Healthcare investing: Four areas of opportunity

By Gregg Michaelson, Edison Partners

It’s clear that healthcare and, more specifically, healthcare IT, will continue to be a major space for innovation and, as such, heightened investment, even from investors that perhaps have not historically focused on the healthcare market.

Edison Partners has successfully invested in healthcare IT for the last 31 years. Our experience is that the complexity of scaling a company in the space can be more than offset by a truly differentiated product and a great management team that can execute.

Healthcare Investing VC
Gregg Michaelson, operating partner, Edison Partners. Photo courtesy of the firm.

We also know that new regulatory requirements, increased urgency to improve outcomes, and a desire to increase efficiencies has opened up the market for technology companies to provide software and tech-enabled services to payers, providers and big pharma. No matter what lawmakers in our nation’s capital decide, we believe this is a great time to invest in healthcare IT. While it may be a challenge for new market entrants to succeed, here’s where we see opportunity.

Data and network management and interoperability

Obviously, healthcare produces and stores tons of data, but what’s most important now is how to make the data accessible, usable and useful.

Today, data sits across multiple areas within the healthcare ecosystem and few companies are able to give a holistic viewpoint of a patient’s information. Creating access to these data silos requires well-built networks that can interpret the information. In particular, when there are more than 500 EHRs that don’t communicate well with one another, it’s understandable why healthcare professionals have a difficult time gaining a holistic view of the patient.

Population Health Management (PHM) companies like Virtual Health have made great inroads, but we still need to see true interoperability between these systems. While there are some players working to solve for this problem, we believe better solutions are on the horizon.

Interoperability is paramount, and companies offering these solutions are at the tip of the iceberg, making for a very strong investment thesis. Ultimately, interoperability will create usable and useful data that will help healthcare providers identify and predict who is going to get ‘sick’ (trend), and try to make an intervention (analytics).

Patient engagement, adherence and compliance

We are bullish on technologies that will allow healthcare organizations to engage patients and physicians in collaborative ways to drive better outcomes. It’s important for these technologies to create efficiencies, and eliminate the technical, regulatory, security risks and challenges that result from the lack of patients being engaged over the course of their treatment. We invested in Lincor for exactly these reasons.

Low patient engagement rates have become a huge problem leading to incompliance and high readmission costs. Moreover, providing things such as targeted education at the patient’s bedside will not only increase medication adherence and compliance, but also help decrease re-admissions.

For true engagement though, providers need to build and maintain patient relationships once they leave the hospital. We believe that multiple investment opportunities exist throughout the care continuum and look forward deploying even more capital in this area.

Analytics and artificial intelligence

As providers switch to value-based care, the need for new and innovative analytic models to identify high-risk patients, deploy evidence-based medicine, and reduce adverse effects is evident. Healthcare data has become so prevalent that, as mentioned above, it’s become critical to utilize it properly through machine learning that helps to improve outcomes while meeting HIPAA (Health Insurance Portability and Accountability Act of 1996) and other security standards.

We saw a lot of impressive AI companies earlier this year at the HIMSS conference, and believe that it’s just early days for machine learning technologies. AI can and will revolutionize the industry, and in my opinion for the better, but the question remains where we will see the biggest applications.

Changing the perception of data aggregation and analytics while transforming the care delivery model will lead to more innovative healthcare technologies that push the industry to new fronts.

Behavioral health management

Caring for people with behavioral health issues is perhaps the most reactive and negative issue in the healthcare ecosystem. Behavioral health technologies have lagged behind and have proven costly due to lack of patient engagement and lack of public funding.

For example, the rapid rise in opiate addiction has created an epidemic that costs people their livelihood and ultimately their lives. It also costs American taxpayers billions of dollars every year. The need for tech-based behavioral health companies never has been more important than right now if we expect to reduce the long-term cost of care for patients facing mental and behavioral health issues.

Private funding is becoming more and more available for this growing public health problem and Edison Partners will continue to push forward here.

Healthcare IT investing is more exciting than ever.

Companies that can truly deliver value through technology are poised to win in every healthcare sector. Interoperability, payment reform, and greatly heightened connectivity using data and analytics across the care continuum will all be pillars of the new digital and patient centric healthcare model.

Gregg Michaelson is operating partner of Edison Partners and is responsible for advising companies in the firm’s Healthcare IT and Marketing Tech practices. He can be reached at

Photo of healthcare concept on touchscreen courtesy of NicoElNino/iStock/Getty Images