Investors boost health care IT funding

A stethoscope resting on a laptop.

TEXT OF STORY

Kai Ryssdal: Among those holding a little more tightly to their checkbooks in this recession is a group of people whose job it is to spend money. Venture capitalists aren't venturing quite as much as they used to. Investment in biotech, for just one example, is down by roughly half since the beginning of last year.

One sector is holding its own though. It's even up a little bit. Health care information technology -- all the software and management systems that keep doctor's offices and hospitals humming along. From the Marketplace Entrepreneurship Desk at Oregon Public Broadcasting, Mitchell Hartman reports.


MITCHELL HARTMAN: Until recently, when venture capitalists put money into medicine, they went after the hot stuff: cutting-edge drugs and heroic surgeries using space-age medical devices.

SETH RUDNICK: Funding those things used to be a no-brainer, because people wanted to live for an extra six months or an extra year.

Dr. Seth Rudnick heads up health-care investment at Canaan Partners, a Silicon Valley venture capital firm. In the past decade, biotech and medical device companies routinely sucked up $1 to $2 billion every quarter. After all, drugs to fight cancer and pace makers to keep hearts beating are expensive to develop, and deploy.

RUDNICK: Suddenly, maybe that's not going to be cost-efficient. So you may shift your funding to those things that change how long people live healthy lives.

SCOTT WALLACE: We all of a sudden have to focus on the routine care of chronic conditions, early, rather than the life-saving, really glamorous, glitzy treatment of acute conditions after they've progressed.

Scott Wallace is a fellow at the University of Virginia's Darden School of Business. He used to head the National Alliance for Health Information Technology. He says investment dollars are following the government's new reform agenda: to control costs by promoting the most efficient, cost-effective treatments. Which in turn hangs on putting more patient data online, then using it to coordinate care. Take, for example, one of the most pervasive conditions, says Wallace: diabetes.

WALLACE: In the patient's home, the patient takes a blood-sugar reading, the patient steps on a scale, they can use a blood-pressure cuff that is connected to their computer and somebody in a caregiver's office can look at that data, and can say, "Wow, this patient is trending toward a problem; we need to intervene in this really early.

But, Wallace says, we're not anywhere near there yet.

WALLACE: The systems to support that don't really exist, and there's an enormous opportunity, and now an enormous incentive, to put those kinds of systems into place.

Including $19 billion in the Obama stimulus package to encourage doctors to get up to speed using electronic medical records.

LUIS MACHUCA: Health care IT is a good place to be right now from a fundraising point of view.

That's Luis Machuca, CEO of medical software company Kryptiq in Portland. Kryptiq's software securely connects medical offices online. It allows medical staff to use, and share, electronic patient records -- charts, CAT scans and the like -- 24-seven.

MACHUCA: So that point of efficiency, although it's very pedestrian and perhaps not as glamorous as the next new breakthrough drug, really is what stands between us and a better health-care system.

Kryptiq has been growing 20-to-40 percent a year. Machuca says his phone's been ringing off the hook since the president announced his digital medicine incentive plan. It doesn't hurt that doctors and hospitals face penalties if they don't take the bait.

DrChrono.com is another company moving into this space. The two-person New York startup offers Web-based appointment-scheduling for small doctors' offices. It launched in January, and co-founder Daniel Kivatanos says they'll introduce their latest software package in June.

DANIEL KIVATANOS: One of our future goals is to have a billing system that electronic medical records systems can just kind of connect into us and use us as a billing component.

Rocket science, maybe it's not. But that's really not the name of the game anymore. Used to be, the hottest medical startups were chasing hit-or-miss miracle drugs and treatments. Nowadays they're more likely to be like Kryptic and DrChrono: painstakingly tying up the electronic loose ends of our tangled health-care system. Saving a little money, and perhaps a few lives, in the process.

I'm Mitchell Hartman for Marketplace.

About the author

Mitchell Hartman is the senior reporter for Marketplace’s Entrepreneurship Desk and also covers employment.

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