How Health Care Technology Is Minting A New Class Of Billionaires

Perhaps we should add the Affordable Care Act is fueling the rise of software support for human resources and other essential functions for medical practice.

The introduction of the ACA along with suitable digital health aids has allowed SAAS companies to fluorish. One example is Zenefits.

Zenefits’ announcement that it raised $500 million at a $4.5 billion valuation marks another milestone for the health care information technology and services industry. Zenefits manages health insurance, payroll, and other benefits for small businesses. The valuation was stunning, and it makes Parker Conrad, who launched the start-up in 2013, a near-billionaire with a net worth of $900 million, based on an estimated stake of 20%, according to a source close to the company.

For decades, health care information technology, now sporting the hipper moniker of digital health, was the poor relative of tech and biotech. The market valuation of 10 health IT companies in March 2010, when the Affordable Care Act was signed into law, was less than $20 billion. Today, their value is up nearly 90%. Cerner CERN -0.74%, a vendor of electronic health records, is worth alone $24 billion.

The health care industry has long resisted newer technologies, the kind that made the financial and travel industries more efficient. It took the Affordable Care Act and the 2009 HITECH Act which calls for the computerization of patient records, to unlock opportunities for entrepreneurs, and unleash new wealth. All of these changes have attracted venture capitalists.

Of course this cost is added to the overall overhead of Health Care, paid for out of insurance premiums, patient pockets and/or insurance industry profits. The burden has become serious to substantial, effecting bottom lines and diverting capital from true lifes sciences R & D.

Venture capitalists who have long ignored health IT because of poor prospects, have taken notice. They poured $6.5 billion into digital health start-ups last year—more than five times the amount in 2010, according to StartUp Health. After laboring for 10 years on miniaturized technology to test blood, Elizabeth Holmes came out of nowhere to become a billionaire when investors recently valued her company at $9 billion.

Startup Health summarizes the ranking of Digital Health Fund startups. Download here

The start-up in 2014 with the fastest growing valuation was not Uber, but Zenefits.