Insights > Healthcare Highlights: Opportunities for Providers and Private Equity Investors

Healthcare Highlights: Opportunities for Providers and Private Equity Investors

In a 2021 podcast discussion, the Kayo Conference Series Weekly Knockout podcast explored why providers are turning to private equity, and how modern health care technologies and trends require large amounts of capital. These factors present obstacles and opportunities for health care providers and investors seeking to succeed in this highly complex environment. Read key takeaways [1] from the podcast that featured healthcare industry expert Amel Hammad, a managing director at Conway MacKenzie, part of Riveron:

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Share how you fell into the healthcare industry.

My career started in finance and accounting, with my first role working for a home health provider. I also worked for a group of skilled nursing facilities and assisted living facilities—and stayed with it, a highly regulated industry, always dynamic. I have worked in healthcare for about 20 years—on the provider side—doing accounting and finance, restructuring and turnaround, operational turnaround, value creation and strategy, and operations.

As a healthcare specialist, how do you define “provider”?

A provider is not just a physician but any entity organization or individual that interacts with a patient. Examples include acute care (hospitals and hospital systems), post-acute care, ambulatory care centers, physicians and specialty groups, or dentist offices. There is also a senior living aspect—the nursing homes, assisted living, independent living services, and related facilities.

In the highly regulated environment, what is the challenge providers face now?

The biggest challenge right now is that the pandemic opened up an opportunity for more care at home—calling for innovation and a shift for cost containment. People are reluctant to go to facilities, and home care options are extremely convenient.

The hurdle, then, is what does the regulatory environment look like? Providers need to navigate regulations to provide home health care. In a simple encounter, if a patient uses a telehealth service to see a physician, until recently that was not reimbursed as a normal physician encounter. Instead, it was reimbursed by the minute at a lower rate. Now, such encounters are being considered the same as an in-person visit.

Many other services can be provided at home, but providers need to define what they are and how to implement those services. To provide more care at home will require diagnostic and therapeutic tools, and—as opposed to having someone go to a facility—the regulatory hurdle is the biggest hurdle.

If providers get the regulatory side figured out, it seems like some of these initiatives could require significant capital investment?

Correct. A lot of sophisticated organizations have the capital to come up with these strategies and use these types of tools and secure environments allowed in the new world of health care practice. But many other providers, especially in the home health space, are not as sophisticated and lack the capital to make investments in the infrastructure as needed to provide many different types of encounters in the home.

For a company or fund in the acquisition space considering its portfolio and the types of organizations it wants to acquire (for example, home health and physical therapy platforms), look at synergies and how to leverage the home health model and bring in some of the other types of therapies.

With a good platform or good portfolio, investors need to find gaps—to provide services that people are looking for. The reality is there are many non-sophisticated health care organizations that need the capital infusion to be able not only to develop the products but also to develop the platform and technology. Capital can enable organizations to grow and jump over those regulatory hurdles.

Are many “roll-ups” of physician practices still going on? And what related investment opportunities exist?

The Affordable Care Act mandated electronic medical records. Many providers started to consolidate, to roll up together to be able to the leverage capital of a large organization and meet that mandate. Now, managed care organizations are treating patients holistically as opposed to symptomatic treatments, and physician groups have realized they need to be multidisciplinary and multi-specialty.

The industry is going to continue to probe more to provide that managed care model with different types of services in roll-ups, with multidisciplinary care provided as close to home as possible. Organizations need to have sufficient capital resources and medical resources available to be able to provide that holistic managed care.

In the next 18 months to two years, healthcare trends will likely include:

  • Capital needed for medical devices, specifically handheld.
  • Technology for secure networks, to provide care over the computer or Zoom, or any other type of device. Platforms are going to need to evolve and be better integrated.
  • A holistic approach to care—making more information available and easily integrated and transferred—leading to better care provided for each individual.

Being a consultant with a healthcare background, how do you typically help organizations?

First and foremost, we help with strategy—and how a health care organization can bring the pieces together from a long-term perspective. Second, especially for a smaller organization, processes typically are not in place. We can help provide an assessment of the organization and overhead departments, and determine what shifts need to be made so that an organization can scale. We assess not just for personnel, but for IT infrastructure as well—where processes may have been done manually due to the lack of investment capital—and what providers can do differently to grow and scale. This is the same concept as an operational turnaround, but for a healthy company, it is called value formation.

In a situation where the organization is not doing well, we provide a different type of assessment and then provide an operational turnaround quickly. A turnaround differs from a traditional performance improvement, which can take a bit more time. As a consultant, I can help organizations with strategy and the tactical planning around that strategy.

Comparing distressed turnarounds versus operational value creation, what types of situations do you foresee on the horizon in healthcare?

There will be some distressed situations but also opportunity for a lot of investment to address problems. “Distressed” may not mean bankrupt; instead, it could require a bit of restructuring to help an organization become viable. It does not necessarily mean an organization is at its end, but it could be facing an opportunity for investors to help with the restructuring of that debt, and to bring existing components into a larger organization where there are synergies, to continue to operate—under a different name or funding source.


[1] Podcast excerpts have been edited for brevity and clarity.

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