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

Investments in Provider Support Technology: Mobile Apps, Revenue Cycle Businesses, and Similar Investments – 5 Key Points

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 focuses on investing in and implementing technology. It is authored by Kayla McCann Marty and Sara Shanti.

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Investments in Provider Support Technology: Mobile Apps, Revenue Cycle Businesses, and Similar Investments – 5 Key Points

By Kayla McCann Marty and Sara Shanti

Technology has become a vital tool for improving affordability and efficiency of healthcare, but it should never be implemented solely for the sake of claiming that a healthcare entity is utilizing technology, according to experts who spoke at the Annual Healthcare and Life Sciences Private Equity & Finance Conference in Chicago last month.

Matt Hartzman, Healthcare Leader at RedMane Technology LLC, Lou Silverman, Chief Executive Officer at Advanced ICU Care, and Pete Tedesco, Principal at Health Enterprise Partners spoke to the room full of investors, innovators, and providers about what to consider when investing and, subsequently, implementing technology in healthcare. The moderator of this panel was Sara Shanti—Attorney at McGuireWoods. Below, are five key points from the panel.

1. Healthcare is needy. Due to the many business, clinical, and quality needs of this industry, healthcare technology is likely to attract investors attention if it has one or more of the following key characteristics: (a) the technology is scalable, (b) the technology provides an opportunity to integrate patient care across platforms or specialties, and/or (c) the technology is able to produce useful data (big or small) to improve the patient experience or demonstrate conformance to quality benchmarks. If a piece of technology does not solve for a core clinical problem, often involving one of the preceding characteristics, it will struggle to attract customers. The more of these characteristics that the applicable technology can meet, the more likely customers (and effectively, investors) will allocate capital to the project.

2. Hot is sometimes not. Technology or processes that are effective or “hot” in other market sectors are not always attractive to the healthcare sector. Healthcare technology must deliver meaningful value to providers and/or patients. This special need often requires input from clinical providers and patients during development of a healthcare product. The panel noted that in developing healthcare technology, it is paramount to consider whether the data output is useful in addressing the healthcare “problem” that the technology aims to solve. Overall, the technology needs to solve clinical or other specialized problems that exist in healthcare. A product developed for the purpose of “disrupting” the market is interesting, but a flag for additional diligence.

3. Signs point to success. The panel identified several signs that point to a useful piece of healthcare technology, including: (a) the technology establishes a commercially successful business model (often measured by EBITDA); (b) the technology has a substantial number of customers who continue to return to the producer for the product; and (c) clinical providers are interested in investing or using the product. Healthcare technology that has significant investment from within the healthcare industry are some of the most successful products because they are able to utilize feedback given by providers.

4. The hurdles are real. Healthcare technology faces numerous hurdles related to integration and user buy-in, as is the case for any piece of new technology within a sector. When adopting a new piece of healthcare technology, entities should be prepared to address: (a) education/training users on new interfaces; (b) differentiation within the marketplace; and (c) implementation that assures success of the technology. The panel experts noted that these challenges are faced by all healthcare technology companies and any healthcare technology company must plan for capital to overcome these challenges and plan for customer support of the same.

5. Diligence, ladies and gents. In connection with investing in healthcare technology, investors are required to critically diligence the technology’s owner and the new technology. Cybersecurity considerations are one of the leading areas of diligence for healthcare technology investors because there has been a significant rise in healthcare data targeting. Investors also need to understand how any new piece of technology is going to integrate into consumers’ existing systems. If the technology cannot integrate with multiple generations of software, the healthcare technology’s marketability may be limited. Finally, if market for the new healthcare technology is not significant, the investment is unlikely to be successful not matter the innovation.

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