Safeguard Scientifics: Health IT Could Grow to One-Quarter of Investments

UPDATE: Safeguard Scientifics has recalculated that health IT could grow to one-quarter of its investments.

Safeguard Scientifics (NYSE: SFE  ) Executive Vice President Jim Datin said its investments in health IT could grow from just under one-tenth to one-quarter, in an interview with MedCity News.

The Wayne, Pennsylvania company recently consolidated the management of its life science and technology portfolios in a move that acknowledged the increasing crossover between health-care services and IT, as well as the ability to use its experience to make forward-thinking, strategic investments in these areas.

This year has been one of Safeguard's busiest to date with exits from five companies, including Portico -- a health IT company for health provider networks in a $90 million cash deal with McKesson (NYSE: MCK  ) . It currently has one health IT company left in its portfolio -- AdvantEdge Health care Solutions, a physician billing system software provider in Warren, New Jersey.

But it sees room for growing its health IT investments, particularly in the area from Philadelphia to New York, a region Datin described as an "epicenter for health IT."

Datin and Gary J. Kurtzman, a senior vice president and managing director of the life sciences group, said investments would be informed by the need to reduce the cost of health care and empower consumers to make more informed health decisions.

Commenting on how its investment portfolio will shift, Datin said: "I think you're going to see it evenly split between traditional life sciences, technology and health care IT, and potentially you may see a third each. It's hard to say based on the opportunities we see and how things [turn] out. But we see some real synergies between the two groups to create that additional category. And today, while it is just under 10 percent where we put capital to work, [health care IT] could be the largest growth area moving forward."

Kurtzman is a former COO with BioAdvance, a company that makes early stage investments in life sciences companies. He said the company's collective experience with businesses in health care services and financial technology give it a key understanding of the compliance issues that underpin health IT.

"You might be seeing some groups that were traditionally life science -- the pure biotech or biotech and [medical] device -- thinking 'Oh, we need to get into later-stage or de-risk and the way to de-risk is to go into health care services and health care IT.' Well, if those groups never had the expertise in health care services or health care IT, they may [be] just as likely to make a mistake."

Kurtzman added: "If you look at financial IT, what underpins that is compliance. If you are talking any kinds of patient data, hospital records, compliance is huge. We are looking at things in health care IT that deal with consumer engagement -- how do you get people into the system so to speak, and then underpinning it, the whole notion of analytics and the value of the data. So for us to say we're getting more into health IT, it's not like we're stretching."

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