New Blues VC Fund Aims to Improve Healthcare

BlueCross BlueShield Venture Partners, a new venture-capital arm of several Blue Cross and Blue Shield managed-care organizations, has made its first investment, funneling $5 million into Initiate Systems, which provides a key application for health information exchange.

Eleven Blues plans formed the VC fund with the help of the Blue Cross Blue Shield Association and the Chicago-based Sandbox Industries. The fund has a total of $116 million to invest, with the primary goal of supporting startups whose products and services that can boost efficiency, lower costs, increase transparency, and improve patient outcomes, says Paul Brown, the fund's managing director.

The fund's companies typically provide services to health plans, hospital systems, or both. That's the case with Initiate, which creates master patient indexes that are instrumental for helping IT systems operate across healthcare enterprises and communities. Brown says the fund will also consider startups involved in wellness and disease management.

Some Blues plans have formed a health savings account bank, and some individual insurers like Blue Cross Blue Shield of Massachusetts and Blue Cross Blue Shield of Tennessee have invested extensively in health information technology. But this is the first time that Blues plans have formed a venture fund to encourage particular kinds of enterprises.