Private equity firm Advent International bought a significant stake in Iodine Software, valuing the company at more than $1 billion.
A major player in healthcare artificial intelligence, Iodine is a large clinical AI engine used by more than 800 health systems and 80,000 physicians. Its clinical AI engine improves clinical documentation to help health systems capture more revenue while also allowing providers to improve clinical care.
"This strategic growth investment is a signal and a validation of the work we're doing in deploying a specialized version of AI to solve problems within the midrevenue cycle," William Chan, Iodine’s CEO and co-founder, told Fierce Healthcare.
Additional financial details of the deal, announced Wednesday, were not disclosed.
Bain Capital Ventures and Silversmith Capital Partners, which invested in the company in 2018, will remain shareholders.
The investment provides Iodine with access to capital for expansion and growth strategies so the company can innovate faster, Chan said.
Iodine, which was founded in 2010, experienced rapid growth over the last decade by applying its machine learning engine to solve midcycle revenue leakage—a problem that costs healthcare systems billions in lost revenue due to resource-intensive, highly manual clinical documentation workflows.
Performance benchmarking company KLAS Research recently recognized Iodine as a top performing clinical documentation improvement company.
While the company's machine learning approach initially focused on solving things like clinical documentation improvement, Iodine has recently picked up other tech companies to build out its AI platform and broaden its market reach.
In May, Iodine snapped up Artifact Health to get its AI technology directly into the hands of more than 80,000 providers across the country. Artifact Health developed the first mobile app for physician queries so providers can respond quickly and compliantly to clinical documentation improvement and coding queries from their smartphone or computer.
In June, the Austin, Texas-based company bought competitor ChartWise Medical Systems. The acquisition expands Iodine’s clinical predictions to more than 800 hospitals and health systems, according to company executives.
The private equity deal reinforces Iodine's growth and provides the company with "firepower" to expand its technology to other strategic areas of care delivery, Chan said.
"Hospitals and health systems really need to up their game with relevant and applicable technology to drive improvements within the hospital system. AI is really leading the way through a lot of this change," he said. " Advent sees what we’re doing and how the AI platform that we built can be easily applied to other areas within the hospital. With this investment comes an opportunity to take our platform and the tools that we built into other areas, for example, denials management."
Iodine Software is experiencing rapid growth across hospitals and health systems, said Carmine Petrone, a managing director on Advent’s Healthcare team, in a statement.
“Iodine’s world-class AI innovation engine and strong customer focus underpin the company’s ability to deliver a best-in-class product with highly differentiated value," Petrone said.
Over the past 30 years, Advent has invested or committed more than $11 billion in 88 technology companies and $10 billion in 51 healthcare companies, including health tech, software and provider businesses.
The enterprise AI space in healthcare is one to watch, with Microsoft's eye-popping $19.7 billion acquisition of speech recognition and healthcare AI company Nuance. Investment dollars for AI startups boomed in 2020 and skyrocketed during the first quarter of 2021, according to CB Insights.
Globally, healthcare AI companies brought in a record-breaking $2.5 billion in the first quarter of 2021 in 111 deals.
Chan points out that Iodine's AI and machine learning technology is markedly different than how tech giants have approached AI in healthcare, such as IBM with Watson Health.
"Our view is that AI is not a one-size-fits-all approach. We designed a solution purpose-built to address a specific problem," he said.
Chan also noted that many healthcare processes, like claims denials, are currently handled by clinicians, a resource-intensive, highly manual process, particularly at a time when hospitals are facing a labor shortage.
"The use of AI is just going to continue to increase, and the extent that AI and machine learning can help augment what these folks do to help them do it better and faster, then hospitals and health systems are going to embrace that technology," he said.
Iodine is helping to drive that change, noted Yumin Choi, partner at Bain Capital Ventures, one of Iodine's earlier investors.
"We saw the enormous potential its AI-powered software would provide to hospitals going through digital transformations. With this strategic investment, Iodine will have the opportunity to reach more hospital professionals, resulting in better care for patients across the U.S.," Choi said.