US-based healthcare data technology provider Health Catalyst raised $70m in a series D round last week, proving that companies offering ancillary healthcare services are growing as they seek to help healthcare providers provide more efficient services.
Norwest Venture Partners, the venture capital firm funded by bank Wells Fargo, led the round, which also featured healthcare providers Partners HealthCare and Kaiser Permanente, Sequoia Capital, Sorenson Capital, Sands Capital Ventures, Tenaya Capital, Epic Ventures, Leavitt Equity Partners and CHV Capital, the investment arm of healthcare system Indiana University Health Company.
The round brought Health Catalyst’s total funding to about $165m, with Kaiser Permanente, which invested through its Kaiser Permanente Ventures unit, CHV, Norwest, Sequoia and Sorenson all also contributing to a $41m series B round in 2013, as well as a $41m series C that closed in January 2014.
Health Catalyst has developed a data warehousing and analytics platform for healthcare that helps providers conduct analysis on their clinical, organisational and financial procedures, enabling them to become more efficient. The potential scale of the business can be seen in the $100m, 10-year deal the company signed with Minnesota-based healthcare system Allina Health in Januar this year.
Because its platform also aggregates information from patients’ electronic health records, Health Catalyst’s technology is well poised to enable Allina to navigate the US government-mandated transition from a fee-for-service to a patient outcome-based payment service. As part of the deal, Allina has also taken a sizeable equity stake in Health Catalyst Forbes reported.
As the US healthcare system continues to evolve, the market for Health Catalyst’s technology appears likely to expand. The equity element of the Allina hospital deal may or may not end up making it an outlier in terms of size but the cuts to Medicare and Medicaid reimbursement rates for physicians over the next year will ensure a sizeable customer base available for the company’s service, a base that could be enlarged further if it expands overseas.
Nor is Health Catalyst, the only healthcare analysis service to raise money over the past year. Several other healthcare data analysis startups have secured funding, most notably clinical cancer data specialist Flatiron Health, which raised $130m in a Google-backed series B round in May.
Health Catalyst plans to use the series D cash to support what it calls “significant” ongoing product development, particularly with regard to applications that can improve clinical and workflow outcomes, as it seeks to strengthen its position in what it views as a growing market.
As Health Catalyst CEO Dan Burton said in a statement announcing the series D funding: “As more healthcare organisations are coming to understand, data warehousing and analytics are foundational to their success under new payment and risk models.
“This additional capital will enable Health Catalyst to develop the solutions necessary to offer every health system in the US a roadmap to systematically reduce waste and improve care delivery, across every major clinical and workflow area.”