Funding for digital health startups skyrocketed in the first quarter of 2013, according to a report released today.

Companies in the health care IT space raised almost half a billion dollars (approximately $493 million) in a single quarter. A report from Mercom Capital Group, a global consulting firm, found that 104 startups received funding this quarter compared to 51 in the previous quarter. Many of the early-stage deals were fueled by health accelerators, which have popped up in recent years, including HealthBox and Rock Health.

A recent shift is that the majority of the startups that received funding are marketed to consumers rather than practices, and these include telehealth, mobile health, and scheduling apps for patients.

This trend in favor of consumer health technologies has proliferated despite the increasing interest in electronic health records (EHRs), which doctors are being pushed to adopt by 2015 — or risk paying penalties.

“The enormous market opportunity in consumer-focused health has appeared to pique the interest of investors and is likely to continue to grow as witnessed by the surge in VC activity,” said Raj Prabhu, the CEO of Mercom Capital Group.

While investment in health IT continued at a “torrid pace,” Prabhu’s research team found that mergers and acquisitions remained steady. There were 46 in the health IT space, which is on par with the previous quarter.

The top five health deals of the quarter?

• Health Catalyst for a $41 series B round .
• xG Health Solutions for a $40 million round.
• NantHealth for a $31 million round.
• Fitbit for a $30 million round (although this was reported as an intent to raise).
• One Medical Group for a $30 million series F round .

For more in-depth research, which projects a record year for digital health, check out Rock Health’s report.

Investment in health IT is one of the key themes that will be discussed at HealthBeat, VentureBeat’s upcoming health conference. 

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HealthBeat 2013 is a new conference showcasing how technology is transforming health care. We'll explore how IT is driving out inefficiencies on the hospital, practice, and patient levels. Check out full event details here, and register here.

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Congress is conducting a three-day series of hearings to decide how to regulate the explosion of health apps on smartphone and tablet devices.

Lawmakers from the House Energy and Commerce committee have been holed up to discuss how to balance patient’s privacy concerns and inspire innovation in the developer community.

“Developers are mystified by the rules in this highly regulated industry,” said Ben Chodor [below], the chief executive of mobile health app store Happtique, who called me after testifying alongside a handful of medical experts in Congress today.

The Food and Drug Administration (FDA) has been mulling over this problem for years. It remains unclear which medical and consumer health apps come under its jurisdiction.

“Since the 2011 guidance [that it would be seeking public input], the FDA has held a public workshop on mobile medical apps and has received many public comments, but has not yet issued final guidance,” states a letter the committee sent to the FDA earlier this month.

Gaining FDA approval can take years and thousands of dollars, but it’s worth it for companies like AliveCor, a technology that turns your smartphone into a sophisticated heart monitor.

But what about the vast majority of medical apps that are not for clinical use and are designed for scheduling doctors’ visits or devising a healthy eating plan?

Chodor advised the FDA to clarify that apps sold in a consumer environment, like an App Store, will not come under regulation. The vast majority of health apps fall into this category (only about 15 or 20 percent of all apps are for clinical use.) He explained that FDA approval should only be necessary if the app is intended for physician use to make decisions about your health. “The FDA is in the best position to regulate that subset of apps,” he said.

The total market for health-related app services will reach $26 billion by 2017, according to a study from the consulting firm Research2Guidance.

The burgeoning med-tech community fears that the FDA will step up its enforcement, and shackle consumers health products. This is stifling innovation with developers “waiting on the sidelines” for an official decision, according to Chodor.

“FDA needs come up with their guidelines already — sooner rather than later,” he said.

According to the Washington Post, lawmakers are also questioning whether the Patient Protection and Affordable Care Act would encourage the FDA to define smartphones and tablets with health-related apps as “medical devices.” This has repercussions for the tax that will be levied on the next generation of mobile health products. Medical devices are levied far higher taxes than consumer products and services.

Chodor is concerned that investors are already turning to international markets, where tax rates on medical-related products are lower.

The blurry line between a consumer-focused health app and a medical device is a bureaucratic nightmare. To make matters worse, many of these new health-related apps are used in clinical settings and by consumers. “To put it bluntly, that is the area that no one gets,” said Chodor.

Top image via Tyler Olson// Shutterstock 

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HealthBeat 2013 is a new conference showcasing how technology is transforming health care. We'll explore how IT is driving out inefficiencies on the hospital, practice, and patient levels. Check out full event details here, and register here.

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The cost of sequencing the human genome has plummeted. But how will this benefit doctors and patients?

Biomedical researchers hope to harness data about the human gene pool to usher a new era of “personalized medicine,” which could lead to a highly targeted treatment of disease.

Syapse is a Palo Alto, Calif.-based startup that claims to be one of the largest repositories of human molecular profiles. It has raised $3 million today.

The startup is on a mission to bring human genetic data out of the lab, and into the hands of doctors. ”Health care traditionally has been a field of observational science,” said CEO Glenn Winokur in an interview. “With the advent of being able to measure more complex components of the human body through sequencing, we are able to have more precise diagnosis and treatment.

“Many feel this [personalized or precision medicine] is the future of health care,” he continued, but revealed that the problem is “very challenging” as the data is “new, voluminous, and complex.”

The Social+Capital Partnership led the first round of funding. It’s a venture fund launched by a former vice president at Facebook, Chamath Palihapitiya, who will join Syapse’s board.

Syapse is one of a growing number of Silicon Valley startups that seek to remove some of the guesswork out of medicine.

Randy Scott, a cofounder and CEO of InVitae, said he is working with Syapse on a shared goal of “bringing genomics into everyday clinical practice to truly enable personalized medicine.” Syapse provides the software infrastructure to “connect genomic and clinical information across millions of individuals,” he said in a statement.

Scott is the former CEO of Genomic Health and is an important figure in the genomics sector. He has poured his personal resources into the creation of a dream diagnostic test to help geneticists look broadly for rare, inherited genetic disorders.

Related: Read about the efforts of genome entrepreneurs to sequence the DNA of millions of people, and learn more about the human gene pool.

Syapse is currently sequencing 3,000 patient genomes per quarter. It is working with laboratories and clinics using the latest sequencing technologies to diagnose and treat patients. Customers include Foundation Medicine and Genapsys.

Its flagship cloud-based technology, launched last summer, finds use from labs and companies as a way to deliver diagnostic reports. It generates a full report for physicians, which Syapse electronically delivers.

Winokur said by email that the funding will help expand the team, primarily in the hiring software developers. He also hinted at an additional product, which will be geared at delivering “genomics based solutions” to select hospitals, meaning that patients will someday receive drug therapies based on their individual molecular blueprint.

The company was founded in 2008 at Stanford University by a team of entrepreneurs and software engineers. It an undisclosed angel round, it received $1.6 million. Social+Capital’s limited partners include billionaire philanthropist and entrepreneur Eli Broad, and the Mayo Clinic, among others.

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HealthBeat 2013 is a new conference showcasing how technology is transforming health care. We'll explore how IT is driving out inefficiencies on the hospital, practice, and patient levels. Check out full event details here, and register here.

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QuantiaMD, the website and mobile app for doctors to brainstorm and collaborate on tricky cases, has raised $12 million in venture capital funding.

The Waltham, MA. based health IT startup will use its funding to engage more physicians, and add them to the growing network. Over 160,000 physicians are currently registered — representing about 25 percent of doctors in the U.S.  The technology is secure and encrypted — so it’s safe for doctors to discuss sensitive patient information and offer practical tips.

To remain at the top of their field, doctors need to stay up-to-date on the latest research.. In they past, they communicated through fax and email. It wasn’t an easy task for the founding team to change this behavior, but the persistence is paying off.

“We are replacing antiquated methods, and therefore it takes time to encourage adoption,” said Eric Schultz, the company’s CEO, when asked about the greatest hurdle to growth.

The company is showing signs of traction with its target market: Physicians that regularly use the system spend an average of 45 minutes per week sharing their insights, and asking for clinical advice from the pool of over 500 experts from major medical institutions.

Once they sign-up, they can set up a profile page, review research, access relevant discussion forums, and privately reach out to other physicians. Doctors are keen adopters of tablet devices and smartphones — about third of them exclusively use the mobile app.

QuantiaMD makes it easier for hospitals, pharma’s and health insurance providers as a means to reach doctors — which is key to the company’s business plan. “Most health plans and hospitals still rely heavily on homegrown portals, fax and mail to communicate with physicians,” said Schultz. With the funding, the company will also invest in sales and marketing efforts to reach the top pharmaceutical companies. To succeed, it will need to beat out competitors like Doximity, the “Facebook for doctors” and Sermo, an online community for physicians.

The funding round was led by existing investor, Fuse Capital.

Top image via Shutterstock

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HealthBeat 2013 is a new conference showcasing how technology is transforming health care. We'll explore how IT is driving out inefficiencies on the hospital, practice, and patient levels. Check out full event details here, and register here.

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