Practice Fusion, Emerging Power in Health Records, Lands $34 Million

Published on June 28, 2012
by Arik Hesseldahl

Health care reform, at least in the way that President Obama and Congressional Democrats envisioned, it may be under attack — as I write these words the Supreme Court ruling on the Affordable Care Act is less than an hour away (Update: It has just been upheld) — but one piece of health care reform is still happening: The transition to electronic record-keeping.

Getting paper out of the health care process is widely seen as a key step in getting some control over constantly skyrocketing costs, by increasing efficiency. Though there is some debate on the issue.

One company I’ve been following intermittently in the space is the start-up Practice Fusion. It provides a free Web-based system for storing and retrieving health records, and is available to doctors and health clinics.

A little more than a year ago, I noted that Practice Fusion had raised $23 million in a Series B round of venture capital funding. Today it announced that it has landed a $34 million C round led by Artis Ventures. As is typical in VC deals, prior investors are also chipping in. They include Band of Angels, Felicis Ventures, Glynn Capital, Ali and Hadi Partovi, Founders Fund, Morgenthaler Ventures, Scott Banister, SV Angel and Ghost Angel.

The round brings Practice Fusion‘s total capital raised to an impressive $64 million.

The company is moving along in other ways. When I last looked in on it, there were 75,000 healthcare professionals using Practice Fusion, and its system stored data on 9.5 million patients. Today, those numbers have swelled to 150,000 health care professionals and 40 million patients.

Part of the motivation for health care providers to switch to using digital health records (Why does everyone insist on calling them electronic?) is the federal funds that come with it. Since doctors’ offices are often small businesses, they can get some government help to defray the costs of making the transition. Doctors and clinics using Practice Fusion have received a total of about $30 million worth of those funds.

As I said, there is some debate about the overall benefit derived from moving to digital records. In March, a study published in the journal Health Affairs found that doctors who had digital access to testing results tended to order more tests, not fewer. This is key, because one of the conventional arguments about digital health records has been that it discourages repeat tests that result from paper-based errors or lost records. A lot of people had problems with that study, however.

Another handful of other studies questioning the benefits came out in January. Though as Steve Lohr of the New York Times points out here, the debate is less about whether it makes sense to move to digital records, and more about how and at what pace.

The pace seems just fine for Practice Fusion: Remember the 40 million patient records it has on its network? That amounts to about 10 percent of the U.S. population, and is double the size of the combined patient populations of the Kaiser Permanente and U.S. Veterans Affairs systems. That makes it an emerging power in the business of electronic (I still want to say digital) health records. This latest investment will only accelerate that.

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