We hope this blog finds you, your family and colleagues safe and healthy. As the evolving impacts of COVID-19 extend into the new calendar year, we are grateful for the continued resiliency of our healthcare ecosystem. Despite the continued spread of the Omicron variant, TripleTree monitored the elevated levels of market activity for the month of December and noted three important themes from across healthcare M&A.
- Accelerated Adoption of Artificial Intelligence-Based Clinical Productivity Solutions: Evolving regulatory demands, quality reporting requirements and shifts towards value-based care have continued to bring provider documentation initiatives to the forefront of healthcare innovation. Historically, physicians have often failed to note all diagnoses, conditions and comorbidities while treating patients, often due to the overwhelming time required to compile comprehensive documentation at the point of care. A recent McKinsey report found that the United States spent an estimated $950B on administrative healthcare costs alone in 2019, an estimated $265B of which could be reduced without compromising care quality or access. Additional hiring and legacy technology solutions are unable to solve the problems that providers currently face. We remain impressed with vendors such as Iodine, which utilizes its CognitiveTM ML Engine to streamline workflows and the clinical documentation integrity process from admission to final chart coding. Edicts issued by governmental bodies and insurance companies are best tackled through leveraging data analytics, predictive insights, and actionable workflow automation.
- New Wave of Electronic Health Record (EHR) Consolidation Activity: The acute and ambulatory EHR market has seen a crescendo of vendor consolidation over the past five years. Despite meaningful scale and research & development resources, many legacy incumbents have struggled to meet strong demand for specialized workflows and cloud-based delivery. Oracle’s blockbuster acquisition of Cerner might be a signal that Cerner is already looking at the next step in its journey beyond the EHR. Cerner's largest business and main clinical system already runs on the Oracle Database, therefore the focus turns to how Oracle’s cloud-based resources will improve usability and voice tools for medical providers. We remain intrigued by the less mature EHR markets, such as those EHRs addressing home health, hospice, and behavioral health. Vendors in these markets deliver highly tailored offerings and continue to make strategic acquisitions that support the build out of their clinical suites.
- Resurgence of Dental Service Organization (DSO) Platform Investments: The broader healthcare industry and its key stakeholders are increasingly accepting the downstream benefits that oral well-being can have on an individual’s overall health. The dentistry market’s fragmentation has continued to support one of the longest tenured private equity healthcare provider strategies. 2021 realized an uptick in private equity investment for the industry, which saw patient volumes bounce back from initial COVID-19 lows. Despite increased utilization from expanded commercial payer coverage, overall dentistry reimbursement rates have been falling for roughly a decade. We remain intrigued with how DSOs are increasingly willing to inorganically pivot into subspecialty service line extensions, as we have seen in orthodontics and onsite laboratories. McGuireWoods estimated that 15% of orthodontists are part of multi-practice groups, compared to more than 22-23% of dentists. These ancillary services are often higher margin and consist of more attractive payment models.
Several transactions announced in December align with the above themes:
- Oracle, a cloud-engineering application and database management provider, announced an agreement to acquire Cerner, a leading provider of EHR and health information technologies, for $30B. Oracle’s focus on usability and voice enabled user interfaces will help modernize Cerner’s systems while dramatically reducing the amount of time that medical providers spend dealing with administrative desk work. As part of the transaction, Cerner will become a dedicated business unit within Oracle.
- Qualifacts + Credible, an EHR record software for behavioral and mental health organizations, announced the acquisition of InSync Healthcare. InSync's flexible and easy to use software solutions for small to medium-sized practices will allow the combined organization to cover a broader scope of the behavioral health and human services market.
- Netsmart announced the acquisition of Remarkable Health, which will augment NetSmart’s CareFabric platform capabilities in the behavioral health and substance abuse end markets. Remarkable Health’s Bells clinical documentation solution facilitates data capture and automatically syncs to a patient’s chart in the EHR, creating a seamless information flow and providing agencies with a holistic, real-time view of the patient.
- Iodine Software announced a significant growth investment from Advent International, valuing the business at over $1B. Utilizing advancing technology to interpret raw clinical data, Iodine generates real-time, predictive insights that clinicians and hospital administrators alike can leverage to optimize care delivery. TripleTree served as buy-side advisor to Advent International as part of this transaction.
- Fortive, a diversified provider of essential technologies for connected workflow solutions, announced its acquisition of Provation for $1.4B. Provation’s comprehensive end-to-end procedure workflow solution addresses critical pain points around clinical documentation, billing, and patient engagement. Post-close, Provation will join Fortive’s Advanced Healthcare Solutions business segment with more than 5,000 customers across many blue-chip health systems, hospitals, and ambulatory surgical centers.
- Smile Doctors, a fast growing orthodontics-focused dental support organization, with more than 295 locations, announced a strategic investment from Thomas H. Lee Partners (THL). The new investment will fuel Smile Doctors' efforts of continued geographic growth and expanded service offerings. Linden Capital Partners will remain invested in the business as an equal partner alongside THL.
- Guided Practice Solutions (GPS Dental), an expanding dental service organization, announced a strategic growth investment from Main Post Partners. GPS Dental provides a diverse range of services to support their partner dentists and Main Post’s investment promises to drive further business development and geographic expansion.
TripleTree continuously monitors the market to identify the forces and themes impacting the healthcare industry. Thanks for reading and, as always, let us know what you think!