Norwest, Kaiser, and others bet a fresh $70M on Health Catalyst’s analytics platform

Health data analytics firms have come into vogue as health care providers struggle to reduce costs in the face of declining Medicare and Medicaid reimbursements. Many of these firms have proved to be attractive venture investment targets, and Salt Lake City-based Health Catalyst is a good example. The company has just pulled in a new $70 million round, bringing its investment total to somewhere around $170 million.

Health Catalyst creates data warehouses for clinics and hospitals using data from the providers’ financial and clinical records systems. From the data, Health Catalyst and its customers work together to create clinically effective and financially efficient care protocols. The protocols are designed to create better outcomes and, above all, reduce waste.

The company’s CEO Dan Burton told me that in one case a Texas hospital was doing far more chest x-rays on wheezing children than was necessary. Many of these were prescribed by ER doctors. The data showed that, in a great many of these children, the (expensive) chest X-ray didn’t contribute to the eventual diagnosis. This evidence was then shared with caregivers.

Burton said that one of the most important parts of the process is the way in which the data is shared with doctors. Doctors don’t like having rigid care protocols imposed upon them. However, as Burton explained, doctors are by nature scientific thinkers, and want to use data-driven clinical approaches to treating patients. So the physician leadership of the hospital or clinic must present doctors with the evidence, and the physicians will naturally use the data to make the right care decisions.

Health Catalyst is already doing business with 200 hospitals and 2,000 clinics, Burton said. Customers include some big names, including Indiana University Health, Kaiser Permanente, and Partners HealthCare.

Burton said his company needs the new cash infusion to continue to expand the capabilities of its analytics platform.

The funding round was led by existing investor Norwest Venture Partners, and included contributions from other existing investors Sequoia Capital, Kaiser Permanente Ventures, Sorenson Capital, CHV Capital (an Indiana University Health Company), and Partners HealthCare.

Some new investors also jumped in for the new round. These included Sands Capital Ventures, Tenaya Capital, Epic Ventures, and Leavitt Equity Partners. Notably, Sands Capital usually invests in public companies, and rarely in startups like Health Catalyst.

“We were honored to be significantly oversubscribed for this latest round of financing, and are grateful for the market validation of the effectiveness of Health Catalyst’s platform and solutions,” Burton said in a statement.

Health Catalyst is headed for an IPO, and Burton believes this funding round will provide the capital needed to get there.

Health Catalyst has been providing medical and financial data warehousing for hospitals and clinics since 2008.