Healthcare Financial Insights
Noteworthy M&A Transactions – April 2020
May 29, 2020
Throughout the month of April, businesses continued to adapt and evolve in response to COVID-19. Many healthcare businesses were forced to dramatically shift their business models towards virtual care for the safety of both their patients and their employees. While overall M&A activity slowed due to the combination of volatility in public markets and a tightening of lending markets, a handful of healthcare subsectors and delivery models have maintained or strengthened their competitive position during this time, and these were the areas that saw the most notable M&A activity in the month.
Looking back on the month of April, we dive into three important themes that shaped M&A activity:
- Telehealth and Virtual Health Services. COVID-19 has served as a significant catalyst for healthcare organizations to initiate or expand existing telehealth offerings. Across the continuum of care, healthcare providers have rapidly deployed these solutions and modified their delivery models in an effort to continue to provide quality patient care in a virtual setting. The Centers for Medicare & Medicaid Services (CMS) has supported this shift in care delivery by waiving certain reimbursement and regulatory requirements in order to give providers greater flexibility in utilizing telehealth and virtual health services and has also expanded reimbursement for such services. The increasing demand and support for telehealth and virtual health services is driving investor demand for companies providing these services, and we expect to see continued capital raising and M&A activity in this space in the near-term
- Data, Analytics, and Interoperability Solutions. As utilization of telehealth and remote care solutions increases in the wake of COVID-19, providers and provider organizations are seeing a greater need for an omnichannel approach to real-time data and analytics. The spread of COVID-19 has also driven an increased focus on the ways in which data can be shared across healthcare organizations to drive efficiencies and improve outcomes. Optimizing patient outcomes across care settings continues to be a significant area of focus, and this requires providers to maintain a comprehensive view of the patient across all environments. Additionally, CMS recently announced the Interoperability and Patient Access Final Regulation, which drives the need for next generation interoperability solutions to support required claims data transparency for patients. We expect continued investment and M&A activity for solutions that drive more efficient interoperability and access to data.
- Hospice. Hospice continues to benefit from broad acceptance as a cost-effective end of life treatment option and remains an active space for M&A. Several post-acute acquirers have, in the near-term, prioritized hospice M&A over other services across the post-acute care continuum given strong demand and a stable reimbursement environment. At the end of March, in response to the COVID-19 public health emergency, CMS issued guidelines that made it easier for hospice agencies to both provide care and receive reimbursement for that care through telehealth services. Anecdotally, many hospice providers have seen a minimal impact to their census during the pandemic and in some cases have continued to grow.
Several transactions in April aligned with these themes:
- Tyto Care, a mobile health device and telehealth platform aimed at transforming primary care, has raised $50 million co-led by Insight Partners, Olive Tree Ventures, and Qualcomm Ventures. To date, the company has raised more than $100M. In response to the COVID-19 pandemic, Tyto has seen a significant increase in sales and demand, driven by its ability to serve as a telehealth diagnostic solution. Tyto works with the major telemedicine providers, including American Well and Teladoc, and last year, signed a deal with Best Buy, following its acquisition of Critical Signal Technologies (CST).
- 98point6, a telemedicine platform that offers personalized, text-based care from physicians, has raised $40 million, led by Goldman Sachs, with additional participation from other high net worth individuals. To date, the company has raised $129 million, following its $50 million Series C round in October 2018. The funds are going to be used to hire more physicians, helping handle the more than 3 million patients that the company serves. The company uses AI in conjunction with physicians, and with the influx of demand associated with the COVID-pandemic, is aiming to stand-out in a crowded landscape.
- LifeStance Health, a provider of behavioral health services for children, adolescents, and adults suffering from a variety of mental health issues across a range of care settings, was recapitalized by TPG Capital in a deal valued at $1.2 billion. TPG Capital is joining existing investors Summit Partners and Silversmith Capital Partners. LifeStance saw increased investor interest for its outpatient behavioral health services business, which also featured a prominent telehealth offering. Isolation, caused by social distancing measures introduced as a result of COVID-19’s ongoing impact, and general societal stigma barriers have the behavioral health market ripe for virtual disruption. TPG’s growth capital will be used to further expand LifeStance’s geographic and online footprint.
- SilverCloud Health, the Boston-based digital mental health platform for healthcare systems and providers, health plans, and employers, announced a $16 million Series B funding round led by MemorialCare Innovation Fund. SilverCloud will look to capitalize on a market void for accessible behavioral health treatments, driving further engagement across 350,000+ users while looking to bend the mental health cost curve. Originally a Trinity College Dublin research project, SilverCloud’s expansion sights are set on further penetration in the United States market.
- Kaufman Hall, a Madison Dearborn Partners-backed healthcare consulting and enterprise software management company acquired Change Healthcare’s Connected Analytics for $55 million. Connected Analytics was comprised of several of Change’s data and analytics platforms / solutions, including Analytics Explorer, Performance Manager, and other data solutions. The combined platform creates the leading platform providing data, analytics, and enterprise performance management software to hospitals and health systems.
- Particle Health, a New York-based healthcare data sharing startup, has closed a $12 million Series A funding round led by Menlo Ventures. Particle is attempting to make healthcare data easier to access, connecting those across the healthcare continuum. This funding will be used to continue development on the product, ultimately working to connect digital healthcare solutions to patient health data. Currently, the company has access to data for nearly 300 million people, and the platform has an 85% success rate in finding an individual’s medical history.
- HealthChampion, a digital health analytics company, has acquired alligatortek, a provider of custom software solutions to help businesses maximize growth. The acquisition will help HealthChampion deploy expanded remote care and data analytics, as the demand for remote monitoring and virtual care continues to increase.
- W2O, a New Mountain Capital-back provider of analytics-driven, digital-first marketing communications to the healthcare sector, has acquired Symplur, a healthcare social media analytics platform. Given the global pandemic, healthcare companies are seeking rapid measurement and tracking of essential information in order to shape decision making. The W2O and Symplur combined-platform is already being relied upon for COVID-19 tracking. The combined solution uses Symplur’s analytics platform and W2O’s proprietary data and technology to track conversations and trends across the healthcare ecosystem.
- Amedisys acquired AseraCare Hospice, a provider of hospice services in over 40 locations in 14 states, for $235 million, inclusive of a $32 million tax asset. AseraCare Hospice provides hospice care for more than 2,100 patients daily and generates approximately $117 million in annual revenues. The two companies’ combined hospice operations represent nearly 200 locations in 35 states and an average daily census of approximately 14,000.
- Missouri Home Hospice, a provider of home health, hospice, palliative care, and personal care services throughout Missouri, acquired HomeCare of Mid-Missouri, a provider of hospice and home health services. This acquisition is the Company’s fourth in the last nine months as it continues to expand its post-acute presences throughout the state.
- Choice Homecare of Texas acquired Nextgen Hospice, a provider of hospice, rehab, and home health services in over 100 counties throughout Texas. This acquisition represents Choice’s entry into the Houston hospice market, where it currently operates both home health and rehab services. The Company expects to make additional post-acute acquisitions over the next several quarters to expand its overall footprint.
TripleTree and TT Capital Partners continuously monitor the market to identify the forces and themes impacting the healthcare industry. Thanks for reading and let us know what you think!