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March 22, 2018

Key Takeaways from the McDermott Will & Emery 12th Annual Health Care Services Private Equity Symposium . . . a Continuation

MHT Partners  | Healthcare Investment Bank

MHT Partners’ Healthcare Services practice leadership team’s key takeaways from the McDermott Will & Emery’s 12th Annual Health Care Services Private Equity Symposium:

Core Trends . . . a continuation

Demographic Tailwinds/an Aging, Ailing Population: Where dollars go, investors follow, and the healthcare industry is no exception.  Funds allocated to cover the cost of healthcare services (both commercial and public) continue to grow, reflecting an aging, ailing population.  Unique among other industries, healthcare expenditures have grown at an unpreceded rate over the past 20 years as more patients consume more healthcare services across the board.

MHT noted increased interest in home healthcare, hospice, and palliative care businesses.  While few scalable models have emerged, and the talent market remains tight, long-term trends should support these businesses as the country looks for a compassionate, cost-effective means to support the older members of our communities.

Solving the Healthcare Cost Equation:  Being a part of the solution makes sound business sense.  Opportunities abound to streamline costs and improve patient care.  As larger groups form, better purchasing terms can be established.  As different groups and specialties consolidate, patient care can be enhanced, and costs reduced.  Revenue cycle management systems can help find and correct billing inaccuracies.  One example MHT noted in our conversations (and informed by our work with orthopedic groups) is the opportunity to move towards more comprehensive, cost-effective care bundles.  With CMS’s decision to pay for total hip and knee procedures, orthopedic groups who own ASCs can provide outpatient treatment obviating an expensive hospital stay.  This decision also allows orthopedic groups to partner with physical therapy groups to offer a “one-stop-shop” for the provision of a common surgical procedure for aging patients.   Similarly, palliative care can reduce the cost of near-to-end-of-life care.  While unpleasant to think about, spending on Medicare beneficiaries in their last year of life accounts for about 25% of total Medicare spending on beneficiaries age 65 or older.  By caring for these patients at home, in the company of their families and loved ones, meaningful healthcare dollars can be saved.

Sub-Theme – Get Patients Out of the Hospital:  As noted in the examples above, getting patients out of the hospital and into care settings with lower overhead can significantly reduce costs and improve patient outcomes.

Emerging Areas of Interest

Throughout our conversations, we were keen to note new areas that senior members of the healthcare investment community were interested in.  Of note, these ideas peaked our interest:

Taking At-Risk Positions: Companies with deep healthcare experience, in an effort to collaborate with health systems and payors on larger / more proprietary opportunities, are willing to take at-risk revenue positions in the form of severing capitated patient populations, building or participating in ACOs, or setting up pay-for-performance revenue models (specifically related to medical devices).

The Next Wave of Specialty Physician Consolidation: Based on the success of efforts in the dental, physical therapy, vision, and dermatology sectors, investors are seeking new specialties to consolidation.  Notably target specialties include GI, Urology, Podiatry, OB/GYN/Women’s Health Serveries, and orthopedic surgery practices.

Wrap-up

Coming out of the Health Care Services Private Equity Symposium, there was a great amount of enthusiasm for finding good healthcare deals and putting investment dollars to work.  MHT is excited about healthcare deal opportunities in 2018 and looks forward to core investment themes and new areas of interest as they continue to evolve and shape the market for healthcare assets.

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