Practice Fusion raising $60M, sources say

One of the largest digital health deals is imminent. Practice Fusion is on the cusp of closing a $60 million fourth round of funding, say multiple sources close to the company.

The funding will come from a New York-based investment firm, not one of the usual Silicon Valley suspects. At this point, the company’s valuation (a source says that it’s between $600 and $700 million) is late-stage venture or private equity territory.

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Practice Fusion is best known for its free web-based electronic medical records (EMR), although it is developing a suite of new products. In recent months, the company launched a website for consumers, dubbed Patient Fusion. On the site, patients can book appointments, access personal medical information, and leave feedback on doctors. With this launch, Practice Fusion is competing with East Coast-based ZocDoc.

Practice Fusion is based in San Francisco and currently has about 300 employees. The startup has made a few strategic acquisitions; most recently, 100Plus.

What’s interesting about this financing is that Practice Fusion raised $34 million less than one year ago. The company needs a large infusion of capital to sustain its rapid hiring and aggressive product roadmap.

It is proving expensive for the company to ensure its products are fully Meaningful Use compliant.

Practice Fusion is looking for new revenue models, in addition to selling advertising and data. One source close to the company said the company is considering monetizing the Patient Fusion product by selling premium services to doctors.

In Spring, Practice Fusion claimed to have over 27,000 doctors and 1.5 million reviews signed on to Patient Fusion. It is unclear how many doctors are actively using its web-based EMR — the percentage is likely high, given that it is available for free.

Practice Fusion currently generates revenue by selling ads on its free EMR. Its largest advertisers are pharmaceutical companies who are looking for new ways to reach doctors beyond traditional sales channels.

EMR providers are an increasingly sought-after funding prospect for venture firms, given that doctors are under pressure to move away from paper-based systems. Competitor CareCloud recently raised $20 million in funding, and another competitor, Kareo, pulled in $20.5 million to fuel rapid growth.

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Practice Fusion had no comment to share at this time.

This story is developing. We will update you as we learn more.