Venture Investors is raising a new healthcare venture fund, according to a PE Hub report citing an SEC regulatory filing.
The firm is targeting $100 million for the fund.
Venture Investors, with offices in Madison, Wyo., and Ann Arbor, Mich., seeks to make early-stage investments in healthcare, specifically within the therapeutic, diagnostic and tools, medical device and IT sectors. The firm focuses on the Midwest, with initial investments ranging from $250,000 to $2.5 million.
Linden Capital Partners has announced the closing of its fourth private equity fund with $1.5 billion.
Linden Capital Partners IV was oversubscribed, exceeding a $1.25 billion target. The fund will target middle-market healthcare companies in sectors including services, medical products, specialty distribution and pharmaceuticals.
Linden Capital, based in Chicago, is a PE firm focused exclusively on leveraged buyouts in the healthcare and life sciences industries.
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 profiling women leaders in private equity throughout 2018. 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. This month, we are pleased to feature Rena Clark of Laurel Oak Capital Partners. Access her profile by clicking here.
To recommend a woman for a future interview, email Amber Walsh at awalsh@mcguirewoods.com.
The next in our series of posts sharing key takeaways from panels at the Healthcare & Life Sciences Private Equity and Lending Conference focuses on opportunities for investment in micro-hospitals and other specialty hospitals. It is authored by our colleagues Jeff Peterson and Sarah Mick.
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By Jeff Peterson and Sarah Mick
Investors’ and providers’ interest in micro-hospitals and other specialty hospitals has grown as the delivery of healthcare has increasingly shifted from large, full-service acute care hospitals to smaller, lower cost, and more focused settings, according to experts who spoke on a panel at McGuireWoods 15th Annual Healthcare and Life Sciences Private Equity and Finance Conference on February 21.
Experts included Samuel Cappellanti, President, Bellwether Group, LLC and Jeffrey Peterson, Partner, McGuireWoods LLP with Rex Burgdorfer, Vice President, Juniper Advisory as the panel moderator.
Here are five key points from the panel discussion.
1. Facilities such as micro-hospitals, psychiatric hospitals and other specialty hospitals have been touted as having the capacity to offer lower cost, patient-centric care that is more highly tailored to the applicable populations’ needs. Micro-hospitals, in particular, can play an important role in areas where there is not enough demand for a full-sized/full-service hospital and can serve as a backup to community hospitals in other areas. When part of a larger healthcare system, these micro-hospitals can serve as a portal into the healthcare system for higher acuity patients.
2. A significant amount of recent activity in the specialized hospital field has involved partnerships and joint ventures among specialty operators, health systems, real estate investment trusts, and private equity funds. For example, private equity-backed Emerus has partnered with large health systems such as Dignity Health and Baylor Scott & White Health. REITs have often been involved in such deals helping to defray some of the initial capital costs.
3. Many larger hospitals and health systems have faced challenges due to economic pressures and uncertainty from reimbursement programs, such as potential changes with the 340B drug discount program and site-neutral payment policies, healthcare-related budget cuts in the President’s proposed Federal budget and continued emphasis on value-based care coupled with declining fee-for-service rates. This pressure not only affects existing hospitals and health systems, but it makes them re-think where to spend their limited capital in order to best serve their patient populations and fulfill their missions.
4. The new Secretary of the U.S. Department of Health and Human Services, Alex Azar, indicated that he is open to rethinking the ban on new physician-owned hospitals. If these ownership restrictions are lifted, it could present significant opportunities in the hospital sector for private equity investors in partnership with physician investors.
5. It appears that in response to the surge in micro-hospitals, the Centers for Medicare and Medicaid Services (CMS) issued guidance in late 2017 on the statutory definition of “hospital” and whether a hospital is “primarily engaged” in providing inpatient services. This guidance could present certain growth challenges to micro-hospitals and smaller specialty hospitals. CMS clarified that a hospital must have two inpatients at the time of survey in order for surveyors to directly observe the actual provision of care to inpatients. Additionally, CMS clarified that the use of benchmarks for average daily census and average length of stay will be two primary factors utilized to determine whether a hospital is “primarily engaged” in providing inpatient services. These hospitals and investors in this space will want to pay particular attention to these factors, among the others that CMS states it will consider in such an analysis.
Private equity firms TPG Capital and Welsh, Carson, Anderson & Stowe (WCAS) are joining with Humana to acquire CURO Health Services for approximately $1.4 billion, according to a news release.
CURO Health Services, based in Mooresville, N.C., is a national hospice operator providing care to patients at 245 locations in 22 states.
TPG Capital, headquartered in Fort Worth, Texas and San Francisco, targets investments in middle-market companies in healthcare and a number of other industries.
WCAS, based in New York, targets growth-oriented companies within the healthcare and information/business services industries.
The CURO transaction is anticipated to close during the summer of 2018. Announcement of the acquisition comes less than six months after TPG, WCAS and Humana agreed to acquire Kindred Healthcare in a $4.1 billion deal.
The next in our series of posts sharing key takeaways from panels at the Healthcare & Life Sciences Private Equity and Lending Conference focuses on opportunities for investment in primary care centers. It is authored by our colleagues Holly Buckley and Josh Reynolds.
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By Holly Buckley and Josh Reynolds
According to experts who spoke on a panel at the 15th Annual Healthcare and Life Sciences Private Equity and Finance Conference on February 22nd, 2018, the practice of primary care is changing, which allows for investors to implement certain innovations to facilitate these changes. Smart investors can provide support to clinics, physicians and even patients in order to run a better and more profitable practice.
Experts included Todd Squilanti, Managing Director, InTandem Capital Partners; John Pircon, Vice President, New Harbor Capital Management, LP Arion Robbins, Principal, Revelstoke Capital Partners LLC; Susan Ford, President, Semma Health; and Marc Cabrera, Co-Head of Healthcare Investment Banking, Oppenheimer& Co. Inc.
Here are five key points from their discussion:
1. Primary care practices remain appealing for investing due to the size of the industry, the current high rate of fragmentation, as well as the opportunity for innovation within primary care practices, including the implementation of new delivery models, and concierge medicine.
2. The current patient mix who visit primary care physicians is in a state of change due to evolving demographics. New millennial patients do not want the same doctor as their parents and their health care preferences are much different. As for the growing elderly population, ease of access is now an emerging area where clinics are focusing on delivering prescriptions directly as well as providing transportation to and from the clinic.
3. Primary care physicians are starting to play a greater role as care coordinators, and investors can bring resources to these practices so that the physicians can provide efficient coordination. For example, a practice can arrange for a specialist to be present at the primacy care clinic once a week to see patients rather than either referring outside the clinic or hiring a specialist full-time.
4. The future success of primary care practices will depend on changing patient behavior. Getting patients away from urgent care clinics when symptoms have become dire and having them examined at a primary care clinic will put less strain on urgent care centers and emergency rooms. The sickest 10% of patients account for 35% of total healthcare costs.
5. Opportunities exist to actively engage patients which can lead higher collection rates. One option is to promote price transparency through primary care physicians talking directly with patients on pricing. Many clinics struggle with collecting the patient portion of bills, and part of this issue may be due to the lack understanding of the treatment price at the time the patient decides to obtain treatment. The panelists discussed how the best person to communicate the price of a procedure to a patient is their primary care physician.
The next in our series of posts sharing key takeaways from panels at the Healthcare & Life Sciences Private Equity and Lending Conference focuses on opportunities for investment in dermatology. It is authored by our colleagues Tom Zahn and Chris DeGrande.
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By Tom Zahn and Chris DeGrande
Dermatology continues to be an area of strong interest for private equity investors, and both platform and add-on investments continued at a robust pace in 2017. This activity as well other trends in the field of dermatology were explored by experts who spoke on a panel at the McGuireWoods 15th Annual Healthcare and Life Sciences Private Equity & Finance Conference on Wednesday, February 21.
Experts included Dan Conroy, Chief Development Officer of United Dermatology Partners; J. Kyle Brown, Director of Brown, Gibbons, Lang & Company; Samarth Chandra, Partner at Enhanced Equity Funds; and Elizabeth Campbell, Principal at LLR Partners.
Five of the key topics discussed were as follows:
1. Dermatology remains highly fragmented relative to other fields, with roughly only 5% of the industry currently consolidated. During the last 12 months, there has been strong M&A activity for both platform practices and add-ons, and the panelists expect to see continued add-on growth. Many dermatology practices are becoming more sophisticated with regard to investment strategies, and so it is becoming more difficult for investors to differentiate themselves to dermatologists looking for investment partners.
2. The dermatology field is an attractive field due a variety of factors, including the fragmented nature of the industry and the field’s added retail element. In addition, the productivity level for dermatologists tends to be very high, and profitability can be further increased by owning lab/pathology services in addition to a dermatology practice.
3. Effective use of midlevel providers can be a key to increasing the success of a dermatology practice. It is still very important to use board certified dermatologists to drive the practice, but midlevels can be used to provide services so long as these services are appropriate. Practices should be aware that different states may require certain ratios of physicians to midlevels or may have additional supervision requirements.
4. While the panelists did not report a giant leap forward in negotiating favourable contract terms with payors (as a result of growing platforms obtaining more leverage), they did report minor successes in this area. The presence of larger, diversified practices has in many instances at least resulted in the prevention of cuts to reimbursement rates by payors, and in some cases resulted in minor rate increases as well. One key element is the increased ability of the personnel brought in by investors to better negotiate with these large payors, as these personnel are often professional individuals experienced in such negotiations.
5. Marketing is a major focus area for almost all dermatology practices. Online marketing is a key source to drive patient flow, and the use of online feedback surveys is useful to understand the success of the practice. Online marketing and scheduling can help to get a patient in quickly for his or her first visit in order to encourage the patient to come to the practice long term.
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 profiling women leaders in private equity throughout 2018. 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. This month, we are pleased to feature Carolyn Galiette of Ironwood Capital. Access her profile by clicking here.
To recommend a woman for a future interview, email Amber Walsh at awalsh@mcguirewoods.com.
The next in our series of posts sharing key takeaways from panels at the Healthcare & Life Sciences Private Equity and Lending Conference focuses on opportunities for investment in dental services organizations. It is authored by our colleagues Bart Walker and Amanda Roenius.
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By Bart Walker and Amanda K. Roenius
Dental services organizations (“DSOs”) continue to experience consistent growth in both market share and revenue in the dental industry, making them a continued area of interest for investment and expansion. Experts at the 15th Annual Healthcare and Life Sciences Private Equity and Finance Conference, hosted by McGuireWoods on February 21, 2018, explored trends in DSO investments as well as insights as to what potential investors should look for to best align themselves for success.
Experts on the panel included David Friedman, Vice President of Silver Oak Services Partners, James R. Davis, Jr., Managing Partner at Blue Sea Capital, Craig Castelli, Founder and Chief Executive Officer of Caber Hill Advisors, Sean Roberts, Partner at Huron Capital, and Ken Doyle, Partner at The Halifax Group.
Here are five key considerations from the panel discussion:
1. The investment market is active and competitive. As DSOs continue to thrive, so too does the competition for investments. The dental services niche remains fragmented. By most estimates, approximately only fifteen percent (15%) of dentists are associated with a DSO. Panelists opined that private equity-backed platforms with a wide array of healthcare experience, including in the dental field, are amongst the biggest competitors for investments. Nevertheless, operators who have little to no dental experience are also entering the market with success. Given the strong pool of competitors, potential investors should consider looking at smaller practices that may allow for successful consolidation and should strategically select a market that will allow for growth and expansion.
2. Consistency and integration are keys for success. When considering an investment in a dental platform, panelists emphasized the need for consistent and integrated policies and strategies across the platform, such as those related to hiring and training, branding efforts, and service offerings. The more integration and consistency that exists, the more value the investment will bring. As such, whether investors are looking at pre-established or de novo investments, these core considerations should be emphasized from the start.
3. Stay aware of changes in reimbursement, specifically with regard to Medicaid. Although the panelists noted that Medicaid reimbursement has remained fairly consistent over the past several years, investors must keep in mind that reimbursement varies from state-to-state (and market-to-market). Services that are reimbursed by Medicaid in one state may be reimbursed at a much lower rate (or not at all) in another. Investors should pay attention to lobbying efforts in their selected markets and continue to focus on building connections with state managed care organizations to best align themselves for success.
4. Consider the market’s regulatory landscape prior to investing or expanding. When considering whether to expand or invest in a particular market, panelists emphasized the need to consider the market’s reimbursement rates, regulatory structures, and competition. For example, North Carolina often poses challenges for DSOs from a structural and Medicaid reimbursement standpoint. Panelists noted that the difficulty of a market may sometimes lead to enhanced value when properly structured, citing Texas as a state that, even with the hurdles, can be very profitable.
5. Align investment incentives and goals with those of the dentists. The quality and motivation of a platform’s dentists are key factors to success. Panelists stressed the need to keep the investors’ and dentists’ interests, incentives, and goals aligned. This can be done through various compensation and staffing models as well as flexibility on the part of the investor. Investors should position themselves to help dentists meet their end goals in an acquisition, which, in turn, will help the investor meet its goals as well.
The next in our series of posts sharing key takeaways from panels at the Healthcare & Life Sciences Private Equity and Lending Conference focuses on opportunities for investment in oncology, urology, vascular, and neurology. It is authored by our colleagues Erin Dine and Holly Buckley.
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By Erin E. Dine and Holly Buckley
After experiencing high returns during the first wave of consolidation of physician practice management (PPM) models in dermatology, vision, and dental sub-specialties, investors are now contemplating what the second wave of PPM consolidation will look like. Investment opportunities in oncology, urology, vascular, and neurology specialties could lead to a continuation of the active deal flow in PPM transactions in the next few years. Following are some considerations for investors related to the second wave of PPM consolidation, according to experts who spoke on a panel at the 15th Annual Healthcare and Life Sciences Private Equity & Finance Conference on February 21, 2018.
Experts included Nandan Kenkeremath, Senior Health Policy Consultant at Marwood Group; Brent Kitts, Chief Operating Officer at AC3 Health; Steve Aguiar, Managing Director at Provident Healthcare Partners, LLC; and Eric Coburn, Managing Director at Duff & Phelps.
Here are five key points from the panel discussion:
1. Second Wave Sub-Specialties Investment Breakdown. Urology is a heavily fragmented sector. There are currently 12,000 urologists practicing in the United States, but the nation’s top 5 urology groups only encompass roughly 300 urologists. Thus, investors have the opportunity to consolidate small groups and build an attractive platform across regional markets to achieve necessary scale. Many investors, however, seem to shy away from urology due to its high percentage of Medicare and Medicaid reimbursement.
The oncology space circles around a patient population that is 55 years of age or older, a population that by 2040 will balloon. This population statistic has caused the government much concern regarding how it will handle this patient population. Thus, funds that can devise a successful model to efficiently and effectively treat this patient population will be winners.
Vascular transactions seem to have garnered a “lukewarm” reception in the investment community due to their heavy Medicare reimbursement and tough patient mix. But investors that can integrate and capitalize on vascular-related ancillary services, such as vein treatment, will likely prevail.
Neurology is not highly lucrative from a professional fee perspective. Thus, it is important to structure any neurology deal with a strong physician alignment model. Aligning with younger, entrepreneurial physicians and partnering with physicians who strive to achieve high returns could constitute a successful foundation for a neurology platform.
2. Follow the Money. Policy developments and regulations, specifically concerning reimbursement, inevitably drive various waves of consolidation. Evolving reimbursement frameworks and alternative payment models are currently driving PPM consolidation. Private equity funds can transform a practice to be more efficient and more valuable, achieving scale and size so as to position it to succeed in value-based bundled payment models and thrive in the current and future healthcare landscape.
3. Reimbursement Diversification. Diversifying a practice’s reimbursement mix increases stability. The sub-specialties in the first wave of consolidation (dermatology, vision, and dental) all have relatively low government reimbursement. Oncology, urology, vascular, and neurology, however, have high government reimbursement and do not have the layers of commercial and self-pay reimbursement that the first wave experienced. But payment diversification still plays a major role and investors looking to take part in this second wave of consolidation should look to ancillary services to diversify a practice’s payment portfolio, as discussed below in Item 4.
4. Capitalize on Ancillaries. As the second wave of PPM consolidation evolves, it will be important for investors to capitalize on associated ancillaries aligned with the specific specialties of oncology, urology, vascular, and neurology. Because practices in these sub-specialties produce less fee-for-service professional revenue compared to other specialties that have attracted investment dollars in the past, ancillary service revenue will be important for the overall value proposition.
5. Adjustments for Out-of-Network Business. Amidst volatility in the stock market, rising interest rates, and some political uncertainty, experts are still confident that EBITDA multiples will stay fairly constant throughout 2018. There is approximately $1 trillion in private equity dollars ready to be invested. Certain characteristics of targets can impact the multiple, such as the percentage of out-of-network verses in-network funds. Investors are adjusting a practice’s EBITDA to only encompass a practice’s in-network reimbursement and are excluding all out-of-network funds because of the risk attached as payor networks continue to narrow and close in.