This is a guest post by David Chao 

It’s a brave new world for healthcare organizations. Hospitals and other providers are teaming up to form Accountable Care Organizations to take a coordinated, community-level approach to health care.

Health insurance companies are no longer passively paying off claims, but are becoming active managers of their policyholders’ health. Providers and payers are having to change what they do and how they do it.

This requires the use of technology to ensure a free flow of information across clinical and non-clinical systems and across legacy, cloud, mobile, and personal device platforms. As the number of systems increase, this integration challenge will only grow.

How can organizations successfully meet this integration challenge?

1. Eliminate point-to-point integrations

All too often in the past, health care organizations have built custom point-to-point integrations between systems, creating a tangled web of connections. Businesses should instead turn to an integration platform that provides a common interface for all systems.

2. Leverage learnings from other industries and adopt a best-of-breed systems approach

Experience from other industries tells us that sharing data through a single, inflexible system is doomed to failure (contrary to what what some heatlhcare vendors would have you believe). Instead, loose coupling of “best-of-breed” applications has proven to be a far more effective model. Initiatives such as the CommonWell alliance and the SMART API platform are on the right track, but more must be done to push healthcare IT vendors to open up their systems.

3. Be pragmatic 

It seems that as a response to outdated technology in healthcare IT, there is a tendency to over-engineer solutions. As Facebook’s Sheryl Sandberg said, “done is better than perfect.” Case in point: the 10+ years it took for the HL7 v3 healthcare messaging standard to supersede HL7 v2. For many, v3 is now so bloated that it’s impractical. At the same time, use of v2 is so deep-seated that it can’t easily be replaced. Low-tech examples can be very successful, as we see from the adoption of DIRECT protocol (essentially secure email), and the popularity of the secure e-fax feature in Doximity’s doctor platform. When it comes to solving healthcare interoperability challenges, done is certainly better than perfect.

As we’re all well aware, when it comes to technology, the healthcare industry is struggling to play catch up. The HITECH and Affordable Care Acts have provided a real catalyst for change, and it is up to all of us who work in the healthcare space to ensure we work together to deliver on this promise.

David Chao is a Product Manager at MuleSoft where he leads MuleSoft’s healthcare business. In this role, he works with providers, payers and government bodies to improve patient outcomes and lower costs by solving the challenge of interoperability across healthcare systems.

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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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So you’ve developed a cloud-based electronic health record (EHR) or medical device that will drastically change the way we deliver health care.

Just a few years ago, you may have faced a prolonged struggle to gain investment. Practice Fusion CEO Ryan Howard, CEO of Practice Fusion, one of the more dynamic new EHR companies, recalls having to use the cash from a motorcycle accident to pay the salaries of key employees. But by 2009 when the Obama administration calling for doctors to shift to electronic health records, investors saw opportunity.

Today, investors are rushing to invest in digital health.  This will be a “record year” for investment in the health care, Rock Health recently predicted. The research shows an uptick in deals in the first quarter of the year and an increase in venture capital.

But will the elite venture capital firms open their check books for you? With our inaugural health conference HealthBeat coming up next Monday and Tuesday (it’s almost sold out, but you may be able to get a ticket still if you move fast), I caught up with Sequoia Capital‘s Warren Hogarth, and Morgenthaler Ventures‘ Missy Krasner to dig deeper into their digital health investment thesis.

VentureBeat: What’s the primary area of health that you’re currently interested in? What’s the future?

Warren Hogarth: One of the key areas is bioinformatics. It’s everything that is enabled by cheap genome sequencing. We’ve made about a half dozen investments to date in the U.S. and Asia. We have also taken a keen interest in the consumer side and health IT. These new technologies will play a role in engaging people in their health in a complete way.

Morgenthaler’s executive in residence, Missy Krasner.

Missy Krasner: A sister theme would be “big data” analytics and business intelligence in health care. There is a tremendous amount of interest in sucking data out of health records and mining data from clinical performance.

Hogarth: We’re talking now about the microbiome, not just the genome. We’re understanding that the microbiome interplays with our health, and we’re seeing a new opportunity for non-invasive treatment and testing.

VentureBeat: Have you addressed the ethical concerns around mining data about the human body?

Hogarth: Patients will have choice and control when it comes to their data. Hopefully, we’ll overcome some of the concerns about the broad misuse of data. The trick is to do it in a de-identified way with a clear process.

Krasner: And in 2014, medical underwriting will be banned so patients won’t be rated based on preexisting conditions. [Medical underwriting is already prohibited for children. -Ed.]

VentureBeat: Are you buying into this “quantified self” trend? Is it empowering for patients to have access to all this data about their health?

Hogarth: I think it’s empowering. I just had my genome sequenced, and my doctor was able to use that information to make a decision regarding my health. Companies like Jawbone are taking reams of data and surfacing it to a physician in a meaningful way.

Krasner: I spent five years at Google Health trying to get patients to engage. We tracked some of the early adopters of Basis, BodyMedia (recently acquired by Jawbone), and other great activity trackers. But there are a couple things that still need to happen. The data that is collected needs to actually be put into nuggets that are actionable. We need to take this data and figure out how to use smart algorithms to provide usable clinical insights. Otherwise we’ll get alert fatigue.

Hogarth: We need to go beyond the “chronically worried well.” We need to make an impact on people who are obese.

Krasner: I did some interesting research by signing up for Weight Watchers. I went to the meetings and subscribed to the mobile product, the device that helps you count activity. It’s a great program but we are still in the stage where patients have to record what they’re eating and put manual data into the app. The next piece of technology will automatically know my patterns. We’ll see a fantastic amount of adoption.

[Editor's note: Krasner will moderate a panel at HealthBeat on the "death" of the personal health record (PHR). That's different from the Electronic Health Record (EHR), which is alive and well and seeing serious innovation. Also at HealthBeat, we'll have executives of the major disruptor EHR companies speaking, from Practice Fusion's Ryan Howard, to the leaders of CareCloud and AthenaHealth).

VentureBeat: Are there areas that you wouldn't invest in?

Hogarth: We don't invest in drug discovery or medical devices that are pre-FDA approval. [Venture capitalists say it's a nuclear winter for medical devices. Read more on that here. -Ed.] It’s too risky, and there is a lack of control. When it comes to devices, I would love to see a culture where things happen in a timely manner.

VentureBeat: What’s the one big health care transformation that you’re most excited about?

Krasner: The one area we haven’t talked about is the new insurance models for health. Patients are being asked to pay more out of pocket than ever before. That whole wave is forcing people to think much harder about where they go. There is no transparency around quality and price. There is a big opportunity here.

Hogarth: We will see a big transformation with employee sponsored healthcare — we’ll see businesses not offering insurance. You’ll shop and make a decision about health care based on price. We’re looking hard at startups that consumerize this experience.

Meet and mingle with health investors at HealthBeat, VentureBeat’s conference in San Francisco on May 20 and 21. Partners from Sequoia Capital, Bessemer Venture Partners, Norwest Venture partners, and Kleiner Perkins Caufield Beyers will speak on a panel “Health IT: The Numbers, The Funding, The Exits,” about the drivers making this industry segment more appealing to investors. 

photo credit: Emmanuel Gadenne via photopin cc

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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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This is a guest post by Jiff CEO Derek Newell

Digital health may be garnering all the glory for its promise to transform health care, but take a closer look and you’ll find a promising next wave of health care investments.

With a proliferation of mobile apps and data being generated at a dizzying pace, few investments have yet to fulfill their financial promise. The real money will be made when companies build services around these applications, make the data actionable, and connect all this inbound patient data to the physical health care system.

Expect companies that find new, creative ways of connecting data to patients, determine what to do with the data when it’s generated, and figure out ways to creatively (and profitably) engage the health care system, to attract the attention of VCs and entrepreneurs alike. Here are three areas worth watching.

Smart sensors

What if a device could predict whether you were going to catch a cold, succumb to diabetes or even your risk for getting cancer? Sounds a little far-fetched, but a new generation of sensors holds the promise to do just that.

Companies developing smart sensors that can be placed on the body or in the home that can accurately, non-invasively predict your chances of becoming ill stand to attract investors’ attention. Component and connection costs are dramatically dropping, while at the same time the value of connecting to the Internet has dramatically increased. Just think of Tesla’s ability to collect data from its cars. Look for value in companies that develop sensors that collect, connect and predict high-cost events that can be prevented by timely intervention.

Software systems for data analysis

Data generated from new smart sensors holds little value if it can’t be analyzed and acted upon. New investment opportunities in the companies that develop software systems to analyze data and determine what to do with it will ultimately be very profitable for some investors. Single-use systems, where a single sensor talks to a single server designed to analyze its data (which is the way most are architected today), will be much less valuable than servers that can import and analyze data from dozens, hundreds or even thousands of sensors.

Businesses across the spectrum are developing algorithms to analyze, for example, whether a person’s blood pressure and weight require a fitness program or whether other symptoms merit immediate provider attention. The smarter the software, the better. Just imagine patient alerts being delivered to warn of an increased risk of illness before the illness is even detectable through symptoms. Watch for large companies, such as IBM, to jump into the fray while new companies emerge to help connect all the dots. It’s also worth keeping a close eye on artificial intelligence companies.

New service models for patients

Smart sensors and smart software, however, will only go so far. At some point, we’ll need good old-fashioned people power. A new crop of services companies will arise to give virtual care a healthy dose of checks and balances. Take, for instance, the smart sensor that detects a racing heartbeat or chest pain.

Software algorithms will take in the information, analyze it and determine, for example, that a person needs immediate attention. But what if the racing heartbeat was just a false positive because the person had just climbed stairs? Activating an expensive health care system will be a waste of money, so services companies that provide the human intelligence to validate and verify the information will be required. A second type of services company will also emerge to manage the care.

Everything that can be done digitally and virtually will be done digitally and virtually. This will dramatically improve access to and efficiency of the traditional health care system. Call centers will be staffed not just by the traditional nurse, but also by physicians, pharmacists and other professionals who can provide a higher level of care.

Derek Newell brings more than 20 years of experience growing and leading innovative health care technology and services companies to his role as CEO of Jiff Inc. He is passionate about exploring the intersection of health care and emerging technologies, and believes that health outcomes and wellness improve when mobile and digital health technologies connect consumers with the traditional health ecosystems. 

Prior to joining Jiff, Newell was president and CEO of Robert Bosch Healthcare. While at Bosch, Newell worked to build Bosch into the world’s largest remote patient monitoring company. Previously, he was the CEO of Health Hero Networks, a US-based remote-patient monitoring company, and the chief marketing officer of a leading disease management company. 

Derek is a leading voice in the areas of health care technology and finance. He has co-developed and taught health care finance classes at the Haas School of Business from his alma mater at the University of California, Berkeley, where he holds graduate degrees in business and public health.

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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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Maintaining a healthy lifestyle is not only about getting exercise and eating well. Making wise purchasing decisions is also a factor, but consumers often let cost dictate their choices. Linkwell has partnered with twenty-two insurance providers and big name brands to deliver coupons for “better-for-you” products to members of the network. Participating brands include Kellogg’s, Campbell’s, Unilever, Proctor & Gamble, Werther’s Original, Centrum, and Splenda.

While it is a stretch to call some of these brands “better-for-you,” insurance companies, brands, and retailers respond well to the marketing opportunities. The network gives them direct access to 100 million consumers through health plan direct mailings, websites, micro sites, emails, and mobile apps.

This third round of funding will bring additional health plans, brands, and retailers onto the platform. Health benefits company WellPoint led this investment, with participation from existing investors Spark Capital and HLM Venture Partners. Mass.-based Linkwell has raised $27.3 million to date.

The digital health industry grew dramatically last year and a funding report issued by Rock Health indicated that it will continue to thrive. Health consumer engagement represented $237 million in funding in 2012. These types of companies work to strengthen the connection between insurance providers and their consumers.

As many of the 45 to 50 million uninsured consumers get health insurance in 2014, this market will take off and millions more will be able to save money on health-promoting products like artificial sweeteners and caramels. Read the press release.  

In the first weeks of 2013, health care technology startups are already closing some major funding rounds. The latest to benefit from Sand Hill Road’s burgeoning interest in the sector is a Washington D.C. based company called Audax Health, which raised almost $21 million, according to an SEC filing.

Backed by former Apple CEO John Sculley, Audax works with insurance companies like Cigna to help consumers devise online personalized health plans. Users earn points and rewards for eating well and exercising regularly. Its flagship product is Zensey, which combines gamification tactics, social networking, and secure medical data sharing.

Grant Verstandig, CEO of Audax Health

The startup was founded in 2010 by 23-year-old college dropout Grant Verstandig. The idea came about when Verstandig, a lacrosse player and student at Brown University, experienced a succession of injuries. During his recovery, he discovered that he could find few resources online that provided an easy, personalized, and social patient experience.

Verstandig revealed in Forbes that he subsequently dropped out, moved to D.C., and pursued his dream to bring “social networking and customization to health care, in a way that protected personal privacy.”

The funding is an impressive effort from such a young founder. Eight of the companies’ heavyweight directors are named on the SEC filing, including Sculley, former National Cancer Institute Director Richard Klausner, and John Rowe of Columbia University’s Mailman School of Public Health.

The Washington Business Journal reports that this is part of a larger $45 million fundraising effort. The company raised funds in a mix of debt, options and other securities.

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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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For more funding news as it happens, subscribe to our Deals Channel feed. You can also follow VentureBeat on Twitter, @venturebeat, to view funding news as it’s published.

Kickstarter’s best of 2012: 2.2M backers, $319M raised, 18K projects funded

Kickstarter released its “best of” list for 2012, and the numbers are impressive: 2.24 million people funded at least one project and pledged a total of $319 million. That’s more than $600 per minute over the course of the year, with 18,109 projects successfully funded. The category with the most funded projects was music, with 5,067 projects funded, but games took in the most cash: $83 million. An astonishing 17 projects took in over $1 million each. Read more on VentureBeat.

Money, money, money: U.S. VC investing up 10% in 2012

U.S. venture capitalists were busy in 2012, bringing overall investment activity for the year up 10 percent compared to 2011. Venture firms invested a total of $20.6 billion last year, according to data from Thompson Reuters and the National Venture Capital Association. In 2012, there were overall 55 new funds created. Thompson Reuters and NVCA consider a fund new only if the money is new. Investors involved are likely involved in previous funds. Overall, the top five venture capital funds led 55 percent of investing in 2012. Read more on VentureBeat.

Digital health market soars as consumers take control of their bodies

Today, health technology accelerator Rock Health released its 2012 Year-End Funding Report. Venture capital funding of digital health grew dramatically in 2012. Investors funneled 46 percent more money and made 56 percent more deals in health care in 2012 than in 2011, with the cumulative funding totaling $1.4 billion last year. This sharp incline contrasts with declining investment in traditional healthcare fields. The median amount of all digital health deals came in at $6 million,and there here a strong funnel of deal leading to potential IPOs. The data also revealed that a significant majority of venture firm only made one investment in digital health companies, and many of the deals were from strategic investors. Read more on VentureBeat. 

AthenaHealth scoops up Epocrates to bring a mobile toolset to doctors

Epocrates Inc., a medical applications company based in Silicon Valley, is being scooped up by AthenaHealth for $293 million. According to a company press release, AthenaHealth will pay $11.75 per share, a 22 percent premium to Epocrates Friday closing price. Massachusetts-based AthenaHealth provides cloud-based services and tools to doctors and hospitals. Epocrates is an attractive prospect for AthenaHealth, as it has built up brand-name recognition with doctors. Read more on VentureBeat.

Classified Communication: As important for hospitals as it is for spies

Care Thread, which provides secure collaboration tools for hospital providers, completed $250K towards a $750K seed round. Care Thread’s HIPAA-compliant mobile messaging solution provides secure channels that teams of health professionals can use to collaborate. This increases efficiency and enhances productivity, while also impacting the quality of care. The Institute of Medicine estimates that between 44,000 and 98,000 Americans die each year from preventable medical mistakes in hospitals, which are often the result of lapses in communication. Care Thread will use the money to advance the development and commercialization of its product. Slater Technology Fund let the round. Read the press release.

Bill Gates, Evan Jones, and Yuri Milner give their “2 cents” to Foundation Medicine

Foundation Medicine has expanded its Series B round to $56 million, adding $13.5 million from new investors Bill Gates, Evan Jones, and Yuri Milner. The company first closed the round in September of 2012 at $42.5 million. Its technology investigates the genetic makeup of cancer patients and applies this knowledge to matching patients with the best treatments. The flagship product, FoundationOne, is a genomic profiler that uncovers genetic alterations in a patient and reports them to the physician. With a deeper understanding of each particular case and the ways the cells are working, physicians can better prescribe drugs, clinical trials, and other medical regimens. This additional financing will contribute to expanding commercial operations and clinical trials, as well as develop new genomic profiling capabilities. Read more on VentureBeat.

Get ‘em while they’re hot: Mosaic sells out stakes in solar projects

Mosaic, an online marketplace that connects investors to solar projects, sold out its first four projects less the 24 hours. Over 400 investors contributed anywhere between $25 and $30,000 to invest a total of $313,000. The average investment was $700. To date, Mosaic has raised over $1 million from investors to finance 12 rooftop solar power plants in California, Arizona, and New Jersey. Read the press release.

Corrected 1/9/2013: The Vuclip news was in error. We’ve removed the item.

Seismic shifts are occurring in the health industry. Policy is changing at the federal level, cultural attitudes about wellness are evolving, and new forms of technology are transforming the way patients relate to their bodies and the way clinicians practice medicine. One of the most important trends to watch is the growth of the digital health sector.

Today, health technology accelerator Rock Health released its 2012 Year-End Funding Report. The findings indicate that digital health technology will continue to thrive and become an increasingly significant part of health care industry, as well as the entrepreneurial ecosystem.

Venture capital funding of digital health grew dramatically in 2012. Investors funneled 46 percent more money and made 56 percent more deals in health care in 2012 than in 2011, with the cumulative funding totaling $1.4 billion last year. This sharp incline contrasts with declining investment in traditional healthcare fields, like biotechnology, life sciences, and medical devices.

The most common theme for investment was health consumer engagement, which represented $237 million in funding. Navigating the tangled health care industry can be daunting. These companies help consumers figure out which care options are best for them and connect them with well-matched providers. Interest in these services is exploding among consumers and investors alike as the implementation of the Affordable Care Act (aka Obamacare) looms closer. Of the five largest deals, which represented more than 20 percent of the entire year’s funding, four were in this area.

“There are approximately 45 million to 50 million uninsured people today,” said Rock Health Chief Strategy Officer Malay Gandhi in an interview. “As we move towards health reform, the biggest impact will be in the insurance market — between 60 and 80 percent of these people will have moved into the insurance market in 2014, depending on the study. There is going to be a marketplace for retail health care, and consumers are going to need help with their purchases and decisions. Venture firms are making investments this year for 2014.”

In addition to health care reform, Gandhi also said that mobile technology is causing consumers to take a greater stake in their physical health, leading investors to take a greater stake in products that help them do that. About $150 million in venture funding went toward personal health tools and tracking last year. The quantified self movement is taking off as people are scoop up devices like the Nike FuelBand, Jawbone, and FitBit.

A number of apps also help people gain perspective on their physical well being and live healthier lives. Whether they provide healthy recipe ideas, detail workout regimens, or create social networks to reinforce positive habits, the companies that make these apps are instrumental in preventing illness and epidemics like obesity. Furthermore, people with chronic illnesses like diabetes can use consumer-facing technology to track their bodily functions and stay on course with treatment plans.

The third most common zone of investment are tools that capture and track clinical health records, which generated $108 million in deal flow. Health care organizations like insurance companies, clinics, and hospitals traditionally have gross inefficiencies in how they run, operating on heavily bureaucratic systems that are time-consuming, expensive, and at times, life threatening. Digital health companies that target the enterprise are creating more effective infrastructure by developing systems for electronic health records, timetabling and scheduling software, and communication tools.

When analyzing this data, Rock Health only included companies that received more than $2 million in venture funding. The median amount of all digital health deals came in at $6 million, nestled between a median $3.8 million for first rounds and $8.4 million for second rounds of financing. Castlight Health’s $100 million Series D round in May was the largest deal of the year, raised to grow its platform where employees compare the pricing of their healthcare options. Rock Health also found that there is a strong funnel of deals leading to potential IPOs, and rumors have Practice Fusion, Castlight, and ZocDoc as the most likely candidates to go public.

The data reveals that while venture firms are interested in health startups, they are not filling their portfolios with them. Of the 179 organizations that made digital health investments, only 35 made more than one deal, and only eight made three or more. Qualcomm Ventures led the pack with six health investments in 2012. Interestingly, many of the most active venture outlets in digital health are strategic investors, as opposed to traditional venture capital. Gandhi attributes this to the healthcare industry’s commitment to changing from within.

Overall, 2013 stands to be a successful year for digital health startups and their investors, not to mention the consumers who are gaining more and more control over their health.

Check out the slideshow featuring the report’s highlights: 2012 Digital Health Funding Report by @Rock_Health from Rock Health

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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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This year, Silicon Valley had a few big moments of clarity and cooperation between entrepreneurs and digitally-savvy patients and doctors.

Outraged by the healthcare industry’s slow adoption of digital systems, some tech entrepreneurs questioned whether doctors could be replaced by machines altogether. Vinod Khosla likened modern medicine to witchcraft, and IBM supercomputer Watson was set to work to help oncologists treat cancer patients at Sloan-Kettering.

Encouraged by “meaningful use” incentives, healthcare providers and hospitals finally embraced the cloud. In 2012, 72 percent of office-based physicians used electronic medical record or electronic health record (EMR/EHR) systems, up from 48 percent in 2009.

To empower patients to monitor and track their health, entrepreneurs produced some seriously cool hardware: one Cambridge, Mass. startup developed an under-helmet skullcap that alerts a nearby physician when an athlete’s collision is potentially dangerous. Another created a biosensor that uses an iPhone or iPad camera to provide touch free heart rate measurements. MIT researchers produced Bandu, a small wristwatch-like device that will monitor the body for signs of stress then take steps to counteract it.

Many of these entrepreneurs were supported by venture capital firms for the first time. Venture investment in digital health grew by 43 percent year over year, according to a soon-to-be released report from Rock Health.

With so much activity in this space, VentureBeat sat down with Nate Gross, cofounder of Rock Health and doctors’ social network Doximity, to compile a list of the ten biggest health-tech stories that shocked and amazed us this year.

10. Scanadu brings vitals home

Scanadu recently unveiled three devices that can be used at home to monitor and track your vitals. One of them, Scout, is a sensor that people hold up to their temple; in less than ten seconds, it will collect data on pulse, heart rate, electrical heart activity, temperature, heart rate variability, and blood oxygenation. The device should be available by the end of 2013 for $150. The company’s founding team includes Walter De Brouwer, an academic and founder of TEDGlobal. De Brouwer was inspired to start the company after his son suffered a brain trauma and was hospitalized for a year.

The story: “‘People can get access information about health and connect to each other about health, but the piece that is missing is that people can’t get information about their own body,’ said De Brouwer. ‘By getting precision diagnostics into the hands of people, this can enable them to get early detection and to inform their conversations with their doctor in the ways that haven’t been possible.’

9. The rise of Practice Fusion

Practice Fusion, a provider of free, web-based EHRs, experienced a meteoric rise this year. It was no overnight success. The company launched in 2005, when there were few incentives for doctors to abandon paper-based systems. Company spokesperson Emily Peters said the stimulus plan and government investment in health IT kept them from going out of business during the economic recession. When Practice Fusion’s users (around 50 percent are doctors) started to receive meaningful use checks in March or April this year to adopt and use an EHR, the technology took off.

“This is the year we went from being the scrappy startup to a big deal” said Peters. A survey conducted by InterWest partners found Practice Fusion is considered the most likely EHR company to go public, followed by ZocDoc and Castlight. In July, the company raised $34 million at a valuation of $500 million, up from $100 million in its previous financing round.

The story: ”‘Ninety percent of doctors do have a computerized billing system, but 90 percent of doctors don’t have an electronic medical records system,’ said Practice Fusion CEO and cofounder Ryan Howard. ‘That means the focus is on getting paid, not on healthcare.’”

8. VCs open their checkbooks

Venture capital investment in med tech and health IT skyrocketed this year. According to Rock Health’s survey, 135 digital health companies raised more than $2 million in funding. Among the 177 investors that poured funds into these companies, roughly 10 percent are completely new to the space (based on a sample from a single quarter). Why this surge in interest? Morganthaler, the venture firm that invested in Doximity and Practice Fusion among others, saw it coming.

“As the requirements under both the HITECH Act and the Affordable Care Act [Obamacare] continue to roll out, there will be additional opportunities for startups in healthcare,” said Rebecca Lynn, a health-tech focused partner at Morganthaler. These acts change the incentives in healthcare with both a carrot and a stick. She explained, “As the incentives change, payors and providers will need to adopt new technologies provided by these startups to be efficiently compliant and competitive.”

In recent months, angel investors also stepped up their investment in health tech, in part due to partnerships like SecondMarket’s with Startup Health.

The story: ”‘Our members might be interested [in health tech] from a macro perspective, but they don’t feel comfortable enough to deploy capital,’” said Jeremy Smith, SecondMarket’s CSO. SecondMarket’s investors are encouraged to pour thousands of dollars into promising health tech startups as well as Startup Health’s new fund. According to a document available to SecondMarket’s network of accredited investors, Startup Health is building up a $7.5 million Innovation Fund to support up to 100 digital health and wellness startups.”

7. Health tech incubators proliferate

A growing number of startup accelerator programs this year specialized in digital health. Nike+ launched its accelerator in partnership with TechStars to encourage developers to build health and fitness applications. This year, the New York Digital Health Accelerator, a program with an initial investment of $4.2 million, also announced its inaugural class. This is indicative of two things: increasing venture capital investment in the space and a booming interest among entrepreneurs.

The story: “The catch: all the products these companies create will have to use the Nike+ platform and/or NikeFuel ‘to build offerings that inspire and assist people to live more active, healthy lifestyles.’”

6. The steady move to the cloud

By 2014, Obamacare mandates hospitals and practitioners with paper records switch to electronic medical records. It will not be a simple transition. However, physicians see the benefits of storing health records in the cloud, which makes it cheaper and faster to organize massive amounts of information. At Seattle’s Children Hospital, in one notable case, researchers were able to work with a huge amount of data to identify patients whose cells looked similar, and identify a rare bone disease called craniosynostosis.

The story: “‘The healthcare industry is fragmented, complex and paper-based,’ said Darin Brannan, president and CEO of ClearDATA, a provider of cloud computing services. In 2012, that began to change with the major shift toward web-based EMR technology.”

5. The Allscripts drama

One-time high flyer Allscripts seemed poised for success, given the EHR boom due to government stimuli. But the company landed in a steaming pile of drama in April after its chairman was fired in a board dispute and three directors resigned in protest. With shares plummeting, the Chicago-based company announced it would bring on a new CEO lured from its rival, Cerner. Then, the company experienced a sales slowdown when customers tried to upgrade to a new product — one that would actually let their doctors’ offices and hospitals share digital patient records.

The story: “The lesson for up-and-coming health IT vendors? ‘The meltdown showcased the rocky transition our sector is going through trying to get legacy vendors to quickly adapt to a changing marketplace and regulatory pressure,’ said Peters of Practice Fusion.

4. Human genome sequencing hits $1000

The quest to harness the potential of human DNA for the purposes of diagnostics and drug treatment hit a major threshold in January 2012: the thousand-dollar genome. Carslbad, Calif.-based Life Technologies introduced a machine to map an individual’s genetic makeup. The news inspired entrepreneurs to harness this data, banishing a one-size-fits-all approach to medicine.

The story: ”‘Every disease has a genetic component, and yet largely none of the available genetic information is being used today to treat patients,’ said Dr. Dietrich Stephan, cofounder of Navigenics. ’With the knowledge we have now about your genes, we are finding ways to diagnose sick people earlier and develop medicines to zap the core defect.’”

3. Khosla made THAT prediction

Tehc luminary Vinod Khosla declared at the Rock Health Innovation Summit that medicine is not so disimilar to witchcraft. The entrepreneur, who made his mark during the dot-com boom, said that machines driven by large data sets and computations power would be better for patients than the average physician and imagined a doctor-free future. Needless to say, this went over great with the medical community.

The story: “‘Eventually, we won’t need the doctor,’ said Khosla. Columbia University-trained doctor Bijan Salehizadeh was one of many critics who vocalized resistance, responding that he was ‘nauseated’ by Khosla’s remarks.”

2. Amazon unveils its free genetic database

Armed with data, developers with little or no medical training can help determine the underlying genetic cause for some of the most common diseases. Amazon’s cloud computing unit, Amazon Web Services, announced in March it would store for public use the entire contents of the National Institutes of Health’s 1000 Genomes Project, a survey of genetic information around 200 terabytes in size.

Developers can freely access the system and can choose whether or not to share their research. The people in the study consented to have their data made public, and there is no personal information linked to their genetic data.

The story: “‘It’s the only public data set like this,’ Lisa D. Brooks, program director for the Genetic Variation Program of the National Human Genome Research Institute. ‘It is an almost complete set of human genetic variants.”

1. Healthcare reaches government

Todd Park, cofounder of health IT juggernauts Athenahealth and Castlight, was promoted from CTO of the Department of Health and Human Services to CTO of the United States.

With this executive appointment, med tech entrepreneurs gained a powerful new ally. Park was instrumental in launching the Presidential Innovation Fellows program, which invites innovators from outside government to work with the powers that be to solve socio-economic problems, particularly those facing health providers and hospitals. It should come as no surprise that one of the fellowships was awarded to a team building tech to enable millions of Americans to easily and securely download their own health information electronically.

The story: “‘We have an opportunity to make this country shine,’ Park said. The government’s official document on its Digital Government Strategy broadly sets out to ‘ensure that as the government adjusts to this new digital world, we seize the opportunity to procure and manage devices, applications, and data in smart, secure and affordable ways.’”

Image credits: lenetstan/Shutterstock, JCD/Shutterstock, Maria Ly/Flickr

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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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Sept. 9 - 10, 2013
San Francisco, CA

Early Bird Tickets on Sale

In the past three years, 21 million people had their sensitive health records hacked in breaches that were significant enough to be reported to the federal government.

The actual number is likely far higher; millions of smaller hacks likely went un-reporrted. The Office for Civil Rights reported that (the “OCR”), from 2009, 477 breaches affecting 500 people or more were reported. In total, the health records of 20,970,222 people were breached, according to the OCR’s website.

At CloudBeat, we’ll be debating this in several ways. First, a panel of healthcare-technology experts will gather discuss ways to improve security for cloud-based systems. In this sector, there are still significant questions and concerns: Cloud security, cloud encryption and HIPAA requirements regularly top the list.

In the past, the most sensitive records were stored on film, tape and paper charts. As data gets digitized, hospitals, physician practice groups, software and hardware companies, consulting firms and affiliated health care organizations are grappling with how to keep it secure.

Second, we’ll be inviting the major healthcare record and billing company, McKesson, to discuss how that $22 billion company is applying new big data initiatives to its data, using things like SAP’s Hana in-memory database platform in the cloud.

(CloudBeat is unique with its emphasis on customer case-studies. It’s not abstract theories and ideas — executives will reveal their hard-frought solutions to very real technology problems.)

Get it this right, and the opportunity is enormous: market and legislated demand has created $35 billion health IT market which is growing at a rate of 20% year-on-year. In the U.S. alone, approximately 900,000 healthcare providers are migrating electronic health records.

So join us for the panel to learn how Scott Whyte, Vice President of IT Connectivity at Dignity Health, the fifth largest hospital provider in the nation and the largest hospital system in California, is addressing the “perfect storm” of challenges facing today’s healthcare providers and how they are using cloud computing to help solve these technical issues.

The audience will learn about Dignity Health’s journey toward HIPPA-compliant cloud infrastructure technologies in order to meet the growing needs of hospitals and healthcare delivery partners across the country — as well as the cost savings associated with this technology leap to the cloud.

Whyte will be joined by Darin Brannan, president and CEO of ClearDATA, who will address the key technology, regulatory and privacy issues facing the various constituents in the healthcare supply chain. The panel will be moderated by VentureBeat’s own executive editor, Dylan Tweney.

In the McKesson case, we’ll discuss how its big data initiatives are letting it process its ERP and financials faster than ever before, allowing it to analyze this data realtime to track which of their customers are profitable and which ones aren’t, and to make recommendations on how to make them more profitable. The session will be moderated by VentureBeat editor-in-chief, Matt Marshall

Healthcare is a hot topic: as the market matures, more mainstream cloud providers will introduce solutions specifically designed for this vertical.

Top image via Shutterstock