Tag: Private equity/investors

Medical cost containment acquisition for strategic buyer

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.

Private equity investment in health IT company

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.