Outdoor Retailer Summer Market Summary

I spent last week at the Outdoor Retailer Summer Market show (“OR”) in Denver.  As usual, it was a good opportunity to connect with many folks and to stay abreast of developments and trends in the space. My perception was that traffic was slightly down from last year. The timing of the show was a bit unusual this year in that Grassroots Outdoor Alliance (“GOA”) was held the week of June 9th (GOA is a less “sexy,” yet highly efficient show; no fancy booths-just pipes and drapes) and several regional trade shows (including the California Outdoor Sports Show in Sacramento, 360 Adventure Collectives in NJ and SC, Western Winter Sports Representatives Association shows in CO and OR (Oregon, not the show) and the Outdoor Reps Association Summer Show in WI) all taking place the week of June 23. While the press and media tend to congregate at OR, specialty retailers likely pick a show or two – but not all. Another strong, but not always verbalized undercurrent, continues to be the dwindling number of retailers themselves.

Outdoor-oriented, direct-to-consumer (“DTC”) players, ascendant in number, may make an appearance at these shows (OR in particular) for networking and meetings, but they obviously aren’t renting booths.

In terms of new products of categories, nothing revolutionary particularly caught my eye, though plenty of evolutionary advances in numerous companies and product lines were present.

Water sports’ companies continue to expand their floor space presence. Related, and in terms of neat products, Oru Kayak previewed a lightweight, 20-pound kayak that folds into the size of a small suitcase (and “no” Boeing has not ordered several thousand of them for their 737 Max 8…maybe they should). Big technology companies (e.g., Google) also appeared to be expanding their presence. Lastly, and consistent with nearly every other trade show these days, CBD / hemp companies were present (though perhaps not as visible as the Mile High venue might indicate).

MHT Partners, a leading consumer growth investment bank, continues to play an active role in the outdoor products space and welcomes the opportunity to discuss activity and strategy within this ever-evolving sector. Click here to connect.

Taking Stock of Reimbursement Dynamics in Telehealth

In recent years, as technology and acceptance of telehealth solutions as a reliable, verified medium for the delivery of certain types of care has grown, demand for telehealth services has surged. Investment, innovation, and entrepreneurship in telehealth has kept pace, rapidly improving the quality of electronic healthcare delivery. Nevertheless, the ultimate facilitator of widespread adoption of telehealth as a means of care delivery are the twin gatekeepers of the healthcare dollar: commercial and government payors. Without buy-in from Centers for Medicare & Medicaid Services (“CMS”) and commercial insurers, the ability to deploy telehealth solutions to more cases will be limited. Therefore, as we survey the telehealth universe to identify new opportunities and emerging trends, it is imperative that we take stock of existing reimbursement dynamics for telehealth.

Similar to other modes of treatment, the payor universe is more broadly guided by the CMS for standards related to the billing, coding, and reimbursement of procedures utilizing telemedicine. Surprisingly, however, CMS’s existing standards for telehealth are relatively limited, and telehealth services are required to meet strictly defined criteria that do not give telehealth full credit for its potential to reduce cost in the healthcare system and expand access to care.

To meet the criteria for federal reimbursement under telehealth services (42 CFR § 410.78), a series of requirements must be met. First, patient medical information must be transmitted from an originating site to a distant site, where a licensed medical professional furnishes the medical service. Although the distant site is loosely defined and can presumably include any location where the provider can access a telecommunications link, the definition of an originating site is stricter. For real-time interactive telehealth communication, originating sites include most practitioners’ offices, hospitals, clinics, skilled nursing facilities, mental health centers, and dialysis facilities. A notable exclusion is patients’ homes. For federal reimbursement, originating sites must also be located in rurally designated areas, or in Alaska or Hawaii. Certain exceptions exist, including (as of July 1, 2019) the inclusion of homes of individuals with pre-identified substance use disorders as originating sites. But for the most part limitations surrounding originating sites inhibit wider access to telehealth services for Medicare patients, a population that stands to realize outsized benefits of telehealth technology.

Commercial payors are making more progress to expand access to care than their federal counterparts. Although commercial payors such as Cigna, United Healthcare, and Blue Cross Blue Shield still must keep pace with the deployment of telehealth services and evolving technology, most have adopted practical policies for providers and patients to leverage telemedicine. For example, commercial payors have largely accepted remote psychotherapy, psychiatry, and nutrition consulting for patients receiving an initial live consult, regardless of geographic location. “Store and forward,” where the provider reviews patient health information remotely in an asynchronous manner, is also more widely accepted by commercial payors for certain procedures in specialties such as radiology. There is still progress to be made, but if CMS can follow commercial payors’ lead on expanded telehealth adoption, Medicare patients are sure to receive more quality care at a lower cost.

Existing gaps in telehealth coverage are certain to be filled by advances resulting from investment, innovation, and entrepreneurship in the industry. MHT Partners, a leading healthcare investment bank, believes that companies that can create solutions to improve technology, claims management, charting, and compliance will undoubtedly push the telehealth forward, shaping the future state of healthcare. 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).

Content to Commerce

The content-to-commerce revolution has begun. A new breed of enterprising businesspeople have started to “crack the code” on a powerful alternative to both the traditional media content model and the traditional wholesale/retail model. Content to commerce (c2c) is a hybrid model that recognizes the flaws and challenges of the traditional content model (relatively large upfront creative costs, reliant on creating or obtaining distribution) and of the traditional wholesale/retail model (crowded product spaces, concentrated power with certain large brick & mortar players, and the unrelenting inertia of Amazon’s online dominance), and through combination accelerates growth of both “content” and “commerce.”

Initiating and executing a c2c model can be challenging and doesn’t happen overnight. The content side of the equation must be firmly established, and the content viewed as industry leading however that may be defined – though typically involves some combo of unique and original content, value-add dynamics to viewers, credibility and trustworthiness. Needless to say, a c2c company doesn’t want to be viewed solely as pushing products or services, as that is a fairly commoditized tactic with no shortage of players in any given space pursuing this approach. Products or services showcased or reviewed by the c2c player need to be presented in a perceived balanced and fair way – which by definition means not all products or services meet the quality standard to be promoted with negative commentary or reviews levied at times too.

Recognizing that the passionate and engaged readership or viewership of a given editorial or TV series is a captive audience of potential consumers already likely somewhere on the “journey of the consumer” (discover, evaluate, buy, experience, advocate), c2c operators provide these readers/viewers the opportunity to purchase desirable, relatable products in what amounts to a win-win for both parties. Attracted by content, readers and viewers represent the “top of funnel” from which related products and service revenues can flow. Other services and products can include paid podcasts, live events, and importantly, the promotion of relevant and related products. For online players, the virtuous circle created by the aforementioned helps drive metrics across all facets of the model –be it viewership, visits, conversions (initial and repeat) and attachment rates (all of which, in turn, drive important KPIs such as CAC and LTV), data capture and analysis, customer engagement, loyalty, and ultimately, revenue and profits.

MHT Partners, a leading consumer growth investment banking firm, will continue to follow the content-to-commerce movement as innovative companies emerge, potentially changing the “journey of the consumer” forever.

Long-Term Demographic Trends Impacting Home Health Care

There are currently 1.3 million Americans in long-term nursing facilities, but despite increases in demand for long-term nursing care, that number is shrinking. Between 2000 and 2009, the number of nursing facilities in the U.S. decreased by 9%, and in the years since, new construction of nursing home units has decreased by 33%. This decrease in nursing homes largely stems from modern reimbursement paradigms: on average, 90% of nursing home revenues come from Medicare and Medicaid, but at the current federal reimbursement rates for nursing home care, it is not profitable for nursing facilities to continue to operate. So what other option do senior citizens have when they need full-time care?

For 4.5 million people in the U.S., the answer is in-home nursing care. In 2015, U.S. spending on home health care exceeded spending on nursing home care for the first time, and that trend is expected to continue. According to recent projections from the Centers for Medicare & Medicaid Services’ Office of the Actuary, annual home health spending is expected to outpace all other types of care in the near term, growing at an annual rate of 7% from $102 billion in 2018 to $187 billion in 2027. In addition to the dwindling supply of alternative forms of care, an aging, less active population will drive significant demand in home health in the near future.

The average American is getting older and less healthy. According to a 2018 U.S. Census Bureau report, by 2035 the number of people over age 65 will exceed the number of people under age 18 for the first time in history. Additionally, the U.S. population is bearing the adverse health effects of a less active lifestyle. Adult obesity rates in the U.S. have risen from 30.5% of the population in 2000 to 39.6% in 2015. Correspondingly, diabetes rates have risen from 4.4% of the population, or 12.1 million people, in 2000, to 7.4% of the population, or 23.4 million people, in 2015.

These negative health trends will cause people to seek full-time care from a home health provider or from a nursing facility at a younger age than in prior generations. Moreover, in-home care is often significantly more affordable than a live-in facility: the average annual cost of a semi-private room at a nursing home is $78,110, compared to only $21,840 for a full-time home health aide. While Medicare and Medicaid will cover limited portions of the costs of either option, the majority of the costs of both are paid by the patient’s family. Collectively, these trends point to a massive increase in the demand for home health care in the coming years.

Private equity investment in home health has ramped up recently as well. Deals such as Advent International’s acquisition of AccentCare from Oak Hill Capital Partners in May 2019, Tailwind Capital Group’s acquisition of Abode Healthcare from Frazier Healthcare Partners in May 2018, and Kelso & Company and Blue Wolf Capital Partners’ acquisition of Jordan Health Services from Palladium Equity Partners in May 2018 are indicative of a growing interest in the space. The imminent surge in demand for home health providers will require a large infusion of capital from the private equity community, and those who enter the market early stand to benefit from the demographic tides.

MHT Partners believes that innovative, niche solutions that decrease the cost of care while improving outcomes will shape the future state of healthcare. 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).

Further Reading:

Discovering the True Cost of At-Home Caregiving,” NPR

Home Health Spending Projected to Outpace All Other Types of Care,” Home Health Care News

Long-term Trends in Diabetes,” CDC’s Division of Diabetes Translation

National Obesity Rates & Trends,” The State of Obesity

Nursing Homes Fade Even as Baby Boomers Age,” STAT

Older People Projected to Outnumber Children for First Time in U.S. History,” U.S. Census Bureau

There Aren’t Enough Nursing Home Beds to Meet Demand,” CNBC

Vital and Health Statistics, Series 3 Number 43,” National Center for Health Statistics