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Insights on Issues & Trends that Impact Investments in Healthcare & Life Science Businesses

Structuring PPM and DPM Transactions for Maximum Success: Tackling Front-End Issues

Posted in Healthcare Services Investing

The next in our series of posts sharing key takeaways from panels at the Healthcare & Life Sciences Private Equity and Lending Conference is authored by our colleagues Alyssa Campbell and Amanda Roenius.

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Structuring PPM and DPM Transactions for Maximum Success: Tackling Front-End Issues

By Alyssa Campbell and Amanda Roenius

In order to structure physician practice management (“PPM”) and dental practice management (“DPM”) transactions for maximum success, it is important to tackle certain key issues, such as tax planning and management team assessments, on the front end, according to experts who spoke on a panel at the 17th Annual Healthcare and Life Sciences Private Equity & Finance Conference, held in Chicago earlier this year.

Experts on the panel included Russell Bryan, Managing Director at Bailey Southwell & Co. LLC, Jon Fidler, President and Chief Executive Officer at Fidler and Associates; Gerald Thomas, Partner at McGuireWoods LLP, and Matt Wolf, Director and Senior Healthcare Analyst at RSM.

Here are several key points from the panel discussion:

1. When making a deal, considering the ongoing partnership is key. Whether a fund is considering acquisition price, compensation, or structuring, experts agree that it is imperative to consider that buyer and seller will be partners going forward. As a buyer, communication with the seller is necessary to understand historic culture and how that culture will affect integration, negotiations, and compensation expectations among the physician/dentist sellers. Determining whether the acquisition makes sense for a platform (both financially and culturally) is imperative to ensuring long-term success and bottom-line growth.

2. When preparing a letter of intent (“LOI”), some items benefit from specificity while others do not. It is important for buyers to identify certain expectations around structure (specifically with respect to whether the deal involves the purchase of assets versus equity and any known expectations for conversions). Rollover equity and known investment terms (including governance expectations) should also be included in the LOI. Further, buyers serve themselves well by setting forth compensation and non-compete terms in the LOI so as to avoid lengthy negotiations later in the process. On the other hand, other specific structuring considerations, such as go-forward benefits or the makeup of a governing board, can often be worked out in the later stages of a transaction. To the extent possible, locking in high-value negotiation items at the LOI stage minimizes negotiation time and helps prevent seller deal fatigue.

3. Looping in certain third-party specialists during the LOI phase may save time and money down the road. As noted in point 2, locking in high-value negotiation items at the LOI stage is a way to better position the transaction for success—the same is true for engaging certain specialists. For example, tax considerations can have a great impact on the structure of PPM and DPM transactions. To the extent key issues are addressed up front, buyers are likely to find themselves saving long-term time and expense by considering unique structuring considerations at the front end and including them in the LOI.

4. Physician compensation models are evolving. As competition in and consolidation of the healthcare sector continues, so too does the importance of thoughtful approaches to physician compensation models. Compensation is often key to alignment and, as such, should be explored as a front-end item. While rollover equity remains a frequently used structure, funds are looking to newer models that provide autonomy over disbursement of economics (e.g., pooled compensation) as well as incentives that draw in the younger physician pool (e.g., bonus pools). Exploring these models in the beginning will better position a transaction for success.

5. Strong executive teams foster growth and prosperity. The market for executive team members is competitive, but it’s essential that a platform’s executives are aligned with the sponsor’s vision and investment goals. Ensuring executive team buy-in from the beginning is essential for go-forward success and growing a platform. Experts encourage buyers to have transparent, upfront discussions regarding future goals at the outset of a transaction to best ensure a cohesive process and go-forward strategy.

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Three Strategic Imperatives for Successful Office Re-Openings

Posted in Healthcare Services Investing

As states begin to reopen during the ongoing COVID-19 pandemic, healthcare providers will be seeking to capture demand and develop new patient opportunities. McGuireWoods partners Holly Buckley and Geoff Cockrell and John Nantz, partner and founder of Redwood Advisors highlight the strategic imperatives for successful office re-openings.

Three Strategic Imperatives for Successful Office Re-Openings

As a result of legal requirements driven by the novel coronavirus (COVID-19) pandemic, outpatient providers have seen an unprecedented drop in patient volume and demand for healthcare services since mid-March. Demand reduction has varied by specialty, however, most providers have experienced drops of at least 60%, with some as high as 100%. Now, as states begin to reopen, healthcare providers have a critical window to plan to capture as much pent-up demand as possible. It is yet to be seen how much of this demand will be “captured” versus “destroyed,” however, providers can take proactive steps now to optimize practice economics, cash positions, and long-term practice strength.

To make the most out of this opportunity, we believe outpatient providers and owners need to focus on three key strategic imperatives. First, providers need to capture as much demand as possible. Providers risk losing patient demand to competitors or to patients foregoing services all together, however, with some careful planning, providers may also stand to gain new patients during this unique time. Second, providers need to prepare clinical and non-clinical operations for success. To be successful, providers need to adequately address several critical challenges including patient cancellations, service backlogs, and a workforce with concerns about returning to work. Lastly, providers need to adapt to balance the need for delivering care with protecting staff and patients from infection. In coming months, patients and staff will place a high priority on safety and expect options to ensure careful delivery of care (e.g., telehealth, minimal interaction with other patients, etc.). Providers need to meet these expectations. Below are some concrete steps practices can take to address these strategic imperatives.

Capture as much demand as possible. Capturing as much pent-up demand as possible is critical. Traditional engagement and outreach methods will be valuable but insufficient to address the current circumstances. Providers need an innovative, all-hands-on-deck approach to patient marketing and engagement. Creativity and energy will be necessary to address this new, unchartered territory. Providers who fail to adapt their marketing and outreach practices risk substantial demand destruction or loss of patients to competitors. We recommend the following tactics:

  1. Start marketing now. To retain and even gain patients, start engaging and marketing to current and new patients now; many patients may be up for grabs in this unique environment.
  2. Focus on rescheduling past appointments. Many patients who have canceled appointments are ready to reschedule; retain these patients by proactively and consistently reaching out; consider implementing an automated or online scheduling system.
  3. Diligently confirm appointments. Patient cancellations could spike given concerns about safety; confirm appointments 1-2 days pre-visit to minimize day-of cancellations. During the confirmation call, communicate a simple plan to the patient about how the visit will be different from historic practice – this will help reassure patients that the provider is taking all necessary precautions.
  4. Set outreach goals for relevant staff. More hands-on marketing and tracking may be worthwhile; consider setting goals for staff outreach and outcomes to ensure focus and good results.

Prepare clinical and non-clinical operations for success. This re-opening phase will present unique challenges and opportunities, and providers need to have clinical and non-clinical operations ready for success. Consider the following:

  1. Add extended office hours/days if demand surges. Some practices may have significant pent-up demand; practices should consider whether and how to add extra hours (7-9 pm) and days (Saturdays) to meet the demand; services delayed too long may be lost or given to a competitor. Adding additional scheduling options may also help space out patients to allow for social distancing.
  2. Monitor state and local orders. Most states are reopening businesses and the economy on a rolling basis, with non-emergent, elective healthcare providers often permitted to open earlier than most other businesses. Even with this flexibility, things will be different than business as usual. Providers need to carefully monitor state and local orders and plan around any applicable limitations.
  3. Observe how other local businesses reopen. This will help providers to gauge patients’ comfort level as their communities take steps to reopen. Where patients are not ready to return, providers will want to minimize operational costs that may not have corresponding revenue, and potentially consider “soft” reopenings as discussed in a prior alert.
  4. Protect your workforce. A healthcare business’ most valuable asset is a trained and loyal workforce and, therefore, plans to reopen should prioritize employee safety and wellness. Providers should review applicable regulatory guidance, including the Centers for Disease Control and Prevention (CDC) guidance for healthcare facilities, the Occupational Safety and Health Administration (OSHA) guidance for employers, along with CDC’s social distancing guidance. Strong planning around workforce safety could build employee goodwill and engagement for years to come.
  5. Consider weekly and monthly staff meetings to huddle on key issues. Identifying issues and resolving them quickly is critical, (e.g., significant patient cancellations, safety concerns, etc.); providers may want to consider frequent, targeted meetings to allow staff to raise concerns and address key topics.
  6. Actively manage performance. Measuring key practice metrics, such as the number of patients served, patients scheduled, cancellation rate, etc. is more important than ever; set up or use a good performance management system to keep things on track. This will allow providers to identify trends and make practice adjustments accordingly to maximize productivity.

Balance the need for delivering care with protecting staff and patients. This delicate balancing act will require providers to be flexible and adaptable to changing circumstances over the next several months. Consider these tactics:

  1. Ensure safety. Stay informed on key safety risks and ways to mitigate COVID-19 and other health risks; continue to stay informed as best-practices may evolve over time. For example, providers may schedule fewer patients per timeslot, spreading patients across the schedule. Providers may also want to shift/rotate staff schedules, where possible, to reduce the number of employees occupying the space at any given time. Providers will want to consider adding space to their waiting rooms or engineering protective barriers to reduce exposure, where possible. Providers may also consider providing automobile waiting options to reduce the number of people in the office. Before entering common areas, all staff and patient temperatures may be taken with no-touch infrared thermometers, so that those with fevers can be isolated.
  2. Emphasize patient safety in marketing and messaging. Patients are worried about safety and these concerns can lead to delays and cancellations; consistently emphasize safety in all marketing and engagement communications (e.g., confirmation emails, calls, texts, website).
  3. Deliver and improve telehealth offerings. In the last two months, telehealth and phone consultations have greatly expanded due to patient demand and regulatory changes; continue improving telehealth offerings via technology improvements and clinical adaptations.
  4. Start lining up staff now for office openings. Providers need to return employees to work appropriately, considering staff furloughs/reductions. Start scheduling and confirming employee returns now so you can open your office and effectively meet patient demands. To motivate employees, emphasize patient needs and consider whether hazard pay or a return bonus is warranted.

The next few weeks will be critical ones for providers. By taking proactive steps now, providers can reduce potential losses and optimize new patient opportunities. To be successful, keep three strategic imperatives in mind: capture as much pent-up demand as possible; prepare clinical and non-clinical operations for success; and balance the need for delivering care with protecting staff and patients. Providers who rise to this occasion will be set to make the most out of this once-in-a-lifetime opportunity. If we can be helpful to you in any way during this unique time, please reach out.

— Geoff Cockrell (Chair of McGuireWoods’ PE Group),

Holly Buckley (Co-chair of McGuireWoods’ Healthcare and Life Sciences Group)

John Nantz (Founding Partner of Redwood Advisors)

We are here to help – and would be honored to speak or email with you:

Healthcare & Life Sciences Private Equity Deal Tracker: Bain Capital Double Impact Invests in Broadstep Behavioral Health

Posted in Healthcare Services Investing

Broadstep Behavioral Health has received a growth investment from Bain Capital Double Impact, according to a joint news release.

Broadstep Behavioral Health provides physical, emotional, and mental support for children and adults with intellectual and development disabilities (I/DD), mental illness, and co-occurring disorders. The company has more than 80 facilities across Wisconsin, North Carolina, New Jersey, Illinois, and South Carolina.

Bain Capital Double Impact, based in Boston, makes control and minority equity investments in middle market companies within healthcare and a few other industries. Founded in 1984, the firm prefers to make more substantial investments from a dollars perspective. Within healthcare, Bain Capital Double Impact targets the provider services, hospital/major facilities, and non-reimbursement industries.

The growth investment will go toward helping Broadstep expand into adjacent services and new markets.

Financial terms of the transaction were not disclosed.

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Women in PE to Know: Hilary Fleischer

Posted in Healthcare Services Investing

McGuireWoods has long been an avid supporter of the advancement of professional women. As part of our initiative seeking to expand the leadership of women in private equity, we are continuing our series of profiling women leaders in private equity. We are hopeful that this series will serve to inspire other women to pursue their careers in private equity in a way that best challenges and motivates them, which these impressive women have all done. We are pleased to feature Hilary Fleischer of Strattam Capital. Access her profile by clicking here.

To recommend a woman for a future interview, email Amber Walsh at awalsh@mcguirewoods.com.

Market Trends on Physician Compensation & Alignment: Key Takeaways

Posted in Healthcare Services Investing

The next in our series of posts sharing key takeaways from panels at the Healthcare & Life Sciences Private Equity and Lending Conference is authored by our colleagues Amanda Roenius and Helen Suh.

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Market Trends on Physician Compensation & Alignment: Key Takeaways

By Amanda Roenius and Helen Suh

As competition in and consolidation of the healthcare sector continues to increase, so too does the importance of thoughtful, forward-looking approaches to physician alignment and compensation models. Experts who spoke on a panel titled “Advanced PPM Topics: Market Trends on Physician Compensation & Alignment” at the 17th Annual Healthcare and Life Sciences Private Equity & Finance Conference, held in Chicago on February 19 and 20, 2020, explored creative compensation structures and alignment strategies, providing important insights as to what potential investors should take into account to best align themselves for long-term success.

Experts included Paul Barrett, Managing Director at BelHealth Investment Partners; Chase Culberston, Vice President at Ridgemont Equity Partners; Mark Miller, Director at Susquehanna Private Capital, LLC; Bill Southwick, Chief Executive Officer at QualDerm Partners; and Barry Tanner, Chairman at Physicians Endoscopy. The panel was moderated by Helen Suh, an attorney at McGuireWoods.

Here are several key takeaways from the panel discussion.

1. Physician alignment should be explored as a front-end item at the outset of a potential transaction. Experts discussed how alignment is key to not only completing a transaction, but to a successful, long-lasting investment. As such, investors should take time and carefully diligence a target practice to ensure that it fits well within the existing platform prior to entering into that transaction. In doing so, investors should seek to understand the elements that are most important to a particular practice and its physicians, such as increased autonomy, and how those pieces look in comparison to the overarching platform/go-forward compensation and incentive structures.

2. Physician alignment is important across an entire platform, not just with regard to selling physicians. Experts noted that, during a transaction, the parties are primarily concerned with the selling physician shareholders; however, experts cautioned investors to ensure that alignment exists amongst the more junior, entrepreneurial physicians as well. This is (and historically has been) accomplished through a separate equity pool for partner-track physicians, but additional compensation and incentive models are becoming increasingly popular across markets, as further discussed below.

3. As competition in the market increases, so too does the need for creative incentive models. While rollover equity remains a frequently used structure for physician equity ownership, investors are looking to newer incentive models that provide greater autonomy over how economics may be distributed (e.g., pooled compensation) as well as incentives that draw in the younger physician pool (e.g., bonus pools). Having a solid understanding of the financial impact of various incentives models and planning for that in advance is key for long-term success.

4. For large platforms that cover several regions or states, experts note that it is important to determine whether compensation will be more localized in nature—tied to, for example, a physician’s productivity at a particular office(s)—or whether compensation and incentives will be tied to the overarching platform. There are pros and cons to each option. Experts note that physicians may be passionate about the particular office locations in which they work or those that they have a hand in expanding and can more closely influence, in which case, a more localized incentive structure may be helpful. On the other hand, some experts noted that, with the localized approach, it may be more difficult to draw in physicians from certain regions who prefer to pool and benefit across the entire platform.

A View from the Top: Goran Dragolovic

Posted in Healthcare Services Investing

Please see below for the latest installment of our interview series, A View From the Top. This series features interviews with C-suite leadership of private equity-backed portfolio companies. This installment features Goran Dragolovic, CEO of Women’s Health USA. To recommend a leader for a future interview, email Holly Buckley at hbuckley@mcguirewoods.com.

Q: What is your thinking around value-based care in women’s health and how Women’s Health USA intends to change the market in that regard?

Goran Dragolovic: When you consider that women consume 30 percent more healthcare spend than men, and when you combine that with the fact that women are now overwhelmingly the healthcare decision-makers for both themselves and their families, it is remarkable that women’s health has not been receiving greater attention within population health and value-based discussions and efforts. Even on an episodic basis, the legacy obstetrical “case rates,” which dominate commercial reimbursement methodologies, are rather modest and pedestrian in their scope and objectives.

At Women’s Health USA, we believe there are significant opportunities to expand the value-based care paradigm to women’s health through innovative ways to engage, compensate and incentivize the OB-GYN and other women’s health providers.

One of the unique features of the obstetric episode is that you start with one patient and end with two or more. That creates a unique set of challenges. In addition, the rapid increase of higher-risk pregnancies due to the rise in obesity and other comorbidities can mean you have four different specialties potentially impacting this event: obstetrics and gynecology, perinatology, neonatology and pediatrics. And, unless you’re extremely well-organized and coordinated, you’re going to run into challenges.

As I noted, the legacy value-based arrangements have focused on the traditional obstetrics case rate for the nine-month episode. We believe in opening our aperture to include the prenatal period, the delivery and perhaps a one-year post-delivery care for the mother as a more appropriate measure of the obstetric bundle. This would warrant more care coordination between specialties and could meaningfully improve the existing gaps in care, reduce total cost of care, reduce NICU utilization and enhance patient experience. We’d be able to more effectively manage higher-risk pregnancies in the earlier days and better position both the mother and baby for a more effective first year.

Obviously, this approach would require bolder thinking and realignment. It would also require a new set of total cost-of-care measures that would go beyond physicians to account for facility costs, diagnostic and technical components, and utilization of the emergency room in the prenatal period. Such an approach would generate more significant results along the Triple Aim metrics.

Furthermore, there is both a real need and a material opportunity for value-based arrangement within Medicaid obstetrics. Medicaid currently finances half of all births in the United States, and when you include pediatrics, you have one of the largest expense line items within Medicaid. And the existing clinical results for obstetrics are remarkably poor.

As the world’s wealthiest nation, we have some of the most embarrassing statistics for maternal and infant mortality among all the industrialized nations. Many of the underlying drivers and causes are largely legacy misalignments on how Medicaid obstetric care is currently delivered and compensated. To achieve the kind of results that are needed, a “population-based value-care” delivery model represents the best option in our view. And for population health initiatives to succeed, the OB-GYN providers must have a significant voice in how the care is organized and delivered, including a completely new set of provider engagement, compensation and reward models.

Q: How is COVID-19 challenging your business and the businesses you serve?

GD: This “once-in-a-century event” will strain any industry and business to a degree most of us couldn’t have appreciated beforehand. In this moment, we’re witnessing the significant challenges confronting the private practice of medicine. Terms like liquidity and access to capital have become the parlance of physicians seemingly overnight. The COVID-19 pandemic is also bringing into stark relief the importance and value of scale/size for stability during moments of major crisis and uncertainty, and the tenuous position that is inherent to the small private practice of medicine. As a result, we will likely see an accelerated shift of small practices into larger entities, be it integrated hospital delivery systems, larger practice platforms or “Optum-like” vertically integrated delivery models.

Our ability to anticipate where our market is shifting and to position ourselves ahead of the pack is now a critical exercise. What it demands from all of us is that, in addition to focusing on the crisis of the day, we now spend a good amount of time focusing on where the country and our healthcare sector are heading and how we can best prepare ourselves for it.

Q: What healthcare trend will cause the most change in the next 10 years?

GD: This COVID-19 pandemic will certainly create a lasting effect that extends well beyond the next few years and long after the economic turmoil has settled down. Those who lived through the Great Depression were permanently changed. Their views, behaviors, attitudes and thoughts permanently shifted. The same dramatic shift will take place now. Patients, providers, employers, health plans and hospitals will change in ways we can’t yet fully appreciate.

Furthermore, COVID-19 is also exposing some of the glaring weaknesses and limitations of the U.S. healthcare system. Access, coverage and national/state coordination of health resources are all found wanting in the midst of the pandemic. These factors all point to the fact that healthcare is on the cusp of momentous changes. How will our healthcare delivery be organized going forward? How can we monitor patients around the clock? How will we identify higher-risk patients? How will we match them to appropriate resources faster? How can we be more efficient with our resources so we can better focus on those who need it more and reduce the load for those who need it less, and do so without compromising outcomes for the entire population?

Predicting and anticipating those changes could possibly be the difference between failing and succeeding, because a shift of this magnitude creates unique opportunities but also threats. And if Shelby Davis is to be believed — that “you make most of your money in a bear market, you just don’t realize it at the time” — then this pandemic will prove to be arguably the most opportune moment in healthcare since the advent of Medicare.

This portentous moment is further amplified by two major technological developments: the advent of 5G and the expansion of artificial intelligence. These technological tools and capabilities will certainly accelerate the rate of innovation and development of new solutions for healthcare. From predictive analytics, to risk-stratified real-time matching of resources and needs, to telemonitoring and telemedicine, I am convinced that COVID-19 will spawn an entire category of new healthcare businesses and solutions in the months and years to come. And we’re looking forward to lending our small voice to this collective effort and pushing the envelope of women’s health where possible.

Q: You have always been a visionary, “think-outside-the-box” leader. How have you implemented that creative approach in your role at Women’s Health USA?

GD: First, I was very fortunate to inherit an extremely competent and capable team when I joined Women’s Health USA 2.5 years ago. Since women’s health was a new sector for me, I am able to rely heavily on their subject matter expertise as I continue to learn about this sector. My general approach in life and career has been to proceed with a sense of awareness of just how little I know about any subject. And it certainly is the case here.

At the same time, I have an insatiable curiosity to understand how everything works, how things are organized and why they are organized as they are. It’s like taking a toy apart to better understand all the components and how they function together.

I think it’s equally important to have a deep conviction that progress and evolution toward improvement are never-ending. There is always a better way, and “continuous improvement” should be our posture in life and business. It is with this combination of attitudes and approaches that the team and I are attempting to maintain an environment where creativity flourishes. We are trying to stay true to these principles as we lead our business of women’s health. The current moment will certainly test these principles. Our ongoing curiosity and conviction to lean into the challenges that lie ahead will be an absolute requirement going forward if we are to continue our success.

About Goran Dragolovic

Goran Dragolovic is chief executive officer (CEO) of Women’s Health USA, a value-based growth partner to women’s health physicians. Named as CEO in 2017, Dragolovic has been instrumental in reshaping the alignment of the organization and effectively setting its course for expansion throughout the United States. His vision and entrepreneurial spirit have been key drivers of the company’s recent and significant growth.

Dragolovic joined Women’s Health USA with more than 30 years of management and leadership experience in a broad range of healthcare service environments. Before joining Women’s Health, he spent nearly seven years at Surgical Care Affiliates (SCA), and at Optum when it was acquired by SCA. At SCA, his responsibilities included management of a $500 million portfolio of surgery centers and specialty hospitals in the western United States, as well as leadership of an enterprise-wide strategic service line expansion.

To contact Goran Dragolovic, please email gdragolovic@whusa.com.

Ophthalmology & Optometry Spotlight

Posted in Healthcare Services Investing

The next in our series of posts sharing key takeaways from panels at the Healthcare & Life Sciences Private Equity and Lending Conference is authored by our colleague Susan Barrett and Bob Ridlen of RSM US.

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Ophthalmology & Optometry Spotlight

By Susan Barrett and Bob Ridlen

Ophthalmology practices offer a significant opportunity for private equity investment, according to experts who spoke on a panel titled “Ophthalmology & Optometry Spotlight” at the 17th Annual Healthcare Private Equity & Finance Conference, held in Chicago on February 19 and 20, 2020.

Experts included Marc Aronstein, Management Affiliate at MidOcean Partners, David Friedman, Principal at Gauge Capital, Anthony Hayes, Principal at Revelstoke Capital Partners, and Greg Nodland, Chief Executive Officer at Sunvera Group. The panel was moderated by Bob Ridlen, Healthcare M&A Director at RSM.

Here are five key points from the panel discussion:

1. Ophthalmology is a large market with high demand. The demand for ophthalmology services is growing, and these services are largely non-deferrable. The number of ophthalmologists are not growing, however. Therefore, the amount of productivity is steadily increasing per physician as demand increases, making ophthalmology an attractive investment for private equity funds.

2. Identify practices with a growth mindset. Panelists emphasized the importance of identifying physicians that are thinking about growing their business. Factors to consider include whether the practice has demonstrated a willingness to invest in its infrastructure and management team, and whether the practice has invested in expensive equipment. Additionally, if a practice is focused on the quality of services and physician autonomy, this is likely a good opportunity for private equity investors.

3. Increase revenue by leveraging retail, optometrists, and premium services. Panelists noted that ophthalmology practices with robust use of optometrists who focus on routine (non-surgical) eye care allowing ophthalmologists to focus more on surgery remain attractive investments. Additionally, some investors value ophthalmology groups where a component of retail feeds into the ophthalmology practice. Panelists emphasized that investors can add value to a practice by developing a methodology for selling premium services, increasing operational efficiencies (such as optimizing scheduling), and managing referrals, among other things.

4. Investors are leveraging increased utilization of ASCs as a revenue stream. Panelists acknowledged that ophthalmologists are one of the largest groups of users of ambulatory surgery centers in the country. Private equity investors can assist practices that have the ability to bring additional procedures to the ASC. Private equity investors and practices with ASCs are also engaging in collaborative conversations on the payor contracting side. Ophthalmology groups that own ASC’s are increasingly more attractive investments for financial groups.

5. Opportunities for physician investments are important for retaining and recruiting physicians. Panelists identified the importance of demonstrating to physicians how their compensation will grow with their career. Private equity investors recommend describing to young physicians the path to partnership and the corresponding equity opportunities, as well as keeping the buy-ins flexible and affordable. Investors are putting young physicians into leadership positions early in their careers to align incentives and keep them engaged.

Successful M&A and Market Dynamics for Autism

Posted in Healthcare Services Investing

The next in our series of posts sharing key takeaways from panels at the Healthcare & Life Sciences Private Equity and Lending Conference is authored by our colleague Hannah Schuppner and Mike Coppa of RSM US.

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Successful M&A and Market Dynamics for Autism

By Hannah Schuppner and Mike Coppa

In recent years, the autism services market has been robust. At the recent Annual Healthcare and Life Sciences Private Equity and Finance Conference in Chicago, experts discussed market trends in the autism services industry.

Experts included Mark Brock, Managing Partner & Co-Founder of Granite Growth Health Partners, Daniel Etra, CEO of Rethink, Mike Miller, CEO of Caravel Autism, and Nicholas Scola, Partner at Abry Partners. Peter Erickson, Managing Director of Triple Tree moderated the panel discussion.

Here are three key points from the panel discussion. While this panel was held prior to the COVID-19 economic shutdown, the points below will continue to resonate in a post-COVID-19 landscape.

1. M&A. While the competition within the autism services industry has increased slightly in recent years, the opportunity for additional growth within the industry is still incredibly high. The experts agreed that there is a high number of single providers and small practices left in the field, which leaves room for significant organic growth, despite the number of private equity entrants into the sector. As the industry grows, the sector is becoming more sophisticated from a seller’s standpoint. Providers are seeing the M&A activity within the field of autism services and are recognizing the opportunity to scale their businesses. Overall, the autism services industry remains an attractive industry for M&A opportunities and private equity investment.

2. Technology. Like many industries, the autism services industry is also seeing an increase in the investment in technology. As the industry has grown, technology geared toward autism services has been created, but frequently the founder-run clinics cannot afford such technology. This is another area in which private equity-backed investment can offer solutions. The scalability of service platforms can provide the necessary capital to heavily invest in technology. Further, technology can also implement standardization across platforms. For example, technology can assist platforms in creating a single electronic health record for every client and a record of every visit. According to the panel, a single electronic health record can be something that is very challenging for providers to maintain without the proper technology. Additionally, as payors become more focused on outcomes, technology allows providers to track outcomes in a sector in which outcomes are difficult to track. Technology helps providers gather data from the very beginning of a client’s treatment, which ultimately assists in tracking their treatment outcomes.

3. Outcomes. As noted above, the panel discussed the importance of outcomes, particularly when it comes to payors. For autism, there is no single determinant of progress or a single treatment plan, so it is a challenge to assess the quality of services. This is something investors should be aware of as they consider business opportunities in this field. When discussing outcomes, the panel also discussed in-center treatments versus in-home treatments. Overall, the consensus was that the client outcomes are not adversely affected by location. However, the experts agreed that clinic-based treatment typically uses resources most efficiently.

Beyond these key issues, autism service providers face several other challenges as they seek to expand their business locally, regionally and/or nationally, including integration of acquired service providers and ability to attract and retain quality staffing. Successful partnering with private equity-backed investors can provide business owners with the needed experience to integrate acquired service providers quickly and efficiently to capture all desired synergies, as well as capital to enhance methods for identifying and securing quality providers who will be critical to growing and branding its services in the marketplace.

Evolution of Female Leadership in Healthcare Companies

Posted in Healthcare Services Investing

The next in our series of posts sharing key takeaways from panels at the Healthcare & Life Sciences Private Equity and Lending Conference is authored by our colleagues Daniel Goldstein and Melissa Szabad.

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Evolution of Female Leadership in Healthcare Companies

By Daniel Goldstein and Melissa Szabad

Although women are better represented in the healthcare industry at nearly every level compared to the rest of corporate America, women are still underrepresented in healthcare leadership positions. At the Annual Healthcare and Life Sciences Private Equity & Finance Conference in Chicago on February 19, a panel of five current and former female healthcare industry executives shared several key insights regarding female leadership and advancement in the industry.

The panel was comprised of Kathleen Stengel, CEO of NeurAbilities, Donna Rodio, Partner at Ross & Company, Greice Murphy, CEO of Advanced Care Pediatrics, Rose Maljanian, CEO of HealthCAWS, Inc., and Terri Kline, former CEO of Health Alliance Plan of Michigan.

Here are five key insights from the panel discussion:

1. A key barrier for many women is a confidence gap. The panel agreed that women in the healthcare industry often do not know what opportunities are available for advancement, or if they do know, they do not always have the confidence that they could successfully carry out the role. The panel agreed that it is important for women to apply and ask for opportunities, even if they feel like the position is a reach.

2. Being willing to speak to your accomplishments can be key to advancement. Some members of the panel expressed their belief that women frequently prefer to be humble or speak to the success of their team in situations in which they could speak to their own accomplishments. Being willing and able to speak to personal success is necessary to advancing.

3. Focusing on results and performance are essential. According to Rose Maljanian, creating a track record of results will help women win promotions and will also protect women if they fall under attack. It is difficult for decision makers to argue with data-driven results. It is important for women to prioritize their time in a way that ultimately gets results.

4. “You can have it all” is a myth and it is ok to make sacrifices. The panel agreed that in order to be successful, some things in life have to be prioritized over others. Terri Kline advised that women in leadership should not be afraid to hire others to handle certain household responsibilities. Delegating tasks to others can give women time to focus on things that can result in career advancement.

5. You should lean on your strengths. Greice Murphy emphasized the fact that not every executive is good at all things. So, women should focus on spending their time on their strengths and their unique abilities, rather than trying to be good at everything. Other people at the organization can fill in the gaps.

Consonance Capital Partners Closes Second Fund at $856 Million

Posted in Healthcare Services Investing

Consonance Capital Partners (CCP) has announced it has closed its second fund at the hard cap of $856 million.

The firm indicated that the new fund — Consonance Private Equity II — will focus on investments in U.S. healthcare companies in the lower and middle markets, consistent with its first fund.

Founded in 2005, CCP pursues investments in lower middle market companies exclusively in the healthcare industry. Based in New York, the firm targets companies that generally have between $20 million and $150 million in revenue.

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