EMS Technology Companies Are Showing Promise and Grabbing Investors’ Attention

In recent months, companies providing technology solutions for ambulance and emergency medical services (“EMS”) agencies have gained steam. Accelerated by the impact of COVID-19, stress on existing healthcare services’ infrastructure has forced change. Regulatory barriers to innovation are being demolished. As a result, a number of high-profile EMS technology (“tech”) companies have successfully raised capital from investors in recent months, and promising new technologies are poised to continue to attract investor attention.

The funding boom for EMS tech companies stems from a few dynamics at play within the industry.

  • Until recently there was little in the way of disruptive innovation in EMS. This persistent lack of innovation and entrepreneurship in EMS has created a significant tech debt among operators, resulting in embedded inefficiencies. Opportunities for technologists to create new solutions abound, leading to real cost savings and improved patient outcomes.
  • Complementary technologies in areas such as communications and geolocation have created new opportunities for innovation. Steps forward in adjacent industries have not trickled down quickly to EMS-specific applications. Technology has been stubbornly difficult to deploy in EMS, despite the significant outcomes-related benefits of doing so. More recently, however, the industry has been nudged in the right direction. Congress’ authorization of the First Responder Network Authority (“FirstNet”) represents a substantial step forward, leading to the expansion of high-quality broadband dedicated to first responders. Similarly, the Centers for Medicare and Medicaid Services’ Emergency Triage, Treat, and Transport (“ET3”) model leverages telehealth to enable treatment at the point of care, and companies like Allerio (allerio.com) are developing innovative products and solutions for first responders to fully realize the benefits of emerging technology. Going forward, industry-wide infrastructure investments will enable entrepreneurs to create more custom solutions for first responders.
  • The market for remote medical care is large, growing, and has never been stronger. The traditional EMS market is huge, with municipal agencies and private ambulance companies operating in tens of thousands of cities and towns nationwide. The traditional market is expanding as prehospital medicine becomes an ever more important stage in the continuum of care. Spurred on by telehealth and the ubiquity of urgent care, more healthcare is being delivered in the field. Companies such as Ready Responders, which leverages field medics to facilitate in-home telehealth, exemplify the trend. Most recently, contact tracing in the field has been a key initiative in the national response to COVID-19.

Recent investments in EMS tech companies include the $21 million raised by RapidSOS in June of this year, bringing its total funding to $107 million, and the more than $11 million raised by Pulsara, bringing its total funding to almost $30 million. Other emerging companies are sure to attract the attention of investors seeking to profit from growth in the space.

MHT Partners, a leading healthcare services investment bank, is an active advisor in the healthcare, technology, and medical transportation industries. If you would like to learn more about MHT’s practice, please e-mail Alex Sauter (asauter@mhtpartners.com) or Taylor Curtis (tcurtis@mhtpartners.com).

Private Equity’s Emerging Interest in Psychology & Psychiatry Practices

Private equity investment in psychology and psychiatry practices has accelerated in recent years. Investors with a track record for partnering with behavioral healthcare companies, as well as generalist funds, have ramped interest up quickly in psych specialties. Numerous attributes of psychology and psychiatry practices align with private equity’s interests and experience, and recent M&A in the space suggests that market opportunities exist for the first-movers who can build large platforms for providing care nationwide. Furthermore, the ability to deliver care via telemedicine (telepsych) means psychology and psychiatry practices have been impacted far less than most specialties, and by some measures have even improved, during the COVID-19 pandemic.

Investors have long been active acquirers of behavioral health companies and service providers, but financial sponsors have accelerated the pace of investment in psychology and psychiatry due to a number of converging factors:

  1. Private equity’s access to financial capital enables consolidation of the fragmented industry as it exists today. Many independent psychology and psychiatry companies are small, composed of fewer than a dozen professionals. Investors looking to acquire or “roll up” a number of small practices stand to benefit from significant increases in efficiencies that accompany greater scale, as well as lower costs. For providers, that often means more time focused on patient care and less time addressing the administrative minutiae of running an independent practice.
  2. There is an enormous market, as well as an unmet need, for mental health treatment in the U.S. Nearly every adult stands to benefit from some form of psychology or psychiatry treatment at some point in his/her life, and the industry has grown at a rate of more than 5% annually in recent years to over $18.9 billion in 2019. Significant growth in demand for services has outstripped supply, and in 2019 there was approximately only one licensed psychologist or board-certified psychiatrist for every 3,300 people in the U.S. Many psych professionals expect the COVID-19 pandemic to exacerbate this trend, as adverse effects on individuals’ social, economic, and physical wellbeing portend additional mental health diagnoses. (American Psychiatric Association, WHO.)
  3. Technological and regulatory improvements are rapidly expanding access to care. The ability to deliver care via telemedicine and fewer regulatory hurdles imposed by CMS and private insurers means that psychology and psychiatry services are available like never before to individuals that cannot travel to a provider’s office for medical or logistical reasons.

TPG Capital’s acquisition of LifeStance Health (joining existing investors’ Summit Partners and Silversmith Capital Partners) is illustrative of recent transaction activity in the sector, and Refresh Mental Health, backed by Lindsay Goldberg, has announced that it will be exploring transaction options as well. In the vast middle market, platforms such as New Harbor Capital’s Community Psychiatry Management represent regional platforms with significant opportunities for growth.

MHT Partners’ healthcare investment banking services represent founders, owners, and entrepreneurs undergoing M&A transactions. If you would like to learn more about MHT’s experience, please e-mail Taylor Curtis (tcurtis@mhtpartners.com) or Alex Sauter (asauter@mhtpartners.com).

Pandemic Shaping the Playing Field for Physician Group Acquisitions

Throughout the pandemic, private equity and strategic acquirers’ appetites for well-performing physician groups across a number of specialties have been resilient.  On the other side of the equation, physician groups that had desired to remain independent are now seeing the benefits of being part of a larger organization as they work to manage significant declines in patient volumes and related operational challenges attributable to COVID-19.  It’s reasonable to infer that as some groups start to emerge from the crisis, they will begin to explore partnerships with private equity-backed platforms seeking shelter from future storms.  This bodes well for both groups, as private equity platforms can add leading practices to their rolls, and physicians can benefit from increased scale, robust back-office services, and enhanced payor contracts.  Across the board, we foresee large waves of consolidation of independent groups and sponsor-backed platforms under the auspice of “we’re better positioned to address future challenges and on-going pandemic fallout together.”

One trend we expect to gain momentum will be commercial payors’ efforts to use the pandemic to drive consolidation of physician groups as part of the race to vertically integrate, provide more coordinated care, and narrow networks.  As an example, integrated payor / provider groups like United Healthcare’s Optum Division have been increasingly aggressive in their pursuit of physician group acquisitions, as well as technology-driven care models like those acquired in the purchase of remote behavioral health provider– AbleTo for $470mm.  We also think there is a meaningful play for sponsors interested in building out more integrated models, which can extend the continuum of care, improve outcomes, and reduce overall healthcare expenditures.   Enhanced Healthcare Partner’s recent combination of a surgicalist group and physician compensation services group to form EA-Synergy is a prime example of how value can be generated by providing more coordinated services to health systems.

Based on conversations with the sponsor community, we expect the first wave of pandemic-driven physician group M&A activity will largely consist of add-on acquisitions in specialties where private equity has already invested, specifically: dermatology, vision services, orthopedics, GI, dental,  physical therapy, and women’s health.  There is also meaningful interest in ENT practices, and interestingly, in some traditionally hospital-based specialties like cardiovascular care.  However, we think new, large sponsor-backed provider platforms will be the exception and opposed to the rule for now.

Timing around the launch of new deals is a frequent topic of discussion.  Many well-capitalized businesses may opt to sit on the sidelines through the summer to see how the response to the pandemic unfolds and how the M&A market responds in kind.  However, for other groups, the relative lag in deal flow could place their process in the spotlight as opposed to competing for attention during headier times.  For those groups willing to dip a toe in the water, after seeing patient volumes swing back, a process launch in the late summer will give their advisors two or three months of “new normal” performance from which to baseline financial projections for the remainder of the year.  In this light, one could expect to see deals coming out beginning in Q3 2020. Pertaining to most things in life, timing is everything. There’s no right answer to the question of “when should I test the market,” but the demographic tailwinds which made physician groups compelling investments prior to the pandemic have not changed, and in fact may be amplified by pent-up demand that has been building for healthcare services over the past three months.

We continue to closely monitor the market for healthcare services businesses and remain optimistic that there will be attractive opportunities for well-run provider groups now and in the future.  To the extent that you would be interested in having further conversations on this topic, or others related to our healthcare services capabilities, please do not hesitate to contact members of the MHT Partners healthcare services team: Taylor Curtis (tcurtis@mhtpartners.com) or Alex Sauter (asauter@mhtpartners.com).

A Bright Future for Telehealth Beyond COVID-19

Telehealth gained significant momentum in 2019. Nevertheless, on an absolute basis, flexible, widely available telehealth solutions were limited. COVID-19 has upended the status quo and charted a new growth trajectory for telehealth(1). In fact, the pandemic has created an opportunity to ingrain telehealth as a commonplace service in U.S. healthcare.

Once COVID-19 started spreading in the U.S., Medicare expanded telehealth coverage(2), Health and Human Services issued guidance to states in favor of relaxing interstate medical licensing rules(3), and 49 states waived or altered regulations on telehealth(4). Waivers included allowing physicians with out-of-state licenses to practice telemedicine within the state, allowing more mediums of communication during a telehealth appointment, and the reduction of regulations on making prescriptions through telehealth appointments. To protect vulnerable populations, elected officials have encouraged and passed legislation in favor of telehealth visits for the elderly and those at higher-risk for COVID-19(5). While many changes are temporary, convenience and increased patient use of the telehealth platforms following the changes has created pressure to permanently adopt the new rules.

Following the forced incorporation of more robust telehealth, the capability to utilize telehealth is growing for patients and providers alike. Patients will welcome the opportunity to see their physicians in person as soon as they’re allowed in order to address more complicated and urgent problems. However, quick health questions and routine consultations are positioned to remain virtual, freeing up patients’ schedules and adding an efficient option for providers. Ready Responders, a tech-enabled, on-demand health service that provides care in a patient’s home, continued serving its patients throughout COVID-19 and announced plans for further expansion(6). Telehealth’s role in companies like Ready Responders can help reduce unnecessary emergency department usage and direct patients more efficiently to proper providers when in-home care is inappropriate, creating promise for potential significant decreases in expenditures while improving care. Furthermore, with provider shortages nationally and in rural areas especially, increased telehealth resources, especially from physicians who might live elsewhere, help bolster access for populations who need healthcare the most.

With elective and non-essential care shut down in most of the U.S., many physician practices began experimenting with telehealth in order to continue to see patients and keep practices running. Largely using live video and audio, patients have discussed symptoms of respiratory infections with primary care physicians, showed dermatologists concerning skin conditions, walked through upcoming procedures with surgeons, and met with mental healthcare providers. Encounters with providers have led to diagnoses and prescriptions, expedited urgent or emergency treatments, and provided plenty of peace of mind. The experience both patients and practices have gained utilizing telehealth in the past few months has created comfort with telehealth that did not exist before the pandemic and lays a foundation for expanded use.

Major hurdles still exist for wider telehealth adoption following the first wave of COVID-19. On the reimbursement front, CMS released new guidelines for reimbursement of telehealth services(7); moreover, private insurance plans are following suit, rewriting policies on what telehealth services they cover and how much is reimbursed(5). Services covered, reimbursement amounts for telehealth vs. in-person services, and the new guidelines’ reimbursement and cost-sharing structures will all determine which services remain viable telehealth offerings for practices. Added time spent arranging telehealth appointments and technology gaps, specifically with patients lacking telecommunication device access or experience, can lower productivity and potentially dampen enthusiasm for future telemedicine use(9). Most importantly, maintaining the ability for physicians and other healthcare providers to practice across state lines following COVID-19 will strongly contribute to telehealth’s potential growth in the coming years(10).

MHT Partners, a leading healthcare services investment bank, believes continued regulatory evolution, demonstrated efficacy and increased efficiency, and consistent and straightforward reimbursement structures are paramount for telehealth to continue its growth and adoption by patients and providers. While telehealth still has plenty of room to grow, 2020 is seeing positive steps towards improving health outcomes, lowering healthcare costs, and increasing healthcare access through innovative telehealth offerings that will continue moving forward. Physician and healthcare practices will need to be increasingly aware of telehealth, know their state’s regulatory environment with regards to telehealth, and have an opinion on whether telehealth presents as an option to best serve their current and future patients.

Sources:
(1) American Telemedicine Association https://www.americantelemed.org/about-us/
(2) Medicare: Telehealth Coverage https://www.medicare.gov/coverage/telehealth
(3) mHealth Intelligence https://mhealthintelligence.com/news/feds-ok-interstate-licensing-paving-way-for-telehealth-expansion
(4) Federation of State Medical Boards https://www.fsmb.org/siteassets/advocacy/pdf/states-waiving-licensure-requirements-for-telehealth-in-response-to-covid-19.pdf
(5) H.R. 6487 and S. 3548 https://s3.amazonaws.com/fn-document-service/file-by-sha384/fb7696e83acaf7ef91c5a397491226f01ae77205a458e462ecaa875fd31b2152083342720c7e7730e4b661aafa929313 https://s3.amazonaws.com/fn-document-service/file-by-sha384/902177abbfcf26c40e1e793ad5f52cca625fc2b900cdcdd95d8fb23dbc488b8e7898cf74c79592b1bc5ae61fa19898be
(6) Business Wire https://www.businesswire.com/news/home/20200320005540/en/Ready-Responders-Provide-At-Home-Care-Patients-Alleviate
(7) Centers for Medicare & Medicaid Services https://www.cms.gov/files/document/03092020-covid-19-faqs-508.pdf https://www.cms.gov/Medicare/Medicare-General-Information/Telehealth/Telehealth-Codes
(8) Kaiser Health News https://khn.org/news/telehealth-will-be-free-no-copays-they-said-but-angry-patients-are-getting-billed/
(9) Policy Med https://www.policymed.com/2020/04/covid-19-recent-changes-to-telehealth-regulations-and-reimbursement.html
(10) Interstate Medical Licensure Compact https://www.imlcc.org/a-faster-pathway-to-physician-licensure/

Emergency Medical Services During COVID-19: Observations and Opportunities

In recent weeks, emergency medical services (“EMS”) and ground medical transportation operators have been on the front lines in the battle against COVID-19. Predictably, given the massive disruption that the virus has imposed on the healthcare system, the medical transportation industry has been upended. Understanding the challenges that medical transport companies are experiencing, planning how to navigate and emerge successfully, and looking ahead to areas of opportunity within the industry will position leading companies to succeed going forward.

In recent days, MHT Partners has had conversations with a number of EMS companies and investors in our network, representing large multistate ambulance companies, regional and local operators, vendors, and private equity groups. In all of our discussions, a handful of key observations have emerged as we look to weather COVID-19 and assess its impact on the industry:

  1. First, the COVID-19 pandemic has significantly impacted medical transportation companies’ performance. Ambulance operators in every jurisdiction have noted that volumes for all classes of service are down approximately 25%. For emergency transports, fewer road miles, widespread workplace closures, and lower hospital utilization rates for non-COVID-19 conditions are depressing volumes. Individuals are largely avoiding hospital environments if they can help it, viewing them as potential COVID-19 hotbeds. Inter-facility and non-emergency transports are down as well, due to isolation protocols within many skilled nursing and assisted living facilities as well as widespread postponements or cancellations of elective procedures.
  2. From a labor supply perspective, paramedics and EMTs on the front lines have been exposed to COVID-19 at greater rates than the general population. And in areas such as New York, the ranks of first responders have been thinned due to confirmed cases or self-imposed quarantines. Even in less-populated areas with lower infection rates, where medics and EMTs may perform work for multiple municipalities or private agencies, efforts to limit the mixing of employee pools have made staffing more difficult.
  3. On the bright side, government and commercial payors have continued to function as usual, maintaining their reimbursement commitments to ambulance operators.
  4. EMS agencies have also performed better on a relative basis than many other segments of the economy, as they have been deemed essential services.
  5. Lastly, ambulance companies have access to emergency funds provided by the federal government just like other businesses.

For these reasons, all signs point to medical transportation companies emerging from the coronavirus pandemic in a position of strength.

In fact, many industry participants are tracking ways in which COVID-19 may accelerate the adoption of emerging operating models and technology within medical transportation. Most notably, though The U.S. Department of Health and Human Services (“HHS”) has delayed the pilot of its Emergency Triage, Treat, and Transport Model (“ET3”), The Centers for Medicare & Medicaid Services (“CMS”) has temporarily allowed the flexibility to transport Medicare beneficiaries to alternative locations for the duration of the COVID-19 emergency. Operators are also watching for relaxed treatment-in-place (so-called “treat-and-release”) and telehealth protocols. Investors with a close eye on emerging trends within EMS include Frist Cressey Ventures, which last week announced a partnership with Ready Responders, a technology-enabled provider of in-home urgent care working with EMTs and paramedics.

MHT Partners, a leading healthcare services investment bank, is very active in the medical transportation industry and will keep its finger on the pulse during this global pandemic. If you would like to learn more about MHT’s healthcare services advisory practice, please e-mail Alex Sauter (asauter@mhtpartners.com) or Taylor Curtis (tcurtis@mhtpartners.com).

What Will “Back to Normal” Look Like for Physicians Once COVID-19 is Contained?

As COVID-19 continues to spread across the United States, the nation’s healthcare professionals work tirelessly to treat patients, reduce the spread, and keep the healthcare system running. With social distancing in effect and more physicians working directly to slow and treat COVID-19, most routine physician appointments have been delayed or cancelled. It’s hard to say when physicians will return to normal schedules and corresponding patient volumes, however, it is clear there is significant pent-up demand for non-emergency doctor visits.  This blog examines how several sub-specialties in healthcare could rebound as social distancing efforts are lifted.

U.S.-based orthopedic surgeons perform 1.77 million knee arthroscopies, 200,000 rotator cuff repairs, and 100,000 ACL reconstructions each year1. ENTs successfully complete 500,000 tonsillectomies and 250,000 sinus surgeries annually2. These surgical interventions represent only a fraction of procedures that are vitally important to the well-being of millions of patients but have also been delayed to ensure hospitals retain capacity and to reduce the spread of COVID-19 to patients. With likely 10-15% of annual procedures now delayed or cancelled, physicians across the diverse array of surgical specialties, nurses and techs in those fields, and operating rooms will be in high demand when COVID-19 cases begin to decrease.

Regular check-ups and screenings have also been put on hold for several weeks and potentially longer. Many primary care groups and even select specialist groups, in areas like dermatology, are rolling out telehealth support for patients, allowing for continued appointments, chronic disease management, and prescriptions for acute, non-COVID-related conditions. However, without regular, in-person primary care, some health problems may go undetected in some already at-risk patient populations. For example, type-2 diabetes and high blood pressure are common health issues caught by primary care physicians in a physical setting3 that may be underdiagnosed in the coming weeks. Specialists that rely on referrals will also see lower appointment traffic. Moreover, many regularly scheduled screenings have been deferred or cancelled. For example, there are 17.3 million mammograms3 and 19 million colonoscopies3 in the U.S. annually to screen for breast and colorectal cancers, respectively, most of which will not happen in the coming weeks. Without screenings and routine check-ups, it is reasonable to expect lower numbers of diagnoses of common diseases, including cancers, in the coming weeks. But, when healthcare operations return to closer-to-normal numbers, diagnoses will likely catch-up quickly to track with expected annual totals, followed closely by those patients beginning appropriate treatments.

Meeting the growing backlog of healthcare demand comes with several challenges:

  1. First and foremost, keeping healthcare providers safe and healthy during the treatment of COVID-19 is necessary for meeting any demand for future healthcare. Appropriate personal protective equipment and precautions for providers will help fight this pandemic and preserve their ability to fight future health challenges.
  2. Additionally, with appointments for screenings, check-ups, and procedures plunging in recent weeks, many private physician practices have turned to furloughing or even laying off personnel that are not involved in activities essential to tackling COVID-19. Physician groups will need to ramp their head counts back up to schedule and treat patients once the epidemic passes.
  3. Lastly, appointments will not strongly rebound without health insurance certainty, which is threatened by the recent mass layoffs.

COVID-19 has challenged the healthcare system in an unprecedented manner and will continue to do so as we approach the peak. Once beyond the momentous task at hand, though, physicians, healthcare systems, and stakeholders will need to begin thinking about how to address a large demand for more traditional healthcare services for patients who will be anxious to see their physician again for surgical procedures, screening exams, and even their routine annual visit.

MHT Partners, a leading healthcare services investment bank, welcomes further discussion about the effects of COVID-19 on the healthcare industry: Taylor Curtis (tcurtis@mhtpartners.com) or Alex Sauter (asauter@mhtpartners.com).

(1) U.S. Market Report Suite for Orthopedic Soft Tissue Repair and Sports Medicine
(2) American Academy of Otolaryngology-Head and Neck Surgery
(3) Center for Disease Control

Coronavirus Impact on Healthcare Investing

As the World Health Organization officially declares a pandemic and global capital markets gyrate, it’s easy to imagine scenarios where healthcare investing grinds to a halt as financial professionals and industry experts recalibrate their expectations for growth in the sector. Without trivializing the risk to the public and the real financial impact of the recent coronavirus outbreak, it is MHT Partners’ perspective that the healthcare sector is positioned to weather the storm.

A significant portion of healthcare expenditures can be described as non-discretionary. Many groups can expect to see similar or increased patient volumes as people’s concerns about their wellbeing are heightened by the uncertainty created by the spread of the coronavirus. Specifically, groups within narrow networks, managed care organizations, lab and diagnostic businesses and products and services geared towards enhanced communication or collaboration could see a significant uptick in their businesses as the need for coordinated care becomes even more important in response to this public health crisis. Notably, this week the U.S. Senate approved an $8.3 billion bill targeting the coronavirus, thereby removing certain restrictions on how, when and where healthcare providers can use telehealth technology. Several of our clients with telehealth solutions in place have already been able to transition patients from in-person visits to online consultations. These capabilities are true differentiators; the return on investment for telehealth infrastructure is already “penciling out” in many cases.

More broadly speaking, we have observed that the markets for leveraged finance are functioning. PE groups and lenders will need to continue to collaborate to make sure that businesses have enough capital to continue to execute their plans – which includes M&A as a driver of growth. While things may be moving a bit more slowly, we also expect that the market rebalancing we’re experiencing will create more “buy” opportunities for groups that have been struggling to deploy capital at near historic valuation levels. With nearly $1 trillion in dry powder being held collectively by U.S.-based private equity and private credit funds, the need to deploy capital should help stoke demand despite the macro headwinds businesses are facing.

From a returns’ perspective, the healthcare sector presents a host of attractive opportunities. According to the widely cited annual “Global Healthcare Private Equity and Corporate M&A Report” published this week by Bain & Co., healthcare investments made during the last recession had a multiple on invested capital that was close to 50 percent higher than other industries (2.7x vs. 1.8x).

It will be some time before the dust settles, but from MHT’s perspective, healthcare remains a viable category for continued investing both in the near-term and long-term.

MHT Partners’ healthcare team welcomes further discussion: Taylor Curtis (tcurtis@mhtpartners.com) or Alex Sauter (asauter@mhtpartners.com).

Notes from the 38th Annual J.P. Morgan Healthcare Conference

Last week healthcare executives, service providers and investors descended upon San Francisco for J.P. Morgan’s (“JPM”) 38th annual Healthcare Conference. In a rare turn of events, the skies in San Francisco were relatively clear after several years of biblical rainstorms during JPM week.

MHT Partners’ Healthcare Services Team was in attendance, hosting several events and numerous meetings with healthcare firms and financial sponsors (thanks to all of you who made the trek over to 101 Montgomery). The general mood of the conference was upbeat, perhaps due to the weather, but a bit more subdued than in prior years. Investors’ appetite for high-quality healthcare businesses, which solve important problems facing the industry (access, cost containment, interoperability, etc.) remains strong.

Here are a few notable observations stemming from our interactions at JPM:

  • There’s still meaningful interest in physician practice deals – Healthcare investors will continue to put dollars to work in the physician practice management space in 2020. Maturing sectors such as dermatology and vision will see slowing deal velocity. Platforms in these sectors will continue to seek quality add-ons while pricing for add-ons stabilizes. It’s likely that we’ll also see several sponsor-backed platforms trade hands. We anticipate increased interest in and deal momentum for third-wave specialties such as ENT, Urology, Podiatry, GI, and Orthopedics. These specialties pair well with ambulatory surgery centers (“ASCs”), which offer acquiring groups attractive, diversified streams of revenue.
  • Women’s health and fertility services groups are garnering attention – As fertility rates have declined, more women are open to seeking treatment, translating into rapidly growing global demand for fertility services. At the same time, a growing number of U.S. states have adopted a commercial payor coverage mandate for fertility services. Many financial investors are looking to invest in these trends.
  • Behavioral healthcare remains an active area of focus for many investors – Autism, Psychiatry, and Substance Abuse deals captured their fair share of headlines in 2019. We expect this trend to continue in 2020, as commercial and government payors expand coverage to address a wide range of mental health issues in the U.S. A scarcity of mental health professionals and a desire to build new and existing platforms will fuel private equity investment in behavioral health.
  • Demographic tailwinds lifting home health and hospice businesses continue to entice investors – An aging U.S. population and a need to provide cost-effective care outside of a hospital setting has provided many private equity groups with strong theses for investment in businesses that can deliver home-based care. Home-based care, regardless of the context, is highly local and presents unique recruiting and scaling challenges.
  • Everyone loves technology-enabled healthcare services – The promise of technology to reduce the cost of healthcare and improve health outcomes was a recurring theme in many of our conversations at JPM. Companies that can solve interoperability challenges, extend or manage the continuum of care, or provide novel insights into care delivery or drug development will receive significant investment interest.
  • Significant capital has been earmarked for healthcare services’ investments in 2020 – Many healthcare-focused private equity firms have raised new funds and are actively looking for platform investments across a variety of industry sub-verticals. Based on conversations at the conference, MHT expects the healthcare deal market to be robust, with an emphasis and focus on high-quality assets in 2020.

MHT Partners, a leading healthcare services investment bank, would love to be a resource for you as you consider the rapidly evolving healthcare landscape and the implications for your business. 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).

Private Equity Investment in Ambulance & Medical Transportation, Part 3: How Ride Sharing and Technology Innovation is Impacting Traditional Ambulance Services

As private equity investment in healthcare services has boomed over the past decade, select funds have turned an eye toward one of the most important and challenging areas of healthcare services: ambulance and medical transportation. In part three of our series on private equity investment in medical transportation, we’ll examine how technology and innovation are altering traditional dynamics in the industry and overhauling existing business models.

Modern ambulances are critical to the U.S. healthcare system and can provide life-saving services in many situations, but for a large and growing population of ambulance riders, high-acuity advanced life support (“ALS”) or basic life support (“BLS”) services exceed patients’ needs. According to recent estimates, non-life-threatening events account for up to 51% of emergency ambulance trips. Utilizing private services such as Uber and Lyft for select non-critical medical transportation is one way that the technology community is working to reduce the cost of care and improve patient outcomes by alleviating a strain on finite ambulance resources.

A one-way ambulance trip can cost a rider thousands of dollars. Insurers often pay a portion of the sum, but in many cases leave a remainder for the patient to pay out-of-pocket. If Medicare determines ambulance transportation to have been medically necessary, Medicare patients are responsible for 20% of the Medicare-approved reimbursement for ambulance transportation, which can vary from $200 to over $450 per trip based on the ambulance type and location. If Medicare determines the ambulance trip not medically necessary, the patient can be stuck with the whole bill. Comparatively, the average cost of an Uber or Lyft is only ~$25. In a true emergency, the financial burden takes a backseat to the patient’s life, but in less critical scenarios, many patients can benefit from evaluating the relative costs of transportation alternatives.

In response, transportation network companies such as Uber and Lyft have introduced non-emergency medical transportation (“NEMT”) services platforms. Both state Medicaid programs and Medicare Advantage (“MA”) plans have begun to arrange NEMT services to transport members to doctors’ offices and hospitals in lieu of traditional ambulance services. The health plans work with NEMT brokers, such as American Logistics Corporation, National MedTrans, and Access2Care, who contract directly with the transportation network companies. In the past, these NEMT brokers have coordinated taxi services or worked with specialized medical transportation providers, but they are increasingly turning toward mainstream ride-sharing platforms.

Uber and Lyft’s NEMT services offerings focus on providing Medicare and Medicaid patients with reliable transportation to doctor appointments. The platforms, marketed as Uber Health and Lyft Concierge, provide a HIPAA-secure environment for healthcare organizations to arrange rides on behalf of patients days in advance of appointments and coordinate with riders via text message or phone call so that riders do not need access to a smartphone. The platforms also provide usage reports and centralized billing functionality for healthcare organizations. Combined, the companies currently have thousands of healthcare partners, including major healthcare organizations such as Allscripts, Ascension, Cleveland Clinic, and Florida Blue.

The introduction of cost-effective, easy-to-use ambulance alternatives has already had a measurable impact: a recent study found that the entry of UberX service into a new market reduced per capita ambulance volume by at least 7%. As adoption of these tech-enabled options continues to increase, the cost of routine medical care and the number of missed doctor appointments will decrease, improving healthcare outcomes.

MHT Partners, a leading healthcare services investment bank, believes that private investment can be a force for good in the ambulance and medical transportation industry, and that companies investing in technology to improve care and manage costs are poised for long-term success. 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).

 

Sources: Inappropriate Ambulance Use study; “Did UberX Reduce Ambulance Volume?” by Leon S. Moskatel and David J.G. Slusky (10/24/17)

Private Equity Investment in Ambulance & Medical Transportation, Part 2: How Private Companies Are Positioned to Improve the Medical Transportation System

As private equity investment in healthcare services has boomed over the past decade, select funds have turned an eye toward one of the most important and challenging areas of healthcare services: ambulance and medical transportation. In part two of our series on private equity investment in medical transportation, we’ll examine how private companies, including those backed by private equity, can contribute to the improvement of care by reducing costs and augmenting quality.

First, it makes sense to take a moment to define what improvements look like in the context of medical transportation. As with all corners of the U.S. healthcare system, the structural makeup of the medical transportation industry makes optimizing the notoriously difficult tradeoff between cost and quality difficult to balance. A few of the complicating elements of the industry include the coexistence of municipal and private services, stubbornly low Medicare and Medicaid reimbursement rates in many regions, and a shortage of highly trained paramedics and EMTs. Solutions to reduce the cost to provide care, reduce the cost to patients and taxpayers, improve response times, or improve the quality of care delivered in transit are in the best interest of all stakeholders in the medical transportation value chain.

In that context, private medical transportation companies can often provide care at a lower cost than alternative services. As opposed to public or municipal ambulance services, which are less inclined to contract with commercial payors, private ambulance operators possess the negotiating power and financial incentive to form strong agreements with insurance companies. Public ambulances are also often more costly to operate because geographic boundaries, population density, and local politics commonly contribute to suboptimal scheduling and positioning in the field, impairing response times. Municipal services can rarely flex resources between emergency and non-emergency work effectively, augmenting the amount of costly idle time as well. Finally, government-adjacent ambulance agencies are protected by select safe-harbors regarding Office of the Inspector General (“OIG”) anti-kickback statutes, protecting public-sector ambulance services from what in the private sector would be considered fraud. Effective payor contracting, fewer geographic limitations on service areas, the ability to provide multiple levels of service, and robust regulations make private medical transportation companies with strong management a superior option in many cases than alternative modes.

On the quality side, private medical transportation companies are differentiated as well. Whereas many municipal ambulance services, particularly in rural and suburban areas, employ paramedics and EMTs that experience significant idle time in the field, private ambulance services are incentivized to optimize uptime and activity. Less idle time gives caregivers the routine experience that they need to stay sharp and maintain lifesaving skills, with the added benefit of giving paramedics and EMTs a fulfilling work experience. At the same time, private companies’ ability to move resources around between geographies means that they can serve the same regions more effectively than municipal services, while employing the same or fewer medical professionals. In an industry where staffing skilled medics is challenging due to labor shortages, increasing the probability that a skilled, experienced EMT or paramedic responds to a medical emergency is a key quality measure. Private medical transportation companies also are subject to oversight and competitive pressures that municipal services are not. Private companies must deliver high-quality services to the populations they serve, or else risk being replaced – an effective system of periodic checks and balances that dedicated, ingrained public services do not experience. Private equity excels in aggregating the expertise of professionals in multiple industries to apply best practices and implement operational improvements for companies of all types. The dynamics of the medical transportation industry force private equity sponsors to deploy that expertise in order to maintain and grow their business.

MHT Partners, a leading healthcare investment bank, believes that private investment can be a force for good in the ambulance and medical transportation industry, and that companies providing excellent care with an eye toward all stakeholders in the value chain are poised for success. While certain public services have excelled at addressing issues of cost and quality, many of the core challenges in the medical transportation system can be addressed by a competitive industry made up of private operators as well. 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).