VC stays muted on HCIT while PE investment is up

While venture investment in health care IT stays stagnant, PE-led deal activity is up and to the right, as of Q3, new PitchBook data show.

Why it matters: Later-stage businesses with a clear cost-saving thesis (e.g. revenue cycle management) will be most successful in securing investments in the months to come.

By the numbers: PitchBook estimates PE closed 78 HCIT deals in Q3, up from 63 in Q2.

Context: PE firms are "dusting off their well-worn RCM theses and playbooks, resulting in a very crowded buyer universe," with rich transaction multiples, PitchBook analyst Rebecca Springer writes.

• Amid health provider point solution fatigue and difficulty reconciling previously high valuations, VC is focusing on "mission-critical workflows and operational cost centers," Springer writes.
• This is pushing venture investors toward solutions automating RCM — also a hot area for private equity buyers.

State of play: RCM for specialty providers, like behavioral, telehealth, oncology and cardiovascular care, is especially attractive for PE, the report says.

• Vista Equity reportedly launched a sale process for Greenway Health back in March, while Veradigm is being courted by strategics and PE alike.

💭 Our thought bubble: It may be a prime time for GTCR to explore an exit for XiFin, an RCM provider for laboratories and diagnostics companies it's held since 2020.