Health IT, Startups

Health Catalyst raises $70M from strategic investors to support product development

"We are evolving from an offline data aggregator and analysis company to a real-time data production and decision support company," Health Catalyst CEO Dan Burton said.

moneyHealth Catalyst, the data warehouse business designed to support hospitals and accountable care organizations in the push to embrace outcomes-based care, has raised $70 million in a Series E round. The funding will be used for new product development and to support acquisitions made in the past year.

University of Pittsburgh Medical Center, a Health Catalyst customer, led the Series E round as a new investor with participation from other customers, including OSF and MultiCare Health System. Another new investor, Leerink Capital Partners, also took part. Returning investors included Sequoia Capital, Norwest, Sands and six health system customers.

The company has raised $235 million in three years.

In response to emailed questions, CEO Dan Burton talked about its IPO plans and shared some of the company’s strategy.

At the Health 2.0 Fall conference last year, you said the company planned to do an IPO by 2017. Are those plans still on track?

“The decision to go public is a board decision that has not yet been made.  However, Health Catalyst has raised significant capital from investors, who will, at some point, look to realize a return on that investment. Given that Health Catalyst’s leadership team does not believe the company can likely achieve its mission if the company is acquired, Health Catalyst has chosen to take steps to prepare to be a successful publicly-traded company.  The company has carefully chosen investors who have a long-term focus and time horizon, so Health Catalyst is not being pressured to go public before the company or the broader market is ready.  The Series E funding will cover Health Catalyst’s near- and medium-term capital requirements…including enabling the company to become self-sufficient relative to cash flows, and as a result, the company does not anticipate needing to raise additional capital as a private company.  This will enable the company to make a prudent, long-term-focused decision regarding if and when to go public.”

Have those plans changed because of the market shift?

“We are seeing a fairly significant downward shift in the capital markets, which reinforces the need for strong business fundamentals in order for companies to survive and thrive.  This includes the need for companies to deliver a unique offering that helps solve a meaningful problem in the industry. Health Catalyst has been fortunate to establish a significant positive track record along these dimensions.  This also includes the need for companies to become cash-flow-sustainable, and we expect to reach that stage by the fourth quarter of 2016.  We will continue to focus on long-term business fundamentals, including achieving our mission of being our customers’  best partner in enabling our customers’  outcomes improvements.”

What specifically will the funding be used for?  

“There are two primary uses of the proceeds.  First, the proceeds will support the development of several new products as Health Catalyst expands in a significant way into population health management, care management and clinical decision support. We are evolving from an offline data aggregator and analysis company to a real-time data production and decision support company, integrating the knowledge derived from analytics into the workflow of our clients and their patients, wherever that decision workflow occurs.  Second, the proceeds will help fund the cash-related costs of a number of acquisitions the company has recently completed, both of Intellectual Property (Health Catalyst has announced IP acquisitions from Allina Health, Partners HealthCare and UPMC) and of a company  (Health Catalyst announced the Acquisition of Health Care Dataworks in July of 2015). ”

Photo: Flickr user WeLoveCostaRica

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