, 2025
recovering from injury
Rebuilding After Injury: Path to Physical and Emotional Recovery
News
June 22, 2025
scientist using microscope
When Healthcare Ends, the Legal Process Begins: What Families Should Know About Probate and Medical Estates
Global Healthcare
June 18, 2025

You Might also Like

healthcare
eHealthMarketing

How Healthcare Practices Can Use Digital Marketing to Retain Patients

December 8, 2020

New Zealand Making a Renewed Effort to Attract Patients from the US With Non-Tort Surgical Procedures-Medical Tourism

February 14, 2011
transparency health records
eHealthMedical RecordsMobile Health

What Does Screening Your Phone Records Have to Do With Health Care?

June 27, 2013
mhealth
eHealthMobile HealthTechnology

mHealth Device Data to Eliminate Annual Checkup, Improve Disease Research

January 29, 2015
Subscribe
Subscribe to our newsletter to get our newest articles instantly!
Follow US
© 2008-2025 HealthWorks Collective. All Rights Reserved.
  • About
  • Contact
  • Privacy
Welcome Back!

Sign in to your account

Username or Email Address
Password

Lost your password?