Health information technology deals took a hit in the first quarter of 2009 despite optimism expressed by industry officials last year that growth would continue this year.
Mergers and acquisition deals among e-health companiesincluding developers of Web-based applications, electronic health records and personal health recordsdeclined from 13 in the last quarter of 2008 to nine for the first three months this year, representing a 31% fall, according to a report by Irving Levin Associates. Medical devices remained steady from quarter to quarter, but were down slightly compared to the first quarter of 2008.
Biotechnology and pharmaceutical deals accounted for the largest growth in the health IT sector, a jump that can be attributed to their ability to use their strong cash flow to attract capital investments, according to Sandy Steever, editor for publisher Irving Levin Associates, which tracks healthcare ventures, mergers and acquisitions.
In mid-2008 hospital officials and vendors called mergers and acquisitions among health IT companies a sign the industry was maturing. The same issues facing health IT then continue this year, with the added pressure that came as the economy spiraled down in the second half of 2008.
E-health deals have not fared as well with finding investment dollars in the tougher capital market because their cash flows have not typically been as robust, Steever said. Theyve had to go to credit lines and borrowing in the past. The e-health market is competitive and reluctance on the part of providers to purchase systems takes a toll as well, he said. Whose electronic record do you use? Theres an awful lot of them in the market.