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August 11, 2016

Another acquisition in Nashville’s hot healthcare IT market

Another acquisition in Nashville’s hot healthcare IT market

Dave Barkholz | Modern Healthcare

HealthStream’s recent $48 million purchase of Morrisey Associates is further evidence of a red-hot market for healthcare IT mergers and Nashville as a hub of that activity.

Publicly traded [1] HealthStream said Chicago-based software company Morrisey’s products will help hospitals and healthcare organizations assess the performance and competence of its clinicians and meet regulatory requirements.

“Ensuring that you have qualified healthcare providers is the first step for all healthcare organizations in delivering quality care to patients—and that’s why we are committed to offering the best provider solutions in the healthcare industry,” said HealthStream CEO Robert Frist Jr.

Nashville-based HealthStream assists healthcare companies with workforce development and training. Terms of the Morrisey acquisition were not disclosed.

Healthcare IT is leading a venture-capital boom in Nashville, according to a study released Tuesday by the Nashville Health Care Council and Nashville Capital Network[2].

Between 2005 and 2015, venture capitalists poured $940 million into emerging Nashville companies, solidifying the region’s place as a hub of for-profit healthcare, the study shows.

The pace of investment in Nashville healthcare IT has quickened in recent years. Investment by venture capitalists in healthcare IT companies has gone from $2 million in 2009 to a peak of $62.5 million in 2014, the study finds.

IT surpassed healthcare services in 2012, making it the largest category in which investors are putting seed money to develop healthcare companies in Nashville.

Venture capitalists tend to be early investors in emerging companies that are about to leave the startup phase to commercialize products and services.

“Early success often increases a company’s capital requirements beyond the scope of individual angel investors. Therefore, local venture resources focusing on the early-stage rounds are necessary to maintain a healthy capital continuum,” said Sid Chambliss, executive director of the Nashville Capital Network, a network of 130 investors.

In the second quarter of this year, healthcare IT was the second-most active subsector [3]for mergers and acquisitions among healthcare companies, according to Modern Healthcare data. Medical-device companies tied with IT at 25 deals.

One of the biggest deals of the quarter was McKesson Corp.’s decision to merge its healthcare IT unit with Change Healthcare of Nashville to create a company with $3.4 billion in combined revenue.

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