Category: Case Studies

Medical cost containment acquisition for strategic buyer

published date
December 1st, 2017 by

Health Business Group has assisted many clients in developing their growth strategies, often tapping into new products and services in existing customer segments and assisting clients in expanding into new customer segments. An outsourced healthcare services client was interested in expanding into a new market segment by providing medical cost containment solutions and asked Health Business Group to evaluate the market and perform due diligence on a potential acquisition.There are different approaches to medical cost containment, many of which rely upon claims analysis. From a clinical perspective, this can be used for intelligent benefit plan design and risk stratification for disease management and wellness initiatives, screening for medical necessity/appropriateness, and other uses. From a financial perspective, this analysis can be used for claims re-pricing, claims arbitration/negotiation, and fraud and abuse identification.

In our assessment, we found that the market was slowly evolving from best-of-breed to one-stop-shop as a way to simplify the supply chain and minimize integration points of failure. The rate of evolution was constrained by the ability of the vendors to offer broad, fully-featured solutions.

We evaluated the needs of the self-funded employer market and how they were being met by TPAs and service/technology providers. We conducted primary and secondary research, which included speaking with TPAs, employers, brokers, and peers of the client. We further segmented the target customer markets, determining the size, degree of outsourcing, level of satisfaction, and the target company’s competitive positioning in each segment.

Ultimately, we determined that the target was well-positioned for future growth and would be a complement to our client’s strategy. The acquisition was subsequently completed.

Growth strategy for outsourced hospitalist company

published date
December 1st, 2017 by

A leading hospitalist company was seeking additional growth and evaluating long-term strategic alternatives to maintain a differentiated offering in the marketplace.The overall hospitalist market is large and growing, due to increasing acceptance from community physicians, demand from hospitals for new programs and expansion of existing programs, and a growing realization that insourced solutions have drawbacks.

To determine our client’s current market positioning and growth opportunities, we spoke with current and past customers as well as potential customers. Through this process we gained a thorough understanding of customer needs, level of satisfaction, performance metrics, and operational considerations. This formed the basis of a market model of size and growth of the hospitalist industry. We further segmented this analysis to represent market potential by geography, size, and hospital type/ownership. In addition, we analyzed the competitive landscape and evaluated our client’s market positioning and differentiation.

We made specific recommendations in many areas across the business. Within sales and marketing, we helped the client refine and improve its value proposition to target hospitals and to incorporate our hospital segmentation database into sales planning efforts and marketing materials. In product development, we recommended that the client evolve its existing product offerings to address emerging issues (e.g., public reporting of quality and patient satisfaction, IT optimization). From a human resources perspective, we analyzed the labor supply and trends and made specific suggestions on how to bolster physician recruiting and retention. Lastly, we identified and profiled several acquisition targets.

Growth strategy, financing for medical risk management company

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December 1st, 2017 by

Advanced Practice Strategies (APS) is a medical risk management company, which partners with leading professional liability carriers such as the Harvard Risk Management Foundation/CRICO to develop demonstrative evidence for use at malpractice trials and to provide online continuing medical education (CME) to healthcare providers to improve patient safety and risk management.Health Business Group’s relationship with APS began in 2005. Initially we provided business development support and strategic advisory services to help the company negotiate or renegotiate agreements with content and distribution partners. As we helped the company gain traction we realized that the commercial potential of APS could be maximized by going beyond the bounds of a traditional consulting relationship.

In 2007, the Health Business Group team secured a round of growth financing for APS. Dennis Ferrill left our consulting practice to become CEO of APS, and David Williams became chairman of the board of directors while remaining at Health Business Group full time.

The company entered an era of growth and prosperity characterized by national expansion and development of strategic partnerships with leading hospitals, liability carriers and universities. In 2012 Ascension Health Ventures made a substantial investment in APS to support continued growth and product development.

Remote patient monitoring: market entry strategy

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December 1st, 2017 by

A leading medical technology company asked Health Business Group to evaluate whether the company should expand its presence in the market for remote patient monitoring (RPM) for chronic illness. RPM is a promising technology that has the potential to address fundamental issues in healthcare, especially the rising demand for chronic care coupled with caregiver shortages and financial constraints. However, the potential for RPM has not been realized; reimbursement is just beginning to emerge and few RPM companies have prospered.Opinion within the client’s senior management was sharply divided. Some thought the company should move boldly into the market through major acquisitions while others thought the sector should be avoided entirely.

Health Business Group and the client chartered a joint project team to conduct research and make recommendations. We researched the strength and nature of customer demand, which we compiled through interviews and secondary sources. We identified and profiled a set of vendors and competitors, and conducted in-person evaluation sessions with the joint team.

Relying on our experience in disease management we developed a quantitative economic value creation model to demonstrate the potential return on investment from RPM for a variety of chronic conditions, including diabetes and heart failure. Finally, we established a set of strategic options and evaluated them according to objective criteria.

In the end the joint team adopted a robust set of strategic recommendations that unified top management’s thinking and set the company on a defensible strategic course.

Private equity investment in health IT company

published date
December 1st, 2017 by

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 healthcare 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.