By Neil Versel

April 1, 2008 | Health Evolution Partners, the investment management firm founded last year by former national health-IT coordinator David Brailer, has launched the early-stage investment portion of its business, with a high-powered advisory board to help find and support top technological innovations in health care.

The San Francisco-based company, which has $700 million to invest from the California Public Employees’ Retirement System, said Monday that it has kicked off operations of its $200 million Health Evolution Partners Innovation Network (HEPIN), an investment fund targeting at early-stage and start-up companies. Actually announced last September, HEPIN represents Health Evolution Partners’ strategy of partnering with other investors in financing smaller ventures.

“It’s a new kind of strategic vehicle for venture funds,” Brailer says.

Brailer says this hybrid strategy of investing both directly and through strategic partners is needed in a venture-capital industry which he believes has never fully recovered from the dot-com crash of 2000-01. “We think we can lead to more consistent returns for our investors,” according to Brailer.

To this end, Health Evolution Partners says it has completed investments in two of the five venture funds it will partner with to fund early-stage companies: Cardinal Partners of Princeton, N.J., and the New York-based Psilos Group. Brailer says the partnerships are “already active and underway,” and indicates that his firm will announce three more partners in the coming year. In total, the partners will receive up to half of the money allocated to HEPIN.

Health Evolution Partners has not publicly identified any potential recipients of this venture funding.

HEPIN is headed by Roy Ziegler, formerly a partner at venture capital firm Partech International, where he focused on health-IT. The HEPIN advisory board is loaded with well-known names in health-IT and quality improvement: former U.S. Surgeon General Richard Carmona, M.D.; former Kaiser Permanente chairman and chief executive David Lawrence; Leapfrog Group co-founder Arnold Milstein, M.D.; and Molly Joel Coye, M.D., founder and CEO of the Health Technology Center, San Francisco. Brailer, who worked with Coye briefly before taking his government job in 2004, says he will add two more advisors to this board.

With $200 million allocated to HEPIN, Health Evolution Partners is reserving its other $500 million for direct investments in growth-stage companies with proven revenue models. (See “Brailer Leads New Venture Capital Firm.”) Brailer says to expect news on his firm’s growth fund in the next 60 days.