Health Private Equity
As the economic impact of Coronavirus (COVID-19) continues to unfold, demand for healthcare remains a unifying global factor and provides an opportunity for innovative investment models to aid recovery and growth. Between 2020 and 2024, global health spending is expected to rise at a 3.9% compound annual growth rate, considerably faster than the 2.8% recorded in 2015–2019.
Those responsible for buying healthcare services (payors) commonly monitor population health metrics and the impact of changes to the healthcare landscape, such as clean water or vaccination programmes to assess need and allocate resources as part of their mandate.
Sovereign Wealth Funds are state owned entities that are used as an investment vehicle by a state, and where the original investment funds are usually derived from state generated sources. SWFs in turn make investments into a variety of real and financial assets such as stocks, bonds, real estate, commodities, private equity, and other trading arrangements. They invest both in their domestic markets and also increasingly on a global basis, and are important funding and investment sources alongside traditional investors.
SWF: Aims And Objectives
It is important to understand that SWFs have additional aims and objectives, and different characteristics, when compared with other investors. These manifest themselves in the way SWFs formulate and adopt their risk policies (including appetites and tolerances), the manner of their investment, their liquidity requirements, the length of their investment timelines and how they organise other priorities.
Occasionally, these priorities can include environmental, social, and corporate governance (ESG) aims. In particular, an SWF may look at the societal benefits of an investment and not just the obvious economic or financial benefits.
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The field of women’s care offers investors several excellent entry points for innovation and growth. McDermott partner Joshua Spielman moderated this conversation featuring insights from Michael Chang, partner at BC Partners; Robert LaGalia, president and chief executive officer of Unified Women’s Healthcare; and Uttara Marti, managing director at Evercore.
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Women’s health continues to be one of the most fragmented sectors of the healthcare industry, which means that there are ample opportunities for new entrants and existing platforms to innovate, integrate and improve the delivery of care in this space.
Women’s care providers have an opportunity to expand their core OB/GYN and fertility focus. Providing additional wrap-around services can drive incremental value.
Women’s health is uniquely able to take advantage of value-based care arrangements, but key obstacles must be overcome first, including scale, provider buy-in and access to the necessary data.
Fertility services remain a strong driver in the women’s health space. More and more, employers are providing fertility coverage and benefits, helping to drive access and volume in this sector.
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Greg Metz, co-head of McDermott’s Private Equity Practice Group, joined Simon Bachleda, co-founder and managing partner at Revelstoke Capital Partners; Richard Park, MD, founding chief executive officer of CityMD and co-founder of Ascend Partners; and John Randazzo, senior advisor, Warburg Pincus, to discuss how urgent care practices are expanding their service offerings and driving value.
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- In recent years, the service offerings available at urgent care centers have expanded beyond traditional “urgent care” into several ancillary services. “Historically, urgent care was for urgent needs, such as flu or strep or strains,” Bachleda said. “Now it has evolved to much more than just urgent, into primary care and ultimately even into multispecialty. A lot of ancillary services now can be offered seamlessly within the confines of the four walls of an urgent care center.” These include orthopedic services, and behavioral and mental health services. “As needs continue to evolve, urgent care is one of the most flexible areas of this market that is able to change with the times,” Randazzo noted.
- For urgent care practices, successful growth hinges upon standardizing the patient experience and developing a brand name with which patients are familiar and comfortable. “Making sure that patients know who we are and know [...]
McDermott partner Karen Gibbs joined Matthew Thompson, general partner at Enhanced Healthcare Partners, and Drew Walk, chief executive officer at Soleo Health, in an insightful discussion of what’s next for investment in the pharmacy space.
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- New therapies and the accompanying technologies to deliver them make pharmacy an appealing space for investment in 2021. In particular, organizations that can find ways to effectively manage escalating costs will be successful.
- The COVID-19 pandemic has highlighted the value and game-changing solutions that pharmacy can bring to the healthcare ecosystem at large. Pharmacy is an end point of care, and its extraordinary innovation is driving better patient outcomes.
- Regulatory scrutiny is always evolving in the pharmacy industry and should remain top-of-mind for any company considering an investment in the space.
- A transition to true and effective value-based care in the pharmacy sector will require significant collaborating between payers, providers, suppliers and manufacturers.
- COVID-19 has created headwinds in this sector because pharmacy is downstream from elective surgeries and other elective care. There is a backlog of care stemming from the pandemic, however, which presents an opportunity for accelerated growth in the pharmacy space moving forward.
- Innovations that help establish “arm-in-arm” relationships between physicians and pharmacists will help drive [...]
The past year saw robust deal activity focused on gastrointestinal (GI) practices, and the sector will remain an attractive target for private equity sponsors in 2021. McDermott partner Amanda Jester moderated this panel featuring Gabriel Luft, principal at Amulet Capital; Hugh McBride, principal at Kelso; Jason Porter, managing director at Baird; and James Weber, MD, chief executive officer at GI Alliance.
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- GI continues to be a popular PE investment. As a specialty, GI has proven to be stable and resistant to market changes, even amid economic and political shifts. GI groups also have the potential to provide ancillary services in-house, such as infusion, anesthesiology and pathology, which can increase their profitability and efficiency of care.
- The ability to scale has become increasingly important as GI groups contract with payors and health systems. GI lends itself well to scale, given the lower costs of operation and the ability to add ancillary services that can also be scaled. This ability to scale will likely continue to grow the value of GI businesses as we transition to value-based care.
- GI practices benefit greatly from the ability to perform procedures in outpatient facilities. Many GI groups now have their own, or are partnering with, ambulatory surgery centers [...]
In this panel, Matt Leavitt, DO, founder and executive chairman of Advanced Dermatology & Cosmetic Surgery; Scott Bremen, chief executive officer of Forefront Dermatology; and Daniel Florian, managing director at Sun Capital Partners, discussed the impact of COVID-19 on the dermatology industry and the sector’s evolving future. McDermott partner Jason Caron moderated this insightful discussion.
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- The COVID-19 pandemic has given industry leaders an opportunity to take a fresh look at their businesses and focus on streamlining operations and improving their organization. Businesses have been able to focus on safety for their patients and employees, and to improve the efficiency of internal processes through the use of novel technology. “Telemedicine is not a short term band-aid, but a long term tool to enhance the patient experience,” Florian said. Despite the pandemic’s challenges, the public health emergency highlighted the value of communication among a strong and passionate group of providers dedicated to providing care in a safe environment.
- Demand for essential dermatological services throughout the pandemic proved to be robust and resilient. Thanks in part to increasing patient knowledge and interest in both the medical and cosmetic side of dermatology, this is a time of growth. “With the aging baby boomers and the size of [...]
Private equity deal volume hit a low in the first half of 2020 as the pandemic slowed the US and global economies. But toward the end of the year, deals began picking back up, particularly in the digital health space.
COVID-19 forced healthcare providers to shift from in-person to virtual care, and technology was the vehicle to make that switch possible. Investors noticed, and more deals focused on companies specializing in telehealth, remote patient monitoring and other technology platforms that facilitate communication among specialists.
Expect this trend to continue in 2021, and keep these three factors in mind when evaluating the digital health landscape.
Easing of Laws and Regulations Surrounding Telehealth and Digital Health
Both telehealth and digital health are highly regulated, as every state has laws and regulations that govern how care is provided virtually and how those services are billed. In response to the pandemic, we’ve seen flexibility with these laws and regulations, and the Biden administration has signaled that it might make some flexibilities permanent.
Investment opportunities will likely increase as a result of the Biden administration’s willingness to lower some of the longstanding barriers to coverage and payment for virtual services, including telehealth, remote patient monitoring and other related services. That’s a positive sign for firms looking at healthcare through the lens of a technology solution.
Reallocation of Resources Due to Vaccine Rollout
Since the onset of the pandemic, labs have conducted a huge volume of testing and have had to ramp up personnel and other [...]
In this session, health law policy authorities discussed changes likely in 2021 in a Biden Administration and how these changes will impact business objectives and strategies for health industry stakeholders.
Below are the top takeaways for Policy Outlook: How The 2020 Election Outcomes Will Impact Your Business session: Health, click here to access the full webinar.
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If Vice President Biden campaigned on anything, it was a more vigorous response to the pandemic. Look for a Biden Administration to make addressing the spread and restoring the economy top priorities early on. Another relief bill is likely, and maybe even in a lame duck session in 2020, but any relief measure will require Republican and Democratic support. Look at both the House-passed HEROES Act and the Senate Republican HEALS Act as likely starting points for discussion.
Affordable Care Act
Vice President Biden campaigned on sustaining and expanding health insurance coverage by enacting a public option to compete with commercial plans in exchange marketplaces. With Republicans likely to retain control of the Senate, legislative expansions of the ACA are unlikely. Instead, look to a Biden Administration to reverse or revise ACA-related regulations and Executive Orders advanced by the Trump Administration. Still, keep an eye on the Supreme Court’s consideration of California v. Texas, which could call the constitutionality of the ACA into question.
Prescription Drug Pricing
Both parties share the goal of addressing the cost of prescription drugs, and there [...]