Meditwitt helps Hospitals/Doctors/Clinics to get easily funding from Seeding funding/Crowdfunding/Private equity investment in the healthcare industry, which has grown considerably in recent years. Here are 20 investment niches where Meditwitt is very actively participating in the evolution of healthcare as an investment area.
1. Healthcare investment growth: As healthcare became a more central part of the economy over the last decade, the arena has moved from a situation where boutique private equity funds and boutique lenders focused on the arena to a spot where all or most major lenders and private equity funds spend a great deal of time in the broader healthcare arena. According to KPMG, global healthcare private equity deals doubled from 2010 to 2011. Bain & Co.’s 2014 Global Healthcare Private Equity Report states more than 209 healthcare buyouts occurred in 2013, and strategic M&A deal value in the healthcare industry was up 30 percent, compared with 11 percent for all industries in the private equity market.
2. The scope of private equity investment in healthcare: In 2013, slightly more than $16 billion dollars were reportedly invested in healthcare by private equity funds in the form of healthcare buyout deals globally, according to Bain. North America led investment activity, with targets in the region accounting for seven out of the top 10 deals. There were no mega-deals in healthcare in 2013, and buyout deal value was down 23 percent.
3. Healthcare investment categories: Healthcare is often defined, for investment purposes, to include several broad categories and dozens of niches. Healthcare includes provider-based companies, i.e. entities that actually serve patients (such as Nashville, Tenn.-based hospital operator Hospital Corporation of America); healthcare lite, i.e. revenue cycle management companies, or organizations that sell into or provide services to providers (such as Healthcare Property Investors, a healthcare real estate investment trust); and life sciences, i.e. medical device and pharmaceutical companies (such as Johnson & Johnson).
4. Urgent care: There is a tremendous increase in interest in investing in urgent care. This includes investment in firms such as CVS’ Minute Clinic (one of the first broadly rolled out urgent care companies) to standalone emergency departments to simple urgent care units. There was an almost 20 percent growth in existing clinics in the past four years, with the total number of urgent care clinics exceeding 9,000, according to a February 2014 McGuireWoods report. The expansion is expected to continue; IBIS World estimates project the sector will produce more than $18 billion in revenues in 2017 at more than 12,000 clinics. Private equity investment has driven the expansion in recent years. For instance, in 2013, NextCare Holdings Inc., backed by Enhanced Capital Partners, purchased 11 PrimaCare Medical Centers in the Dallas/Fort Worth region.
5. Specialized urgent care: Along with the growth in urgent care comes the evolution of orthopedic-specific urgent care. This involves the development of urgent care models centered on particular specialties. These are often created to feed an orthopedic practice, as well as for profit. For instance, OrthoNOW has established itself as a franchise business of specialized orthopedic urgent care centers. The company opened its first location in Miami in 2010 and became a franchise program last year with a network of urgent care centers.
6. Pain management: There has been a tremendous increase in investment interest in the pain management sector during the last several years. This is driven by the core pain business and revenues from ancillary services— such as lab testing and ambulatory surgery centers — divided by pain management physicians. Activity in this space since 2010 includes Chicago Growth Partners’ acquisition of Advanced Pain Management, Sentinel Capital Partner’s investment in National Spine & Pain Centers and the 2012 formation of Prospira PainCare, which was created with the backing of three private equity firms and has acquired pain centers across the country.
7. Dental practice management: There has also been great growth in dental practice management during the last couple of decades. In the past decade alone, more than 25 private equity firms have invested significantly in dental practice management, and some large companies in the sector have seen an annual revenue of more than $100 million. This has evolved to the point where there are at least 10 large-scale dental practice management companies. This is an area that serves either commercial or private pay interest, as well some companies that are heavily focused on Medicaid. There has been an increase in scrutiny in the dental practice management area. In 2013, a Senate committee investigation into DPM practices in the Medicaid program concluded that some practices should be excluded from the program.
8. Dermatology: The dermatology arena has also experienced significant growth. Again, like pain management providers, dermatologists offer professional services, and there are opportunities for specific situations in dermatology where people make outsize profits. Some examples of recent dermatology deals include Audax Group’s 2102 acquisition of Advanced Dermatology and Cosmetic Surgery and Candescent Partners’ 2013 acquisition of Dermatology Associates of Tyler.
9. Lab Businesses: Over the last few years, the OIG has increased scrutiny on lab businesses due to expansion in this area. For example, the growth rate of lab business billed to Medicare is three times that of other businesses. The lab business, both on a large scale and small scale, remains a huge area for investment, coinciding with a focus on preventive care and coordinated efforts to treat patients with chronic disease. For instance, Levine Leichtman Capital Partners has invested $110 million in Genova Diagnostics Inc., a specialty clinical laboratory with a testing approach tailored to personalized treatment and prevention of chronic disease.
10. For-profit hospital operators: There continues to be great interest in for-profit hospital companies. There are huge, publicly traded for-profit companies that have enjoyed large growth in the last couple years, such as HCA and Franklin, Tenn.-based Community Health Systems, as well as smaller private equity hospitals that continue to aim for growth, such as Capella Healthcare, based in Brentwood, Tenn., and others. In one example of why for-profit hospitals attract investors, HCA’s share prices skyrocketed in 2013 (up 53 percent over the year), and the hospital operator’s main investors — such as Bain Capital and KKR & Co. L.P. — sold additional stakes in the public company for billions. Private equity firms have also profited from recent mega-mergers in the for-profit space. For instance, Blackstone Group LP — Nashville, Tenn.-based Vanguard Health Systems’ largest shareholder — collected more than $600 million from Vanguard’s sale to Tenet Healthcare Corp. in Dallas.
11. Medical devices: The medical device arena continues to focus around the five to 10 largest companies. However, there are hundreds of small and mid-sized device startups and small companies that are either trying to be entrepreneurial middlemen or direct providers of devices. Medical device sales are expected to grow 4.9 percent annually through 2016 as a result of technological innovation and the aging population. Although the industry faces some challenges (such as reduced reimbursement, the Patient Protection and Affordable Care Act’s 2.3 percent medical device tax and the FDA regulatory process), sectors such as orthopedics, telehealth, and mobile health have still experienced growth. For example, Wall Street Health Partners has invested $50 million in RTI Biologics’ purchase of Pioneer Surgical Technology, Inc. — a prominent provider of orthopedic and other biologic implants.
12. Care and case management: With healthcare delivery changing, and the number of managed care entities growing, a new kind of care Management Company has evolved. The companies provide case management for dual eligible populations and to various kinds of Medicaid and commercial covered populations. Managed care entities and plans have drawn interest from investors. For instance, in 2011, global growth private equity firm TA Associates completed an investment in Senior Whole Health, which provides managed care plans for patients who are eligible for both Medicare and Medicaid.
13. ACO back office services: With the growing number of ACOs in the U.S., great deals of companies — small, mid-sized and large — have developed around providing services to ACOs. Valence Health in Chicago — a provider of value-based care solutions — helps hospitals, health systems and physicians switch to value-based care models by providing software, consulting, data aggregation and other services. In June, Valence was chosen by Centegra Health & Wellness Network — an association of primary care physicians and specialists — to support its clinically integrated network. There are other companies that provide more focused services to IPAs, physician-hospital organizations and ACOs. For example, Optum, a division of UnitedHealthcare, focuses on information and technology-enabled health services.
As the healthcare industry transitions to value-based care, private equity firms have invested in companies that provide services to ACOs. For instance, earlier this year, the private equity firm Great Point Partners helped bankroll the merger of Orange Health Solutions and MZI HealthCare. Orange Health, founded by former UnitedHealth Group executives, providers services to hospitals and healthcare organizations to help establish value-based care models and ACOs. MZI helps providers, health plans, ACOs and other healthcare entities with data analytics, predictive modeling, medical care management, and health benefit management technologies.
14. Anesthesia practice management: During the last few years, there has been an evolution in the number of anesthesia practice management companies in the country. These companies serve both major hospital systems and a number of smaller companies that provide services on a regional basis or to physician-driven ambulatory surgery centers.
Private equity groups, such as Madison Dearborn, Blackstone Group, and Goldman Sachs Private Capital Investing Group, have invested significantly in anesthesia practices.
Knoxville, Tenn.-based TeamHealth Anesthesia is one of the leaders in outsourced anesthesia and pain management. The physician-led company has almost the largest bench of specialists in the country delivering hospital-based services. Its physicians provide anesthesia services in community hospitals, major medical centers, and teaching facilities.
15. Ambulatory surgery centers: ASCs have not experienced large growth recently. However, with approximately 5,500 ASCs in the country, they continue to deliver solid profits. There are a number of companies that invest heavily in and manage ASCs, with some of the largest private equity firms in the country, such as TPG Capital (which has backed Deerfield, Ill.-based Surgical Care Affiliates, one of the largest ASC companies, and Welsh, Carson, Anderson & Stowe (which has close ties with Addison, Texas-based United Surgical Partners International, another prominent ASC company). Additionally, in 2010, private equity firm H.I.G. Capital completed a major investment in Tampa, Fla.-based Surgery Partners, one of the largest ASC operators in the Southeast.
Many deals occurring in the ASC sector concern existing centers rather than startups, and with many ASCs remaining independent, investors will continue to be attracted to the ASC space.
It is anticipated that private-equity backed ASC companies will begin considering new acquisitions. For instance, USPI has suggested it anticipates increased M&A activity in the coming years as ASCs partner with other providers to form strong affiliations in the face of healthcare reform challenges.
16. Revenue cycle management: The number of revenue cycle management companies focused on the outsourcing of billing and collections continues to increase. For each company that focuses on hospitals and health systems, there are dozens that focus on smaller specialties. The revenue cycle management companies run the gamut from full-service providers to companies providing software as a service.
Revenue cycle management assists healthcare organizations with a number of processes, including coding claims using ICD-10. Although President Barack Obama signed the Protecting Access to Medicare Act of 2014 into law April 1, which delayed the nation’s switch to ICD-10 by at least a year, companies that provide software or services to assist healthcare organizations in the switch will continue to be greatly needed. Market research firm Black Book Rankings has projected that the $2.4 billion hospital revenue cycle management industry will experience double-digit increases in 2014.
Revenue cycle management companies have provided attractive investment opportunities for strategic and financial buyers alike, according to a report from Duff & Phelps, a global provider of financial advisory and investment banking services. In 2010, there were already more than 150 revenue cycle management companies owned by private equity funds, ranging from Executive Health Resources (owned by ABRY Partners) to Transax International Ltd. (owned by Yorkville Advisors).
17. Valuation firms: With the Stark Law and the federal Anti-Kickback Statute requiring valuations for almost everything hospitals do, it is no surprise a number of valuation firms have grown around healthcare. Some of the leading firms include VMG Health, HealthCare Appraisers and Principle Valuation. VMG Health performs more than 1,500 valuations each year.
There are many other companies with a broader focus that offer valuations as a part of their business. For example, Huron Consulting Group offers independent valuation services along with a number of other business advisory solutions.
18. Healthcare investment bankers: There are a great number of investment banks — such as Raymond James, Kaufman Hall, Cain Brothers, and Juniper Advisory — which focus heavily or exclusively on healthcare. These banks offer healthcare organizations a broad range of services and products such as public and private equity to investor-owned and tax-exempt providers.
19. Health IT: There has been tremendous growth in different types of HIT opportunities. Healthcare reform initiatives, including the HITECH Act and the PPACA, have led many health systems to invest heavily in IT, which has made HIT an increasingly popular investment area: HIT’s share of healthcare private equity deals rose from 10 percent in 2011 to 15 percent during the first three quarters of 2013.
In the first half of 2014, 30 companies focused on expanding the care continuum received outside investments, and 47 companies providing patient empowerment solutions received outside investments. According to Bain, recent HIT investments include WCAS’ acquisition of GetWellNetwork, which aims to improve patient engagement and satisfaction; and Bain Capital Ventures and Spectrum Equity’s minority investments in MedHOK, a cloud-based software-as-a-service platform. Mobile health, data mining solutions, and analytics have become attractive HIT investment areas, along with EHRs.
20. EHRs: As the EHR market has matured, a once-crowded field of vendors has narrowed significantly. At the end of 2013, 10 EHR vendors accounted for about 90 percent of the hospital EHR market: Epic, Meditech, CPSI, Cerner, McKesson, Healthland, Siemens, Healthcare Management Systems, Allscripts and NextGen Healthcare. However, there are additional EHR vendors, such as Centricity, Practice Fusion, VA-CPRS and Athena health that are among the most-used EHRs by physicians.
Hospitals and health systems are typically in the middle of the EHR discussion, but payers are starting to enter the conversation as well. With health insurance companies concerned with cutting down costs and improving the health outcomes of patient populations, some payers, such as Aetna, are now mining data collected from EHRs to try to intervene and steer consumers to a healthier lifestyle.
As the industry increasingly turns to data and analytics to address healthcare costs, private equity investments in health IT have centered on EHR systems. For example, Lambert Private Equity has invested $200 million in the healthcare software company Accelera, and, last year, private equity firm Thomas Bravo acquired SRS Software.
21. Behavioral health: There has been a significant increase in investment interest in behavioral health, including substance abuse businesses, and this investment interest is widespread across the spectrum of investors. The spike in interest is due to the increased demand for behavioral health services, and the requirement that health insurance companies do not use more restrictive requirements when reimbursing mental health and substance-abuse related claims than they do with medical-related claims.
The combination of increased demand, a lack of adequate providers and increased sources of payers has created opportunities for private equity investors in the behavioral health market, according to a recent Law360 report by industry experts from McGuireWoods and HCP & Co. Investments in 2013 included Kinderhook and Mansa Capital providing additional funding (building on an initial investment from Kinderhook in 2011) to E4 Health, which provides employee assistance programs and behavioral health risk management programs, according to Bain.
22. Behavioral health with a focus on substance abuse: In 2011, approximately 21.6 million Americans needed addiction treatment for a problem related to drugs and alcohol, although only about 2.3 million received treatment in a specialty facility at that time, according to a McGuireWoods report. The PPACA’s expansion of coverage for behavioral health and substance abuse specifically has garnered the interest of investors. Reimbursement in this sector has been on the rise: From 2002 to 2011, the National Survey on Drug Use and Health found the number of respondents using Medicaid and Medicare payments for treatment increased by 23.1 percent and 19.5 percent, respectively. Investments in this space include Trinity Hunt Partners’ 2013 majority stake in Lakeview Health Systems, a substance abuse treatment company.
23. Specialty pharmacy: There continues to be great interest in the development and funding of specialty pharmacy distribution companies, as well as companies that focus on the actual development of pharmaceuticals. For example, hepatitis C pill Sovaldi posted $3.48 billion in sales for the second quarter of 2014, which puts Foster City, Calif.-based Gilead Sciences, the maker of the drug, on track to become one of the top-selling pharmaceutical companies.