The approaching March deadline for individuals to enroll in a health insurance plan is a useful reminder that provisions of Obamacare will continue to roll out this year. The Affordable Care Act and related legislation are putting a huge demand on the health system, from accelerating the shift to electronic medical records to creating a need for more efficient communication tools between physician offices, patients and insurers. A handful of industry insiders offers a glimpse of the kind of targets that will shift into focus in 2014 and the groups that will be looking to buy them.
Communication platforms that offer a more efficient way to connect the Centers for Medicare and Medicaid and healthcare providers, population health tools that give insurers and hospitals that provide a better read of their patient populations are a couple of examples.
The largest health insurers, led by UnitedHealth Group, will flex their buying power. Vishnu Lekraj, Morningstar Senior Equity Analyst for Healthcare, pointed to UH as a trailblazer for the aggressive pace it has set for acquisitions and the targets of those deals, such as big data analytics companies like Humedica to doctor groups. He added that health IT companies that provide better communication between hospitals and CMS will also be a priority.
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“A lot of hospital systems have been trying to build out new software and install a more efficient infrastructure in order to meet management and integration goals. Any health IT companies that can help hospitals improve communication with federal government because of Medicare will be hot property.”
Michael Esquivel, a corporate partner with Fenwick & West, pointed out that the shift of more venture investors getting involved in healthcare will help drive deals in 2014, particularly in companies helping with the transition of fee for service to outcomes-based care. Sensors that can help hospitals monitor patients as well as help people track their own care will be attractive targets for acquisition.
Mikhail Rozenfeld is a vice president with The Channel Group, a New York-based biomedical venture investment, development and management firm. He made some observations about a broader set of buyers and acquisition targets in the digital health sector.
- EMR providers and health IT companies will look for modular add-on solutions to their existing systems such as companies that perform medication errors assessments, analysis of structured and unstructured data for medical errors and patient population stratification solutions.
- Pharma and CROs are in the process of rethinking the clinical trial process in the context of digital health and connected healthcare technologies. Another theme that has been emerging is pairing a therapeutic with a mobile app or a connected sensor for monitoring and coaching. Pharma companies are likely the only ones to look at the hardware side of the connected health market and acquire a company that would complete a patient’s experience with a particular medication.
- Medical device companies are recognizing that having a connected version of certain devices will become a differentiating factor for the market. Connected devices will generate data that would need to be stored, monitored and analyzed. M&A targets include business service companies that would enable parts of the connected health value chain, including device logistics and provisioning services and monitoring centers.
- Private equity companies are interested in business services benefiting from the rise of digital health and connected care, such as remote patient monitoring and diagnostic centers, personal emergency response companies and patient engagement services. Still, he believes that private equity investors will stay away from M&A deals involving mobile health technology and innovative connected devices and other rapidly changing or unproven technologies.
