Increasing Prevalence of Surgeries Performed in an ASC Setting

It is increasingly common to hear the term (“ASC”), or ambulatory surgery center, in discussions among investors in the healthcare industry. ASCs, often owned by the physicians who practice in them, can provide a cost-effective alternative to care delivery in a hospital setting, drive better patient outcomes, and allow physician owners to capture more of the economics associated with the delivery of patient care.

In the U.S., there are approximately 6,000 ASCs and most specialties have looked at porting procedures to an ASC setting at some point.
However, the treatment of patients in ASCs naturally aligns with some medical specialties more than others. Notably, procedural and technology advances over the last 20-30 years have made it possible to perform surgeries in an ASC, which had previously only been performed in a hospital. One example is total hip and total knee replacements. Another is complex spinal procedures, which have only become a viable option in the last five years.

 

 

 

 

 

 

 

 

 

In next week’s blog, we’ll look at specialties that are well positioned to transition some patient cases to an ASC setting, and what factors, including reimbursement decisions, patient outcomes, and technology are a fit with ASCs, so stay tuned!

 

 

 

 

 

 

 

We’re here to help
Partnering with specialty physician practices as they evaluate strategic alternatives for their businesses represents a significant portion of our work in the healthcare space. As ahealthcare investment bank, MHT is extraordinarily active in the market, recently completing anesthesiology, dermatology, hospitalist and emergency physician deals. We would love to be a resource for you as you consider the rapidly evolving healthcare landscape and the implications for your practice.

Sources: CMS, Becker’s Hospital Review

Seeking High (Growth) From Hemp

From raw seeds, to milks, oils, and protein powders, hemp has been making its way onto store shelves and into consumers’ homes at higher rates than ever before. Hemp is increasingly praised for its numerous health benefits and is becoming one of the new ‘it’ products.

What is Hemp?
Let’s start off with what hemp is not—marijuana. Often confused with its shagadelic cousin, hemp is derived from the same plant family as marijuana, but has less than 0.3% of THC, the psychoactive chemical compound in marijuana.

Hemp is a dry fruit with a hard shell, similar to a sunflower seed. Its plant name is cannabis sativa and is an incredibly versatile and adaptable plant to grow. The plant requires little water or maintenance, needs less pesticides to guard from disease (helping farmers attain the more lucrative organic title), and has a negligible carbon footprint, all traits that make its cultivation an attractive prospect.

Why are Consumers Buying Hemp?
Hemp is trending among health-conscious consumers, and for good reason. This little seed boasts enormous health benefits as it contains all 20 amino acids, including the nine that our bodies cannot produce, has the highest botanical source of essential fatty acids, is a rich source of phytonutrients, fiber, and antioxidants, and is gluten free.

Moreover, hemp is gaining popularity in the protein supplement space as consumers increasingly adopt plant-based diets and look for an alternative to previously market-dominant whey protein, which causes bloat and digestive distress for many. Hemp boasts 11 grams of protein per 30 grams of hempseed, and is a complete protein source, which is a unique attribute among plant-based proteins.

High Growth
With these excellent health benefits, it is no wonder that hemp-based foods and beverages have been growing strongly. In fact, in 2016, U.S. retail sales of hemp-based foods and beverages grew to $129 million, a surge of 44% from the previous year. The total hemp retail market, which includes food and beverage, personal care, textiles, supplements, and industrial applications, among others, reached $688 million in 2016 and is expected to grow at a robust 22% CAGR through 2021. Companies like Evo Hemp, selling everything from snack items to hemp hearts, and Hippie Butter, a self-proclaimed ‘online gourmet food grocer’ which sells items ranging from hemp seed butter to hemp seed shampoos are two examples of companies driving these trends. Although growing, hemp seed products have not hit the masses quite yet. With only 1% penetration in the U.S. and approximately 5% penetration in Canada, there is still immense room for expansion in our local markets.

Forward-Looking Trends
Private Equity groups and larger strategic companies have noticed the growing demand for hemp products among consumers and are increasingly entering the market in search of healthy returns. Notable news includes the recent acquisition of Manitoba Harvest, a well-known hemp brand that can be found in the likes of Whole Foods, by Compass Diversified Holdings. Among strategic companies, M&A activity includes acquisitions of American Nutritional Products (a producer of hemp capsules, gummies, and serums) by INCC, Full Sun (producer of hemp seed oils) by Victory Hemp Foods, and CBD Pharmacy (manufacturer of consumable legal cannabis and hemp products) by Real Brands, just to name a few. With strong product attributes, and macro tailwinds, we expect hemp-based products to continue to “grow like a weed!”

Source: Food Business News

Success in the Evolving Online Program Management Market

Technology adoption, digital disruption, distance learning, positive student outcomes, enhanced revenue opportunities…. As an education investment bank, we have heard a lot from online program managers (OPMs) that seek to change the long-time, ivory-tower model of higher education. Ten years ago, barely a handful of providers were addressing the needs of universities to take their courses online, widening the ‘moat’ of students who could benefit from distance learning. With the myriad of providers now competing in the online market, the question we ask ourselves is, “which providers will stand the test of time?”

This isn’t a question based on market demand. On-campus enrollment at U.S. universities is flat or declining, but online enrollment is increasing. Further, opinions about the quality of online education are more favorable, and now approximately 30 percent of students studying on campus take at least one class online. Colleges currently offering online education which are steadily increasing their digital course selections, coupled with institutions just entering the online game (who will likely need assistance to gain success), will ensure demand for partnerships with revenue-sharing OPM companies for the foreseeable future.

A recent report published by Eduventures suggests there are alternative providers serving different needs of university partners:

  • Full, Upfront Investment (Revenue Share) – tailored to those universities that lack resources to develop a complete online course offering
  • Fee for Service – caters to the ‘a la carte’ needs of universities (e.g., online marketing, enrollment, course design).

Among those groupings, experts note there are new models emerging from the likes of Kaplan and Bridgepoint Education, both spinning off their degree-granting units into non-profit institutions, suggesting specialized OPMs will endure more so than diverse providers.

The implications of a highly competitive, fragmented market suggest that some providers will not survive over the long term. Further, some leaders of OPMs note that it’s getting harder to find new institutional partners, and the cost of launching online programs is rising as student acquisition costs increase. With organic growth proving to be protracted and costly, M&A could be the preferred route for many.

Will consolidation in the OPM market be the answer? Probably. There are 35+ OPMs providing disparate degree types, sectors’ focus and revenue models. That being said, it is too soon to tell which OPM providers will go-it alone, consolidate or be targets.

The Confluence of Education and Workforce Readiness

More and more, we see education companies creating solutions for human capital management. Similarly, talent management and HR technology companies are offering education-related content and tools to support lifelong learning. As an education investment bank, we are continually asking ourselves, what does this mean for the education industry and our clients?

While there isn’t a clear picture or path to a combined market of human capital management (“HCM”) and lifelong education, it is becoming more evident that there is a thesis for providers to participate in both markets. Further, the Trump Administration has proposed merging the Departments of Education and Labor in an effort to enhance U.S. workforce readiness. A recent 2017 report by market research firm Outsell suggests the two markets combined represent a $150 billion market opportunity that is being disrupted by technology adoption and demands by employers to continually develop and retain employees. It’s important to keep in mind that the market for experienced talent recruiting, developing and credentialing the tens of millions of adults who are already in workforce is many times larger than the traditional college-to-career pipeline that captures so much attention. Likewise, the ecosystem to support professional and lifelong learning is growing to include a host of options, ranging from employers themselves to start-up providers, as well as colleges and universities.

Investors are continuing to seek opportunities in both HCM and lifelong learning (when combined these sectors are known as “talent”), recognizing there is a skills’ gap many corporations need to address for their employees. Whether digital, communications, business or soft skills, corporations need to find solutions to continually develop their employees in an ever-changing market environment. According to a survey conducted by the Pew Research Center, 87% of Americans believe it will be necessary to develop new skills throughout their career to keep up with changes in the workplace. Further, the rise of the millennial worker brings its own set of challenges for employers looking to retain the best talent. Compensation and benefits are no longer the driving forces of employee satisfaction. Rather, more and more employees want to feel valued by their employer through advancement and continued learning.

From an investment perspective, funding, in what has traditionally been considered the corporate training technology sector, is increasingly driven by firms that focus on services and technologies related to talent development and acquisition. Some notable funding rounds include those for Coursera, Degreed, Andela, MasterClass, and Trilogy Education Services, all of which are companies that provide platforms to help meet the talent challenge, rather than, say, companies that offer software or tools.

In the future, we anticipate there will be a continuing emergence of multi-faceted platforms serving a combination of students and their employers, representing compelling investment opportunities in the HCM and lifelong learning sectors.

Can Increased Shipping Costs Put the Brakes On The Economy?

Consumer packaged-goods’ (CPG) companies nationwide are experiencing shrinking margins as the cost of shipping their products has increased substantially over the last year. Coca-Cola reported that their first quarter freight costs were up 20% in their North American division over the same period last year. This burden is being felt across the industry, with consumer goods’ companies Procter & Gamble and Hasbro, as well as food companies Danone and Nestle, citing rising freight costs as negatively impacting their 2018 financial performance.

The rising freight costs are a combination of two issues: supply and demand around shipping availability and gas prices. Retailers and manufacturers have been struggling to find freight providers in recent months as shipping volumes have surged in a growing U.S. economy. As the broader economy has continued on its upward trajectory, railways and truck fleets haven’t moved in lockstep, and the price of their transportation services has increased substantially as a result. In addition to a paucity of freight, gas prices have climbed significantly. Since the beginning of the year, the average price of a gallon of gas has climbed by over $0.45, which cuts directly into profits.

With apparently no near-term relief in sight, many industry players such as General Mills, B&G Foods, and Hormel Foods are considering raising their own prices to pass along the spiked shipping costs to consumers. Tyson Foods, for example, has reported that they plan to incorporate price increases in the second half of 2018 in order to return their margins to historic levels. Of course, these increases simply reflect the impact of inflation one might expect in an economy as hot as the U.S.’, and which has been quite moderate for a very long time.

With rising consumer goods prices on the horizon as CPG companies pass along the costs to consumers, it remains to be seen what impact these rising costs will have on the broader economy. What is not in question, however, is that shipping firms will seek to take advantage of the current environment and reap profits while they are able.