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Venture capital funding for healthcare technology rebounds, investors log $1.6 billion in deals in Q3

VC cash for health IT has hit $3.57 billion for 2015 so far.

Mike Miliard, Editor, Healthcare IT News

Venture capital funding for digital health rebounded in the third quarter of 2015, up 32 percent quarter over quarter with $1.6 billion doled out across 148 deals, according to a new report from Mercom Capital Group.

VC cash for health IT has hit $3.57 billion in 2015 so far.

"VC funding into healthcare IT companies bounced back this quarter after a slow start this year," said Mercom Capital CEO Raj Prabhu, in a statement.

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[Also: Tracking 2015 mergers and acquisitions]

Most of the growth came from funding for technologies aimed at the public. Companies focused on the provider side gathered $357 million in 42 deals (compared to $473 million in 41 deals in Q2 2015). Consumer-focused firms raked in $1.2 billion in 106 deals this quarter compared to ($727 million in 98 deals in Q2 2015).

"Rating, booking and comparison shopping companies had their best fundraising quarter since we began tracking the category," said Prabhu: $728 million in 15 deals. Mobile health companies ranked second with $319 million in 59 deals – apps scored $206 million and wearables got $88 million. Personal health and wellness companies, meanwhile, accounted for $114 million in 17 deals.

On the provider side, practice management companies attracted $72 million across five deals; telehealth companies raised $65 million in 14 deals, and data analytics firms scored $61 million in 14 deals.

The top VC deal this quarted looked overseas: $394 million raised by Guahao, an online portal for patients in China to book appointments with physicians. ZocDoc, another online booking platform raised $130 million. Practo, which created a physician search engine to book appointments and rate providers, raised $90 million. Kareo, which develops cloud-based medical office software for small practices, raised $55.4 million. Grand Rounds, which matches patients with specialists and connects them for second opinions on a medical diagnosis, scored $55 million.

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"Consumer-focused health IT companies have continued to grab a larger portion of VC funding but have consistently lagged practice-focused companies in M&A activity," said Prabhu. "This quarter, however, M&A activity increased with 18 consumer-focused transactions, the highest number for these companies in a single quarter. It is a very positive trend if it continues because IPOs have not proven to be a sure path to success for the sector."

On the M&A side, IBM's $1 billion acquisition of Merge Healthcare, maker of imaging technology, was far and away the biggest. Emdeon's $910 million acquisition of payment tool developer Altegra Health was next on the list, follwed by Premier's $400 million buy of CECity, which develops a cloud-based data analytics for performance management.

Twitter: @mikemiliardHITN