Private equity investment in health IT company

Passage of the Affordable Care Act (ACA) has created attractive opportunities for private equity firms to invest in companies that serve newly insured segments of the population and contain costs. But investing in the sector requires insight into the details of how health reform is rolling out and how different players in the market are likely to react to new incentives, rules and opportunities.

A middle market private equity firm asked Health Business Group for guidance on an investment in a health IT company that focused primarily on the Medicaid market. Key questions included: How would Medicaid expansion impact different customer segments and different states? To what extent would Medicaid shift new entrants into managed care? Would Medicaid managed care companies be interested in working with the company? Could the company’s offerings be expanded to the Medicare and commercial markets?

Health Business Group leveraged its deep understanding of health care reform to refine and sharpen they key questions and to develop hypotheses for validation. Our team then conducted interviews with the target company’s existing customers, prospective customers in new market segments, industry experts and competitors. To increase our sample size we also developed and conducted an electronic survey of prospective customers across several segments.

We worked seamlessly as part of the private equity firm's deal team and used our diligence findings to provide coaching and business development leads to the company to add additional value once the deal was consummated.