Valuable Validation: Why Investors Are Lining Up To Invest In Electronic Health Records

The digital mantra of “move fast and break things” doesn’t easily translate to the safety-critical world of healthcare.

But once healthtech innovations have proved their mettle, they are subject to rapid uptake in a sector that is increasingly being forced to adapt in order to survive.

Electronic health record (EHR) systems, for example, have become hot property since their value to patients and healthcare systems alike has been proven.

To mark the release of our 1H 2020 Healthtech M&A market report, we look at how EHR applications could play a leading role in creating the sustainable healthcare systems of the future – and how this is resonating with private equity buyers.

To anyone working outside of a major developed healthcare system, the idea that patient records aren’t routinely digitised seems laughable. But medical science has been slow to catch up with the digital revolution that has swept through other parts of our lives.

Patient safety is its top priority, meaning that, by its very nature, the field is extremely cautious. Each project, initiative and innovation must go through a rigorous period of testing and validation before it is judged safe to use from both a medical and privacy standpoint.

Of course, that process extends to EHR systems, which hold reams and reams of the most personal of all data: health information.

In recent years, they have been put through their paces, and have come out the other end representing at least part of the solution to the existential crisis healthcare is currently facing.

Healthcare systems the world over are facing the same triple-edged crisis. Despite dwindling resources, they are tasked with looking after growing populations of people who are living with more complex long-term conditions than ever before.

In short, they are being asked to do much more with much less.

Engaging people in their own healthcare journey – a key objective of many a digital health innovation – has been seen as an integral part of the solution for some time.

A report from health think tank the King’s Fund, published in 2013, for example, said that improving care for people with long-term conditions “must involve a shift away from a reactive, disease-focused, fragmented model of care”  to a “more proactive, holistic and preventive” model in which “people with long-term conditions are encouraged to play a central role in managing their own care”.

Not only does this make for a better quality of life for the people involved, it also reduces the costs associated with complications and avoidable trips to A&E departments.

The same report recommended that, in order to achieve this, people be given access to their own electronic records to help them understand their own conditions and know what steps they needed to take to stay healthy.

In the intervening years, the benefits of EHRs in this model have been examined, investigated and documented.

Based on the results, the United States Office of the National Coordinator for Health Information Technology has concluded they can contribute to more coordinated, efficient safer care and reduce medical errors.

Crucially, they can help healthcare providers improve productivity and reduce healthcare costs through cutting paperwork, slashing the duplication of tests and improving people’s overall health.

Resounding evidence of effectiveness has led to the USA, UK and many European countries embracing EHR, and committing to the nationwide roll out of systems.

All this is something of a boon for the subsector, which is reaping the rewards of validation.

As our report shows, EHR and information management made up 13 per cent of all healthtech M&A activity in the period covered – significantly more than online health services (including web-based pharmacies such as Amazon’s much talked about PillPack) which accounted for just eight per cent of deals.

What’s more, of the eight top acquirers of the last 30 months, three bought an EHR software or support company.

Aside from the value and sheer number of deals, the type of investors attracted to EHR software and software as a service (SaaS) also shows that the sector is ready for primetime.

Compared to the healthtech sector overall, EHR and information services attracted an exceptionally high proportion of private equity buyers in 2H2019.

In fact, more than half, 55 per cent, of all acquisitions were completed by private equity buyers or their portfolio companies, versus just 33 per cent in the general healthtech space.

What the buoyant EHR subsector demonstrates is that while healthtech innovations may take a little longer to “bed in” than those in less conservative spaces, the value of validation is high.

Programmes and initiatives that can show they can make a real difference to patients – and healthcare systems – will always be in demand.

Hampleton Partners is at the forefront of international mergers and acquisitions and corporate finance advisory for companies with technology at their core. Hampleton’s experienced deal makers have built, bought and sold over 100 fast-growing tech businesses and provide hands-on expertise and unrivalled advice to tech entrepreneurs and companies which are looking to accelerate growth and maximise value.

With offices in London, Frankfurt, Stockholm and San Francisco, Hampleton offers a global perspective with sector expertise in: Artificial Intelligence, Autotech, Cybersecurity, Digital Commerce, Enterprise Software, Fintech, Healthtech, HR Tech, Insurtech and IT & Business Services. 

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