IVCA Feature: Takeaways from the IVCA Education Luncheon ‘An Update on Healthcare Technology Investing’

September 18, 2019

The information was timely and the give-and-take was Socratic at the latest IVCA Educational Luncheon, “An Update on Healthcare Technology Investing,” which took place on September 17th, 2019. Three experts presented a comprehensive perspective on current investments in the Healthcare vertical, through a focus on M&A markets and the associative type of investments. The panel included:

  • John Hennegan, Partner and Founding Member of Shore Capital Partners
  • Joe McIntyre, Senior Vice President at William Blair & Co. (Healthcare focus)
  • Ryan Moseley, Vice President at Cressey & Co. (Healthcare focus)

The following are the individual takeaways from the presentation.


TAKEAWAY: 2018 had the highest deal count and second highest dollar volume on record, driven by easy access to financing and continued dry powder for U.S. investors. Q2 in 2019 is off to a strong start, but perhaps lagging a bit behind 2018.

NOTES: Joe McIntyre noted factors such as aging population, the increase in chronic diseases and an increased focus on quality care. Provider practices are the main driver of volume, mostly from add-on activity. Price multiples are robust. BioPharma mega deals, MedTech and payer services all also have strong volumes as well.

IMPORTANT POINT: Sponsor-to-sponsor exits continue to be the likeliest outcome for lower to middle market investments representing 50% of 2018 M&A deals.


Recent healthcare deal activity has been catalyzed by:
  • Continued infiltration of technology
  • Healthcare and consumerism line blurs
  • Healthcare leaders continue to look for disruption opportunities
  • Changing lifestyle preferences in new providers
  • Continued consolidation activity in the provider sector

NOTES: Patients are acting more like consumers with choice as are their deductibles rise, and are becoming educated on healthcare decisions, according to McIntyre. The practices that succeed are directly addressing these concerns. The quality experience, as much as the price, is becoming more front and center to healthcare consumers.

Changing lifestyles for providers (doctors, nurses, medical technicians) is, in part, driving Healthcare M&A. In generations past, med grads would come back to their hometowns to set up a private practice, but increasingly debt and work/life balance desires have made doctors less entrepreneurial in that scenario. They are looking to join more established corporate practices as employees.

John Hennegan added that the growing consumerism is the driver of everything they do at Shore Capital. Changing lifestyles of providers is an additional factor. Work and life balance is easier to deliver in a group practice rather than a single practice, which has become more important with more women at the physician level.

There was an audience discussion regarding the statistic that 46% of physician providers are near retirement, and they are selling private practices to corporate practices. Also rural areas are bleeding primary care physicians ... med grads don’t necessarily go back to their small hometowns to practice. This has built the Urgent Care divisions and opportunities in those businesses. In essence, provider retention is one of the most important metrics in analyzing success rates in a clinic.

IMPORTANT POINT: Disruptors like Amazon’s partnerships with healthcare delivery systems and new companies like SmileDirect have begun to shake up traditional healthcare.


TAKEAWAY: Ryan Moseley identified the key operational levers for Healthcare growth, which included pricing, use of extenders, expanded products/services, sales, marketing, board/executive recruitment, back office efficiencies, talent management, operations, strategic partners, M&A, greenfield (new locations from scratch) and strategic partnerships.

NOTES: One of the first discussions involved ‘where do these levers need to be housed?’ ... Inside the portfolio? At the firm level? An outside vendor or any combination therein? Pricing is getting more attention, as managed care and consumer driven models are more prevalent. Key data, through technology, is also providing more information regarding pricing and optimal service locations than ever before.

The use of extenders in providing healthcare is a delicate subject, and has to be tread carefully. However, the discussion beforehand on lack of primary physicians causes many clinic investors to look towards alternatives like Urgent Care. The evolution of society is steering toward certain services being handled by downstream med practitioners rather than doctors, and this is categorized as extenders.

Operations, due to technology, has evolved substantially in the last five years. Non medical managers are being trained to “speak the lingo” as providers are morphing into more situations where non-medical managers are affecting their organizational operations.

IMPORTANT POINT: Under talent management, the adjustment of workplace culture has become crucial for talent retention, according to Moseley. That has become an at-the-board-level concern. Finding other ways to deliver value, as Hennegan put it, besides salary and benefits, has become of utmost importance. Investors are looking beyond the numbers.