The Psilos Group, a venture capital firm that makes its money backing healthcare deals, has released an annual report on healthcare investing issues. Among the highlights, the report claims that despite bleak near-term indicators, the United States is poised to establish a “new healthcare economy.” But first, we’ll need to address healthcare’s “innovation gaps,” an effort Psilos says will require increasing funding and expanding annual investment rates to more than $1 billion in healthcare IT.

This report comes on the heels on VCs giving a bad prognosis to health IT in 2008. As eWeek reported in February, the $19 billion in the economic stimulus dedicated to health IT initiatives may stir venture capitalists, but the much touted new health care economy is likely to be slow out of the gate without a large increase in venture funding for health care innovation—and health care inflation still looms as a major barrier to investment.

Attorney Jayne Juvan, who on May 1 moderated a panel at the Cleveland Metropolitan Bar Association's 25th Annual Health Law Institute entitled, “M&A and Investment Trends in Health Care: Outlook for 2009 and Beyond,” says healthcare deals are still underway, but they often get tripped up in due diligence or when parties try to renegotiate terms.  And reimbursement concerns continue to stay at the forefront of many investors’ minds, since they don’t want to pay a dollar today for something that’s worth sixty-seven cents tomorrow.

Investors on the panel—who all agreed that we're in for a long haul and recovery will be slow in coming—are taking a wait-and-see approach, and refuse to speculate as to when any rebound might begin. Nevertheless, the panelists identified sub-sector opportunities within healthcare that support the Psilos Group’s analysis: healthcare companies that benefit from the stimulus package, Obama’s massive budget and reform efforts are likely to be winners.

That means health IT and medical technology companies, as well as companies that provide home and community based care—provided there’s widespread adoption of IT across ambulatory, diagnostic, pharmacy and inpatient settings.