The J.P. Morgan Healthcare Conference, held annually at the Westin St. Francis in San Francisco, is the largest healthcare investment symposium in the industry, bringing together industry leaders, emerging companies, technology innovators, and investors. But only 25% of the 20,000-plus professionals drawn to the city during these three days in January actually attend the conference. The real action happens outside the conference where investors, executives, and innovators meet to form partnerships and strike deals. Given its scope and January timing, I find that this event is ideal for observing the latest developments in the healthcare industry and searching for clues about future trends
Considering how much healthcare has been in the news and the general sense that the industry is experiencing a huge transition, the general consensus is that the industry has undergone relatively few sweeping changes in the last three years. However, there are many reasons to see clouds on the horizon. Everyone is talking about the possibility of government intervention in pharmaceutical pricing or changes to the Affordable Care Act. In an election year the whole industry is holding its breath as it awaits a potential new administration. What does all of this mean for a private equity investor? Here are some of my observations:
Health System consolidation will continue and perhaps escalate. Regional and national consolidation is a growing trend, but this segment of the industry is less consolidated than many other segments and compared to what is necessary to achieve real efficiencies of scale. Partnerships and commercialization, including partnerships with Google, Amazon, and Microsoft, are becoming popular as ways to access additional capabilities and accelerate transformation. While there is still enormous value to be tapped, some systems are truly differentiating themselves at a pace not seen previously. This article from Ed Chadwick, President of Integrated Healthcare Financial Strategies, LLC, describes how proactive health systems adapt to the marketplace and anticipate future changes.
Physician Practice Management has become a particularly hot sector for investors. It is especially popular in more retail medical practices such as dermatology, dentistry, plastic surgery, and even gastroenterology. There are more than 200 private equity platforms investing in private practices. Independent providers face challenges such as rising costs, complex technology, and a constantly changing healthcare industry—which takes time away from caring for patients. Organizations like Privia Medical Group have become physician-led, multi-specialty medical groups which leverage economies of scale to take advantage of tools, technology, and other resources to help scale medical practices, lower physicians’ costs, and improve care.
Investors enjoy plenty of strategic investment options in the Payer sector. While private equity firms don’t usually invest directly in large payers like United Healthcare or Carefirst, there are many opportunities offered by innovative companies that market services and products to these players. These innovators—such as Oscar, Clover Health, and signifyhealth He—provide data analytics, network management, technology interfaces, telemedicine, employee benefits plans, and other services. They leverage new technology to help manage and find value in the massive amounts of information that large payers must store and process.
Every year more people at JPM are talking about Digital Healthcare—both in terms of data management and in human interactions with technology. Consumers are demanding better access to their healthcare records through phone apps, improved internet landing sites, and many other kinds of virtual engagement. Other forms of digital healthcare, including telehealth, data analytics, AI, and robotic process automation are now viewed as essential to better serve patients, although healthcare still lags other industries in terms of technological usage. There are investment opportunities in companies such as Onduo, Livongo, and PWN Health that are improving digital healthcare systems, bringing down costs, and increasing efficiency.
At the Bancroft Group we are always keeping abreast of the latest developments in the healthcare industry. Reach out today, and we’ll be happy to discuss how we can help you benefit from the latest trends to achieve your business goals.