Healthcare IT Industry Spotlight Interview, Part 1: Casey West, Managing Director, SSM Partners
Tell us a little bit about SSM Partners (a Memphis-based private equity firm focused on Software & Technology, Internet & Consumer, and Healthcare). What attracted you to the firm?
I joined in 2004, shortly after business school. It was a dream of mine to do this type of investing in the Southeast, and that’s what SSM let me do. SSM has been a great small firm for many years and a leader in this part of the country, and I am very happy to be a part of that. We have a culture that distinguishes us. Our founder imparted a service orientation many years ago, and that fits really well with the way that I view the world and the way that I think about business. Getting to brass tacks, though, we’re a growth equity firm that invests in technology companies all over the country, so while we are located here [Memphis, TN], we are not limited geographically. Our market split is about 50-50 B2B technology to healthcare, and I am solely focused on the healthcare sector.
Succession Planning and Unlocking Value in Your Practice
It is never too early to lay the groundwork for unlocking the value in your medical practice. Whether the ultimate goal is liquidity, business continuity or exploring the role of consolidator, there are many advantages of planning for an ownership change three to five years before your desired transaction date. The main benefits include maximizing the ultimate sale value of the practice and preserving your legacy for yourself, your employees and your patients. By preparing appropriately, you can optimize the strategic alternatives for your practice.
Recapping the JP Morgan Healthcare Conference 2018
Each January, JP Morgan’s annual Healthcare Conference draws industry leaders to San Francisco to discuss M&A, investment, and the business of healthcare. In recent years, the impact of the conference has extended beyond the four walls of hotel banquet halls into a four-day, city-wide ecosystem of entrepreneurs, practitioners, advisors, and investors – all focused on healthcare.
MHT Partners views the conference as a critical opportunity for understanding emerging healthcare industry trends and investor sentiment as we kick off the new year. Our healthcare team was on the ground, where we conducted over 50 meetings with investors representing over $20 billion of investable capital. These are our key takeaways:
The Managed Services Organization: How Private Equity and Non-Physicians Can Invest in Provider Groups
As the current wave of physician practice M&A accelerates, private equity investors and transaction attorneys are employing multi-tiered legal structures that satisfy unique healthcare-industry considerations, including the ownership requirements dictated by state-specific “Corporate Practice of Medicine” laws. Managed services organizations (or “MSOs”) are typically at the heart of these legal structures and can be useful when addressing many healthcare-specific transaction requirements. MSOs also can align incentives and allow non-physician partners to provide useful services to affiliated medical practices. Understanding the function of an MSO is critical for physician practices that are exploring opportunities to partner with private equity groups, and engaging healthcare investment bankers and attorneys who are experienced advising provider groups can help establish optimal corporate structures to unlock the value of your practice.
Is Being an Out-of-Network Provider a Viable Long-Term Strategy?
For a number of reasons, providers in select areas of healthcare have opted not to contract with commercial payors. Often, higher reimbursement rates and provider independence drive the decision to remain out-of-network. But in the context of an M&A transaction, the long-term viability of an out-of-network strategy is often a point of particular interest to buyers. Given the complex web of stakeholders who are involved in the process of providing and paying for care, investors sometimes approach out-of-network businesses with caution. For that reason, positioning the nuances of an out-of-network strategy is a key responsibility of a company and their healthcare investment banker during the sale of a business.
Is It Time to Sell Your Practice? A Continuation from Last Week’s “Health Matters” Blog
With these essential questions answered (see last week’s blog for more detail):
- What is your Career Path?
- What Objectives Matter Most to you in a Sale?
- What is Your Process Execution Timing?
- How Might Other Partners or Providers View a Sale?
below are crucial next steps in realizing the goals for the next phase of your practice.
Is It Time to Sell Your Practice?
Deciding to sell your practice is one of the largest financial and personal decisions you’re likely to undertake. Despite the highly personal (and slightly scary) decision to consider alternatives for your practice, there are numerous advantages to selling all or a portion of it. Specifically, a sale or partnership can allow you to monetize the years of investment that you’ve made in your practice, plan for succession, create room in your partnership structure for younger physicians, or partner with a larger group that can help to drive growth and provide additional back office support – allowing you to focus on your patients.
The Current Temperature of High-Tech Care
The healthcare IT (“HCIT”) market is expansive and dynamic. A cursory glance at 2017’s wealth of deals—from predictive analytics applications to cloud-based claims management solutions—illustrates HCIT assets’ immense value to both strategic and financial investors.
However, if you ask a doctor about on-the-ground technology implementation, you will likely hear a different story. The healthcare industry is notoriously slow to adopt emerging technologies. Some people even joke that the healthcare industry is 15 years behind the latest technology. Itamar Kandel, president at OrbiMed-backed TigerText, explains that this trend is due to a confluence of concerns surrounding two key factors: safety and workflow. Safety is intuitive. If things go awry with HCIT systems, people can die. Thus, providers must go to great lengths to test every potential flaw of every prospective solution. This demands a great deal of time and resources.
What Makes a Specialty Physician Practice Attractive to Private Equity Groups
2017 has been yet another active year for private equity (“PE”) investment in an array of specialty physician groups. Specialties like dermatology, dentistry and emergency medicine have remained at the forefront of PE investment, while others like orthopedics are increasingly emerging as key future investment opportunities for PE. There are a number of traits that make these practices and their specialties conducive to the PE investment model.