Health care firms attract interest from financial backers

January 13, 2013

Two Washington area firms working to engage patients in their health care decisions and treatment have secured financial backing from investors looking to find companies that will play a leading role in the future of medicine.

The national push to reshape the delivery and cost of health care, spearheaded by the passage of the federal Patient Protection and Affordable Care Act, gained new steam after the Supreme Court declared the law constitutional and President Obama won a second term.

It has inspired a generation of companies with business models built on technologies that lower costs and increase patient engagement. Chasing them are investors who see health care as a large and lucrative industry poised for transformation. The right deal could bring a significant payout.

Bethesda-based GetWellNetwork announced earlier this month that it had been acquired for an undisclosed sum by New York private equity firm Welsh, Carson, Anderson & Stowe. Founded in 2000, the company provides television monitors at a patient’s bedside that display health information and videos.

“We spent the first 10 years shouting from the rooftops that patient engagement will be transformative for health care,” chief executive Michael O’Neil Jr. said. “In the last 24 months ... what we thought and screamed about for 10 years became a really powerful reality.”


Michael B. O'Neil, Jr. is the founder and chief executive of GetWellNetwork. (Jeffrey MacMillan/JEFFREY MACMILLAN FOR CAPITAL BUSINESS)

O’Neil said the company’s hunt for strategic investors included both big corporations and private equity, but executives settled on the latter because it would provide greater opportunity to expand. He expects GetWellNetwork will beef up its mobile products as health care information is no longer just distributed inside hospitals.

“It’s happening in our homes, it’s happening in the workplace, it’s happening in schools. For us it’s really about extending the reach of the platform into people’s lives so the providers can really deliver accountable care into their communities,” he said.

Joseph Ibrahim, president of the Healthcare Private Equity Association and principal at Riverside Co., said that private equity firms see the transformation in health care as an opportunity to buy small and medium-size companies that can be made into big players through greater access to capital, strategic partnerships and new markets.

“Change drives opportunity and the health care system is in constant change,” Ibrahim said.

District-based WiserTogether earlier this month revealed its own deal, securing an undisclosed infusion of venture capital from Richmond-based Blue Heron Capital.

WiserTogether also aims to engage patients in their health care, but targets them through employers and insurance providers rather than hospitals. Its technology allows patients to weigh treatment options based on criteria that matter to them, such as cost, comfort and recovery speed.

“The traditional lines of how people did business, how people worked together are getting redrawn,” chief executive Shub Debgupta said. “That opens up a tremendous amount of opportunity ... to look at the problem and new business models.”

The WiserTogether deal marks the start of an “intense focus” by the partners at Blue Heron Capital on investments in health care companies over at least the next three to five years, said Tom Benedetti, co-founder and partner.

“As we look at the changing landscape of health care and exploding costs, cost containment is going to be critical in the future,” Benedetti said. “As people try to understand the regulations, one thing is clear: that the current path is unsustainable.”

Steven Overly covers the business of technology, biotechnology and venture capital in the Washington region for The Washington Post and its weekly Capital Business publication. In that capacity, he has written about start-up struggles, investment trends and major drug discoveries.
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