Kareo nabs $30M to bring cloud tools to medical practices — starting with a free EHR

Small and independent medical practices are increasingly adopting cloud-based services. And a startup called Kareo wants to make it easy for these practices to migrate away from traditional paper systems to electronic health records (EHR).

Kareo, which sells cloud-based medical office software and services, has experienced rapid growth. It is now used by an estimated 30,000 medical practitioners and administrators daily. In February of 2013, the company launched a free electronic health record. In just 10 months, it has generated more than 5,000 sign-ups.

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Off the back of this growth, the Irvine, Calif.-based company has secured $29.5 million in growth capital funding led by Greenspring Associates, with participation from OpenView Ventures and Silicon Valley Bank.

That said, Kareo isn’t the only young vendor selling to medical practices. The company will need to beat out some well-funded competition, including CareCloud and PracticeFusion.

The electronic medical record market alone is estimated to be worth $6 – $10 billion, and vendors are rushing in. Customer acquisition has never looked so good in this sector, as physicians are currently being compensated for moving their records online, according to Meaningful Use statues.

Similarly to Practice Fusion, Kareo’s electronic health record is available free of charge. However, unlike Practice Fusion, the company doesn’t make its money through advertising to doctors. Instead, it charges a monthly fee for additional services, including its practice management application and billing solution.

MORE: Investor digital-health darling CareCloud raises another $9M

It’s a smart strategy: Doctors are incentivized (and beginning in 2015, will be penalized) by the federal government to adopt EHR. Once they’ve shifted to a cloud-based medical record solution, Kareo is betting that they’ll require additional IT services — and will pay for them.

Kareo is raising funds at a time when health care is undergoing rapid transformation. Chief executive Dan Rodrigues told me via email that the company expects to benefit from the Affordable Care Act (ACA) as it continues to roll out. Kareo expects to reap these benefits in both the short and long term.

“In this environment, Kareo is viewed as a trusted supplier that can help practices manage through significant change while identifying and taking advantage of new opportunities,” said Rodrigues. “Longer-term, the ACA is intended to increase access to healthcare which should expand demand for our core market of private practice doctors.”

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