Obamacare Is The Chance Of A 'Lifetime' For Venture Capitalists
"This is the greatest opportunity I've seen in my lifetime. It's the first time we are seeing really fundamental changes happen. And there's a lot of money that can be made as this chaos is sorted out," said Lisa Suennen, the co-founder and managing member of Psilos Group, a health-care-focused venture capital firm.
With trillions of dollars estimated to be spent on Obamacare as it gets going and trillions more to be reallocated, it's no wonder VCs see this as a huge opportunity.
The Affordable Care Act, which expands coverage to an estimated 32 million uninsured Americans, makes coverage mandatory.
With that many people coming online, health-care providers will essentially be forced to find new ways to manage patients and costs, experts say. Consumers will be affected in a similar manner.
"Obamacare will do a couple of different things. The No. 1 thing it has already done is it has brought the health-care system to the national stage. People are thinking about how health care is brought to them," said Ted Maidenberg, a general partner at The Social+Capital Partnership.
"People will be thinking about better ways to consume and manage health, their pocketbook will be more affected and in general that will have consumers wanting more options. And health-care providers, they aren't going to build more hospitals and hire more doctors. They are going to to have to find new ways to inject millions of people into the system through technology."
Exchanges
So venture capitalists are placing their bets on a slew of different companies that they believe will profit from the overhaul of the system and one of the biggest areas some see potential in is the exchanges.
(Read more: Here's how health insurance exchanges work)
EHealth, a publicly traded company that owns Ehealthinsurance.com, is one of these companies benefiting from the federal mandate. Its stock is up 50 percent since July.
Investors are also betting on companies that provide the backbone of support for both new government run health insurance exchanges as well as the growing sector of private health exchanges.
(Read more: Young people may not 'get' Obamacare)
The government Obamacare exchanges were established to offer insurance to the uninsured so they can comply with the new mandate to have insurance. The private health exchanges are being used by companies to offer a variety of insurance options to both current and retired employees.
GetInsured and Liazon are just a couple of the venture-backed companies looking to power these types of exchanges. Extend Health, which Psilos had invested in, was also a player in the space but was recently acquired by Towers Watson.
(Read more: Vast majority of Obamacare exchange visitors don't enroll)
"Just like when the Internet first came about, it was the guys who built routers and servers that made all the money it will be the guys building the backbones and enterprise software systems for these exchanges that will make a lot of money," said Suennen.
Not surprisingly investors also see a promising future for software companies focused on data-driven solutions in the health-care space. But not all are as obvious as you might think.
(Read more: Veeva Systems IPO shows updraft in cloud business)
For example, Maidenberg is invested in a company called Propeller Health, which is a company that uses a sensor on an asthma patient's inhaler to collect data about the patient's condition. The collected data can be shared with the physician to remotely monitor the patient's condition and know when a change in treatment is necessary.
The doctor can easily monitor a roster of asthma patients with the company's software, which is basically a dashboard that looks a lot like the Salesforce interface. The software helps the doctor to determine who is more likely to be hospitalized based on their behavior and helps the doctor to know when to be proactive about adjusting care.
Data companies also will be key in helping companies decide whether or not they should adopt a private exchange or keep their health plans, said Michael Yang, managing director of Comcast Ventures.
Basically, employers will need to figure out which health-care option is more affordable for them to provide and that creates demand for companies that can analyze data about their current and past employees, Yang said.
Consumerization of health
Companies that help make the health-care industry more consumer friendly will likely also get a boost, experts said. And this starts with educating people about their options, Yang said.
"Consumer education and marketing of these exchanges is so underserved," Yang said. "The advertising and marketing world could do a lot to help private exchanges and the government market to advertise these exchanges."
Yang said his firm is advising all of its ad tech investments to look at exchanges as "newfound" sources of revenue and is encouraging them to seek out opportunity in the space.
There also will be a need for finance management products that make it easier for the consumer to understand costs, Yang said.
Maidenberg is invested in a software company called Simplee, which is a financial services company that works with clients to simplify billing processes. Simplee is a good play in Obamacare, though, because hospitals have a lot of billing problems, he said.
"The bill you receive is often very different from the bill from the physician. And providers tend to have a big receivables issue because of this, because hospital bills are extremely confusing," Maidenberg said. "They can't afford to have the billing issues they currently have."
So what Simplee does is work with the hospitals to change the way bills are presented to hospitals and the company has already seen some success. One California hospital that is a Simplee client saw its online bill pay go from 2 percent to more than 30 percent in just six months, Maidenberg said.