Healthcare Financial Insights
Noteworthy M&A Transactions – March 2020
April 30, 2020
Over the past several weeks, we have watched the U.S. government and healthcare industry respond to COVID-19 and its implications that continue to reverberate across the globe. As the industry works to address the unique and demanding needs of this pandemic, we are keeping a close eye on areas of healthcare creating a meaningful impact during these unprecedented times.
Looking back on the month of March, let’s dive into three important themes that shaped M&A activity:
- Next-Generation Technology: Healthcare technology companies are adopting next-generation digital technologies to manage increasingly complex data with the goal of achieving high quality and affordable healthcare. Leveraging data for clinical and operational benefits is a priority for healthcare organizations in order to gain insights and support decision-making. From key areas like medical costs, clinical data, patient behavior, and pharmaceuticals, new technologies can be used to streamline operations, improve patient care, and lower overall costs for parties across the healthcare ecosystem. These capabilities can vary significantly and impact many aspects of the healthcare system, from automating traditionally burdensome administrative processes, to helping improve clinical care guidelines, to streamlining the review of payments and detecting fraud or improper payments, among many additional applications. Despite the many advantages associated with incorporating next-generation digital technologies, the integration and analysis of data from disparate platforms is costly and challenging to develop. Given these challenges, there is value in partnering with or acquiring capabilities that can use analytical approaches to deliver valuable insights from complex data in a flexible, configurable, and user-friendly manner.
- Home Infusion Therapy: Approximately 60% of Americans and 80% of older adults suffer from at least one chronic disease (e.g. congestive heart failure, diabetes, rheumatoid arthritis, and various immune deficiencies), which have varying treatment paths. One of the most effective, yet most expensive, treatment pathways is infusion, the intravenous or subcutaneous administration of drugs, biologics, nutrients, or fluids. A growing trend in the infusion therapy industry is the adoption of home treatment. According to a 2016 study by the CVS Health Research Institute, the costs associated with receiving infusion therapy at home, rather than at a traditional hospital setting, are consistently lower than services provided in a healthcare facility, with savings ranging between $1,900 and $2,900 per course of treatment. Along with the financial benefit, home infusion has also been shown to reduce the risk of readmission and more catastrophic health issues, such as hospital-acquired infections. Shifting infusion to lower cost care settings like the home provides access to the superior outcomes while doing so in a cost-effective way, driving increased demand for providers of in-home infusion. An increasing geriatric population with a decreased mobility profile, a rising preference for home care for patients of all ages, and a rapidly evolving regulatory environment are further reshaping the home infusion industry, driving M&A activity.
- Workforce Management Solutions: A growing physician shortage and the increasingly competitive healthcare industry are making it difficult to attract and retain qualified employees. By 2032, the projected total physician shortfall is estimated to be between ~47,000 and ~122,000 physicians. In this environment, healthcare organizations cannot allow their labor expenses, which can account for up to 60% of their operating budget, to increase indefinitely. Organizations are already under pressure to reduce their costs and improve efficiency as hospital operating margins decrease and reimbursement rates fall. As a result, we are seeing a growing uptake of workforce management solutions among the healthcare providers across the globe. These solutions help with reducing labor costs and improving quality of care by optimizing the workforce scheduling process, reducing employee turnover rates, automating back-office administrative processes, and ensuring effective recruitment of healthcare staff. Moreover, a growing demand by healthcare professionals for transparency and flexible scheduling for the workforce are increasing the adoption of Workforce Management Solutions and driving M&A activity in the sector.
Several transactions announced in March align with these themes:
- The Blackstone Group announced it will acquire a majority stake in HealthEdge, continuing its trend in investing in high growth technology companies. HealthEdge delivers next generation, mission-critical Core Administrative Processing Systems (CAPS) solutions to healthcare payers, enabling them to efficiently administer benefits, configure plans, manage providers, and enroll participants. HealthEdge’s flexible, cloud-compliant solution, allows payers to navigate an increasingly complex and data-rich healthcare environment while providing a modern, simple user interface. TripleTree served as exclusive financial advisor to The Blackstone Group.
- emids, a Nashville, Tennessee-based provider of digital engineering and transformation solutions to the healthcare industry, has received a strategic equity investment from BlueCross BlueShield Venture Partners. emids works with payers, providers, health technology companies, and life sciences firms to accelerate the adoption of next-generation digital technologies and manage an increasingly complex data ecosystem.
- Thomson Reuters announced that it acquired Pondera Solutions, a leading provider of technology and advanced analytics to combat fraud, waste, and abuse in healthcare and large government programs. This acquisition will allow Thomson Reuters to expand on its strategic approach to deliver insight through advanced analytics, artificial intelligence, and human expertise.
- BrightSpring Health Services, a leading provider of complementary pharmacy and home and community-based services, has announced the acquisition of Advanced Home Care’s home health and specialty infusion businesses. The acquisition continues the expansion of BrightSpring’s home health and infusion lines of business in the Southeast.
- KabaFusion, a provider of specialty acute and chronic home infusion therapies, announced it has acquired the home infusion assets of Lincare, a subsidiary of Linde plc. The strategic combination is intended to strengthen KabaFusion’s position within the home infusion industry by enhancing the company’s ability to deliver superior patient care nationwide.
- HealthStream (Nasdaq: HSTM), a provider of workforce and provider solutions for the healthcare industry, announced that it has acquired NurseGrid, a Portland, Oregon-based healthcare technology company with the #1 rated and top downloaded app for nurses, called NurseGrid Mobile. Nurses use NurseGrid Mobile to manage and share their schedules, swap shifts, communicate with one another, and to coordinate work and non-work activities. NurseGrid Mobile has an audience of over 260,000 nurses as monthly active users. NurseGrid also provides a corollary application for nurse managers, called NurseGrid Enterprise which helps healthcare managers more efficiently publish work schedules to their nursing staff, view and approve shift swaps, and communicate with their teams.
- Marlin Equity Partners has made an investment in Iselin, New Jersey-based SmartLinx, a provider of workforce management solutions for skilled nursing, senior living and post-acute care providers. SmartLinx’s software suite helps organizations to proactively manage their workforce, increase productivity and reduce costs by enhancing employee engagement, simplifying compliance, and streamlining scheduling and attendance.
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!