HEALTH & LIFE SCIENCES NEWS
HEALTH & LIFE SCIENCES NEWS
Exploring Critical Business and Legal Issues across the Healthcare and Life Sciences Industries
HEALTH & LIFE SCIENCES NEWS
Exploring Critical Business and Legal Issues across the Healthcare and Life Sciences Industries
PPM/ASC
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Five Reasons You Can’t Miss HPE New York 2021

McDermott’s signature HPE New York event is right around the corner on October 15, 2021. This year more than ever, it’s a must-attend for private equity investors, healthcare executives, lenders, consultants and leaders across the industry.

Here are the top five reasons you don’t want to miss this exclusive event:

  • To help you navigate the current market’s unprecedented deal volumes and stiff competition, we’ll equip you with the latest analysis of the hottest investment sectors and game-changing deal strategies.
  • We’ve gathered the best and brightest minds in healthcare private equity to share their real-world insights into today’s market and the trends shaping tomorrow’s opportunities. Click here to view our roster of elite speakers.
  • Early risers have an opportunity to start their day right with our bonus Big Bankers Breakfast Discussion, where leading investment bankers will examine the current state of play and the dealmaking outlook for 2022.
  • This premier event is ultra-convenient. In light of ongoing safety and logistics challenges posed by COVID-19, we’re simplifying matters by streaming this year’s event right to your personal computer or device.
  • Registration is complimentary. In response to those continued challenges around COVID-19, we’re happy to offer complimentary registration this year and hope many of you are able to join us for this timely slate of sessions.

We look forward to virtually welcoming you to HPE New York in just a couple weeks. Click here to register today.




HPE New York 2020: Healthcare Private Equity Pioneers

An illustrious group of healthcare private equity pioneers discussed how healthcare investing has evolved from inception to current state and what the future holds. Moderated by Michael Lewis, author of The Big Short, Moneyball, The Blind Side and Liar’s Poker, it featured insights from Senator Bill Frist, MD, founder of Frist Cressey Ventures; Annie Lamont, co-founder and Managing Partner of Oak HC/FT; Curtis Lane, founding partner of WindRose Health Investors; and Ira Coleman, Chairman of McDermott Will & Emery.

Below are the top takeaways for HPE New York 2020 half day session: Healthcare Private Equity Pioneers, click here to access the full webinar.

Access the PDF here.

Investment in healthcare private equity continues to accelerate, even amid disruption. In the past, healthcare made up only a small portion of private equity funds, but pioneers helped make it mainstream. “The amount of infrastructure, commitment and capability focused exclusively on healthcare is becoming commensurate with the size of healthcare relative to the economy,” Mr. Lane said. “I think that’s changed pretty significantly and is continuing to change very quickly.”

One of the most dramatic changes in the field of healthcare private equity since its inception is the ongoing transformation of the healthcare system and the opportunities that transformation has created for entrepreneurs outside of traditional healthcare roles. As virtual health companies and other digital-focused endeavors [...]

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Physician Enterprises After COVID-19: Capturing and Assessing Opportunities

Independent physician enterprises continue to experience unprecedented challenges as a result of the ongoing COVID-19 pandemic. These challenges will linger for the foreseeable future and will have lasting impacts on operations and the provision of care. As a result, transactional opportunities have also shifted, and physician enterprises must be prepared to identify and evaluate new opportunities wherever they may occur. Our recent webinar with leaders from Providence St. Joseph Health, SullivanCotter, DMG Physician Organization, Veralon Partners and Golden State Dermatology explores the key challenges facing physician enterprises at this time and what healthcare providers and investors are looking for in transaction partners for today’s healthcare landscape. Click here to listen to the webinar recording and read on for key takeaways from the program.

 

  1. Independent physician interest in management service organization (MSO) models continues to increase. Historically, independent physician practices have been reluctant to shift certain business and office functions to an external management company. However, due to reimbursement and revenue constraints caused by COVID-19, the economies of scale and other cost savings associated with an MSO model may be more attractive to independent physician practices.
  2. Hospitals and health systems are reevaluating their employed physician practice structures. In particular, hospitals and health systems are reassessing their willingness to tolerate significant losses on their employed physician practices and evaluating whether changes in compensation models, compensation levels or the organizational structure of their employed physician networks can create a more sustainable setting. Some health systems are potentially [...]

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Tips for Conducting Effective Due Diligence in an Auction Process

In today’s highly competitive healthcare environment, investors may find themselves in an auction process where they must conduct due diligence pre-exclusivity. With limited time and mounting pressure, it can be difficult to know what issues to prioritize. Here are some practical tips for focusing your due diligence efforts strategically in a pre-exclusivity setting:

  • Quality of Earnings: Against the backdrop of high valuations, quality of earnings should be a key diligence focus, particularly in the context of high-complexity transactions  such as corporate carve-outs, partnerships with corporates and public-private pairings. For example, it is critical to examine the pro forma EBITDA to see if it excludes costs or includes questionable adjustments or add-backs.
  • Timeline: How competitive is the auction process and when are bids due? Does the buyer plan to conduct a full due diligence review pre-exclusivity, or instead look for big ticket liabilities that have a potential to impact valuation or derail the transaction?
  • Legal Showstoppers: Keep an eye out for legal showstoppers—issues that go to the core of the business, are not isolated incidents and are not fixable through purchase price adjustments, indemnification, escrow or enhanced compliance measures. For example, referral relationships that are based on illegal arrangements, systemic upcoding, quality of care issues, tenuous relationships with hospital partners, untenable and promised salary increases, a culture of non-compliance, or a retiring physician workforce without adequate succession planning.

As you plan your due diligence, keep in mind [...]

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Tips for Winning Competitive Health Care Auctions

The current environment for healthcare transactions is fiercely competitive with high prices, tough deal terms and limited time for proper due diligence. In terms of both value and number of deals, 2018 was the biggest year for health care private equity (PE) since the financial crisis. More large cap PE firms are moving into the small and mid-cap space, increasing competition. At the same time, non-health-care entrants are competing with US and international PE, especially in the area of physician practice management and other related health care services.

Faced with this stiff competition, sponsors are getting more creative in their healthcare partnerships, whether that means partnering with management teams on new strategies, partnering with large strategics or even with one another.  These innovative collaborations can open up more investable opportunities, including public to privates and secondary trades among sponsors.

Even with these creative new opportunities, submitting a winning bid for a health care services business in a hotly contested auction can be a Herculean task. When outbidding the competition is not an option, here are some tips to help differentiate your offer:

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Strategies for Maximizing Physician Practice Management Investments

Don’t miss out! Register today for the 2019 Physician Practice Management & ASC Symposium, May 7-8, Nashville, TN

Private equity continues to fuel robust activity in the physician practice management (PPM) sector. Within the last five to seven years, not only have PPMs within traditional areas of medicine proliferated, but new specialties also have been joining the fray at a rapid clip.

While today’s PPM activity is vigorous, it is markedly more deliberate than the first iteration of these partnerships, which featured a rush of M&A activity but little income repair or ongoing integration, and ended with the dramatic collapse of the single-specialty PPM bubble in the late 1990s.

To ensure that a PPM is viable in today’s environment, consider the following strategies:

  • Pick the right investment targets. Hallmarks of a sustainable health care business include improved outcomes over time and enhanced patient experiences (e.g., access to clinicians, ease of scheduling appointments).
  • Focus on compliance. Take a close look at compliance and utilization early in the deal process. While a compliance audit adds up-front cost, it is a fraction of the price of litigation.
  • Integrate. The 1990s PPM model left physician practices largely independent, with only a loose affiliation under a management agreement. Thorough and carefully planned integration will help you avoid repeating the mistakes of the past.
  • Align your interests. Make sure that compensation and equity are calibrated to incentivize buy-in and a culture of ownership. Strong physician leadership is far more effective in driving [...]

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A Year in Physician Practice Management: For Auld Lang Syne

With equal parts hope and optimism, we look ahead to an eventful New Year. This is particularly true for the physician practice management (PPM) industry: we reflect on the progress of the past while looking forward to the opportunities today’s growing and increasingly complex landscape provides. We believe the trends we’ve seen shape the industry will continue to be influential, including:

The growing involvement of private equity investors

Last year, we hosted the 2018 Health Care Services Private Equity Symposium, where we discussed how various business and legal opinions have an impact of private equity in the PPM industry. Watch this space, as they say, in 2019. PPMs continue to garner an emerging interest from investors, who are noting their benefits for assisting physicians in an increasingly complex reimbursement and regulatory environment.

An increased focus on specialties entering the PPM fray

In the late 90s, we saw a fast, chaotic rollout of PPMs in the health care industry. Now, the reintroduction of PPMs has been more deliberate and evenly paced, allowing for stronger, strategic alignment with physicians and the ability to truly deliver on the value proposition PPMs provide. As such, more specialty practices are coming into the mix, including ophthalmology, gastrointestinal, women’s care/OBGYN, orthopedics and urology. Still, the rising trend of consolidating physician practices and the federal oversight that accompanies this undoubtedly will have an impact on the ultimate success of PPM companies.

Compliance continues to be [...]

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Pursuing Progress: Collaborative Transformation in Action

It’s the industry disruptors, the unusual partnerships, and the cross-border and cross-sector relationships that are driving Collaborative Transformation in the health care and life sciences organizations. But a Collaborative Transformation takes more than signing paperwork and shaking hands. A successful Collaborative Transformation takes cultural integration between non-traditional partners, incorporating new technologies into health care regulatory compliance structures, and so much more. At McDermott, we’ve recently had the opportunity to help our clients pursue their own Collaborative Transformations, and are proud to showcase their achievements.

Innate Pharma Expands its Collaboration with AstraZeneca

McDermott Will & Emery advised Innate Pharma, a French oncology-focused biotech company, in signing a multi-term agreement with AstraZeneca and MedImmune – AstraZeneca’s global biologics research and development arm. This agreement broadens the existing collaboration, aimed at accelerating the development of an oncology portfolio of each of the parties and to provide patients with more rapid access to new therapeutic options. This extended collaboration will permit Innate Pharma to develop and commercially strengthen its investment ability to develop its immuno-oncology portfolio (IO) and its R&D platform. For its part, AstraZeneca will enrich its IO portfolio with new clinical and preclinical programs. For more information on this collaboration, click here.

CVS + Aetna

McDermott is one of the firms that has advised CVS Health in connection with its $69 billion purchase of Aetna. The transaction, one of this year’s largest M&A deals, is expected to transform the US health care sector. For more information on [...]

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Collaborative Transformation: Shaping the Future of Health Care, Together

As the health care and life sciences fields experience ever-increasing levels of disruption, diverse entities across the industry are teaming up to embrace and foster innovation. These new pairings are shaping the future of health care, as organizations come together to tackle the industry’s most pressing issues with redoubled agility and pooled resources.

In an environment of change and uncertainty, this trend of Collaborative Transformation is yielding improved financial outcomes, increased operational efficiencies, and a fresh infusion of diverse talent and perspectives—all of which result in enhanced quality of care.

This is where the McDermott Health and Life Sciences team comes in. As a top-ranked US health law practice and a leader in life sciences with decades of experience advising the leading players in US and cross-border health and life sciences, we have the skill, market insight and ingenuity to partner with you wherever your innovation takes you. Whether you are forming innovative alliances across borders and industries, creating or implementing groundbreaking technologies and services, or restructuring investments to position your organization at the cutting edge of the market, our team can work alongside yours to achieve excellence.

Click here to learn more about McDermott Health, our recent work executing collaborative transformations on behalf of our clients and how we can help your organization form innovative business relationships.




ONC Expected to Release Proposed Information Blocking Rule Soon

It has now been one month since the US Department of Health and Human Services (HHS) Office of the National Coordinator for Health Information Technology (ONC) sent its proposed information blocking rule to the Office of Management and Budget (OMB) for required review.

We expect OMB to approve the much-anticipated proposed rule and ONC to release it soon with the usual opportunity for public comment. While we wait, there are some things that health information technology developers, health information exchanges, health information networks and health care providers who may be subject to the information blocking prohibition and enforcement actions can do to prepare for the upcoming comment period. But before we get to comments, let’s remind ourselves about how we got to this point.

By way of background, Congress asked ONC to produce a report describing the extent of information blocking and a strategy to address it. ONC submitted that report to Congress in 2015 (the 2015 Report) noting, among other things, enforcement authority gaps and indicating that successful information blocking prevention strategies would likely require congressional intervention. In the 21st Century Cures Act, which became law in 2016, Congress granted the HHS Office of Inspector General investigative and enforcement authorities for prohibited information blocking conduct. The Cures Act defined information blocking as a practice that “except as required by law or specified by the Secretary…, is likely to interfere with, prevent, or materially discourage access, exchange, or [...]

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