Digitalization in Healthcare – Alleviating Growing Pains Amid Electronic System Implementation

The year is 2019, and terms such as “Cloud Storage,” “Big Data” and “Artificial Intelligence (AI)” have evolved from foreign, idealized concepts to familiar, tangible solutions for problems plaguing businesses across many industries. Implementation of digital-based systems to assist with the collection, storage and manipulation of data seeks to increase efficiency in operations, but it can also present hurdles for industries with long-established workflows, such as healthcare.

Over the past decade, the healthcare sector has experienced a monumental shift to computerization – more than half of all Americans currently have health information stored in a decentralized data storage software system (e.g., Epic, Cerner, Meditech). The introduction of “EMRs” (electronic medical records) to patient care was designed to enhance the interoperability of medical data, and in turn streamline processes to produce better outcomes. In lieu of paper diagnosis/treatment forms, lab order slips, vital sign charts and hospital ward records, EMRs offer digitized, real-time patient records accessible directly, securely and remotely by authorized users. A patient’s clinical data can be collected and stored in a system that shares the information with other healthcare providers and organizations (i.e., hospitals, laboratories, specialists, pharmacies, workplace clinics).

With a full view of a patient’s medical history, providers can make better-informed decisions concerning the delivery of care. Many EMR solutions leverage AI to gain greater insight into analytics and enhance standardization/interoperability in patient portals. In theory, the EMR concept offers massive improvements to our current system, but in practice, the integration of this technology comes with significant costs.

Upgrading existing hospital software systems is certainly not inexpensive, but it represents a mere fraction of the costs associated with implementing the technology. During the early stages of integration, hospitals and clinics are forced to reduce the number of admissions and appointments to give personnel time to learn and familiarize themselves with the new system. This lost patient revenue, coupled with expenses for tech-support assistance during the implementation phase, account for the majority of the upgrade’s total cost. In addition to the financial obstacles, the introduction of EMR software raises obvious concerns with respect to HIPAA compliance and the privacy of protected patient health information.

Adaptation to this new technology has also caused more headache than benefit for providers in many cases due to the magnitude of disruption caused by uprooting conventional processes. To ensure that these tools are leveraged to deliver maximum value, a handful of companies (and private equity groups) have developed solutions to ease the use of EMRs and other electronic healthcare platforms for providers. Recognizing the opportunity to assist with the integration process, many private equity groups have channeled funding into companies developing EMRs usability solutions: CitiusTech Inc. (General Atlantic), Hayes Management Consulting (Primus Capital), Nordic Consulting Partners (Silversmith Capital Partners) and Sagacious Consultants (acquired by Accenture).

MHT Partners, a leading healthcare services investment bank, believes that more complete patient information available from EMRs will enable providers to make educated care decisions quickly, improving patient care while mitigating safety risks. If you would like to learn more about MHT’s healthcare services advisory practice, please e-mail Taylor Curtis (tcurtis@mhtpartners.com) or Alex Sauter (asauter@mhtpartners.com).

Source: The New Yorker, Why Doctors Hate Their Computers

Trumped by Tariffs?

Trump’s tariffs have trickled down to impact middle market companies, and nearer and dearer to our hearts, middle market deals. We have several consumer growth clients that have been impacted by the tariffs, and each company is scrambling to figure out how to respond. For any company that sources a significant portion of its products from China, the tariffs create an immediate hit to EBITDA, which of course often leads to valuation discussions. What happened here, and what is a seller to do?

Back in early July 2018, the U.S. imposed a 25% tariff on $34 billion of Chinese-imported goods, and China immediately responded with tariffs on U.S. exports in the same amount. On August 23rd, the U.S. imposed 25% tariffs on an additional $16 billion of Chinese goods (totaling $50 billion), and to no one’s surprise – China immediately followed suit. On September 24th, the U.S. upped the ante dramatically, imposing a tariff on $200 billion worth of Chinese goods, including many everyday consumer products like electronics and housewares. China again retaliated, slapping tariffs on another $60 billion of American-made products. While a tariff ceasefire has been enacted for the time being, subsequent trade talks between the U.S. and China have not yet resolved the potential trade war. As we approach the March 1st, 2019 trade deal deadline, everyone is watchfully waiting to see whether agreement can be reached.

The specter of tariffs has sent strong shock waves into the middle market, especially for consumer product companies that rely on Chinese suppliers. As a leading consumer investment bank, MHT Partners has seen companies react in different ways, and many have hit the pause button on a potential transaction to let the dust settle and to figure out how to respond. One of our clients took a very proactive approach and immediately started working with vendors to reduce costs through brute-force negotiations, decontenting of products, or vendor consolidation. As a result, they were able to quickly demonstrate that the tariffs would not ultimately have a material impact on EBITDA. Another client is actively looking to qualify vendors in other countries such as Vietnam or Thailand. Other clients responded by raising prices to offset the tariffs and many were able to delay the impact simply by selling down inventory purchased prior to September without re-ordering until an agreement had been reached.

Not all companies have been as fortunate, and many are seeing or will see a significant increase in product costs and an immediate degradation of profitability. For businesses selling into highly competitive channels (i.e., Walmart), raising prices is somewhere between a tough sell and not an option. For companies that are reliant on Chinese suppliers, it is time to re-imagine that supply chain. For those companies that are in a sale process or contemplating one, they must have a crisp answer to the question that is on every buyer’s lips: how will you be impacted by the tariffs, and what are you going to do about it?

Blockchain for Healthcare Data

Blockchain for Healthcare Data | A Means to Improve Interoperability and Transportability of Patient Medical Records

Change Healthcare’s, a provider of healthcare technology solutions, recent acquisition of PokitDok, a leading provider of platform-as-a-service tools and software for developing healthcare applications, highlights the promise of using blockchain technology to streamline the management and analysis of patient healthcare data.

As noted in Change Healthcare’s December 18th press release:

“This acquisition is about practical innovation to create a more connected, transparent and efficient healthcare system where patients control their own information,” said Kris Joshi, Ph.D., executive vice president and president, Network Solutions, Change Healthcare. “As the leader in blockchain for healthcare and with one of the most extensive open API marketplaces available, with PokitDok we are bringing together synergistic assets and technical expertise for delivering additional capabilities to our customers and accelerated value to digital health markets.”

For years the global healthcare industry has struggled to find a streamlined way to manage patient records. The emergence of blockchain and secure, decentralized data management technologies, may offer a way to create portable, interoperable digital health records for patients.

A Radically Oversimplified Blockchain Primer

A blockchain refers to the way data is structured and stored and is commonly described as a financial ledger with entries or records of transactions. Each transaction is digitally signed to ensure its authenticity and that it is not altered. Digital ledger entries are distributed across a number of different computers, servers, and devices.  These multiple layers, or data storage points, serve the purpose of establishing a consensus about the transaction in nearly real time; each has copies of the existing authenticated ledger distributed amongst them. When a new transaction or an edit to an existing transaction comes in to a blockchain, a majority of the nodes within a blockchain infrastructure must execute algorithms to evaluate and verify the history of the individual blockchain block that is proposed. If a majority of the nodes come to a consensus that the history and signature is valid, the new block of transactions is accepted into the ledger and a new block is added to the chain of transactions. This model allows blockchain to act as a distributed ledger without the need for a central authority to affirm which transactions are valid.

Implications for Healthcare

The highly trustworthy, private, available, and decentralized nature of data stored in blockchains makes the technology an interesting candidate for managing patient health records.  Across most health systems, and even in some hospitals, there are multiple electronic medical records (“EMRs”) or other sources of patient information.  Each system has its own way of recording data and connecting with other systems, making it extraordinarily difficult to share medical records when patients are traveling, or even between different facilities within the same health system.  Sometimes important health records cannot be located in a timely fashion, or at all, leading to complications in treatment and resulting in avoidable costs.  Blockchain technologies are well positioned to address these issues of portability and accessibility of patient health records.  The creation of a healthcare blockchain will allow each patient encounter with a healthcare provider, routine checkup, prescription, allergy, etc., to be added to an individual’s record, irrespective of the healthcare IT system being used to record the data initially and solving current interoperability issues while creating a secure way to store highly personal protected information.

While large-scale commercial healthcare blockchains have not been deployed yet, MHT Partners views it as being only a matter of time before leading healthcare systems and healthcare IT developers begin to leverage the potential of blockchain technology to begin to stitch together a global patchwork of disparate EMRs and other sources of patient data.

In addition to the benefits noted above, this common record could allow for research across large cohorts over long periods of time on an anonymous basis or sync with wearable health devices providing physicians or emergency responders with real-time patient data in the field.  The applications for blockchain technology abound and will surely transform the way we manage healthcare data.  It will be exciting to see the developments and changes introduced to healthcare systems in the coming years.

MHT Partners, a leading healthcare services investment bank, provides bespoke advisory services to niche market business in the middle market. If you would like to learn more about MHT’s healthcare services practice, please e-mail Taylor Curtis (tcurtis@mhtpartners.com) or Alex Sauter (asauter@mhtpartners.com).