Less Is More: Why Matt Holt Is Making a $30B Bet on Simplified Health Tech

Health tech may be getting a new heavyweight — though the deal is still in its early stages.

Last month, reports emerged that Matt Holt, former managing director and president of private equity at New Mountain Capital, had left the New York City firm to start a new venture combining five of its health tech portfolio companies in a deal valued at more than $30 billion. 

The creation of the new company — apparently to be named Thoreau after essayist and naturalist Henry David Thoreau — is not yet finalized, but steps are underway to move the process forward, an anonymous source familiar with the transaction told MedCity News. The source said significant diligence, analysis and capital-raising efforts are still underway.

The five New Mountain-backed startups that Holt is in discussion to acquire are Datavant, Machinify, Office Ally, Smarter Technologies and Swoop. Anonymous sources close to the deal told media outlets that the new entity, called Thoreau, is being backed by London-based alternative asset manager ICG Strategic Equity.

Holt, New Mountain, ICG and all five of the startups declined MedCity News’ request for comment.

Though Thoreau is not yet a done deal, experts think the move represents a major bet on scale and integration in the health tech sector.

Five startups, one platform

This is not the first time in recent history that multiple health tech companies in New Mountain’s portfolio have been consolidated.

In May, New Mountain created Smarter Technologies — one of the five companies being folded into Thoreau — by combining three separate platforms it had already acquired: SmarterDx, Thoughtful.ai and Access Healthcare. The company was formed to compete with established revenue cycle management companies and try to beat them at their own game.

Smarter Technologies’ primary customers are providers and health plans, including large health systems like Novant Health and McLaren Health Care. Providers use the startup’s platform to automate administrative tasks like prior authorizations, patient intake and billing, while payers use it to improve their claims processing and utilization management.

Machinify, one of the other startups making up Thoreau, also focuses on payer and provider workflow automation. The startup uses AI to speed up utilization management and prior authorization decisions, reducing the need for manual reviews. Office Ally, on the other hand, serves smaller providers with EHR and practice management tools designed to simplify billing and administrative tasks.

Datavant brings a data-focused dimension to Thoreau, as it offers a platform that helps healthcare organizations connect and share data securely. The platform links clinical and claims data to support research and operations across providers, payers and biotech companies. 

The final startup included in Thoreau, Swoop, wasn’t purpose-built for healthcare. It sells payment and invoicing technology for small and mid-sized businesses.

Even with uneven customer overlap, New Mountain is evaluating whether combining these companies into an end-to-end health technology platform spanning payers and providers would create real strategic value. Together, the five startups have potential to cover a broad spectrum of healthcare operations, from administrative automation to secure data integration to payment processing.

At a valuation north of $30 billion, Thoreau would instantly rank as one of the largest health tech platforms ever assembled by a private equity firm. 

If the new entity comes together as envisioned, its sheer size and scope would place it in a different category than most private equity-backed health tech ventures. By spanning payers, providers, data exchange and payments, the platform could eventually compete for customer relationships in a way few companies can. At the same time, stitching together different businesses of this scale presents execution risks that even large incumbents like Optum have spent years navigating.

Integrating capabilities across healthcare

It’s unclear how the new entity would be structured. It could operate more like an independent operating company or retain elements of a traditional private equity fund — but either way, New Mountain appears to be looking at the consolidation as a move to create a more comprehensive and scalable player in healthcare tech, said Joe Widmar, healthcare M&A director at West Monroe.

“I believe this reflects a bet on data and AI platform capabilities as a way to accelerate enterprise value creation across adjacent businesses in the industry. The formation of Smarter Technologies was a more domain-specific move in that direction,” he explained.

Thoreau appears to be a broader evolution of that same strategy — this time aimed at extending AI and data capabilities across multiple domains, Widmar noted.

He added that the underlying bet is that once an organization like Thoreau achieves enough scale across various industry functions, AI’s true value in healthcare can start to be realized.

The different businesses making up Thoreau bring a number of capabilities to the table — and most healthcare organizations are clamoring for platforms that balance access to advanced tools with a simplified technology landscape, Widmar pointed out.

“That said, it remains to be seen how effectively Thoreau will strike that balance. Defining a clear integration model and go-to-market approach across its combined businesses will be an ongoing challenge,” he remarked.

Consolidation as strategy

Another industry expert — Morgan Cheatham, partner and head of healthcare and life sciences at Breyer Capital — said he views Thoreau’s strategy as part of a broader trend in health tech consolidation. 

As Thoreau takes shape, it serves as an example of how critical distribution is in healthcare, Cheatham noted.

“The New Mountain portfolio is interesting because it touches on every major stakeholder in healthcare, whether it’s payers, providers, life sciences or employers. So to see Thoreau come together with an amalgamation of these different category-leading companies focused on each of these stakeholders, it shows promise for how we might have more interoperable systems that are in conversation, among the silos that exist today,” he declared.

He said that while healthcare startups can succeed with one stakeholder, such as providers, that success often doesn’t translate to payers or life sciences. Cheatham sees value in creating systems that communicate across these silos — and while it won’t be an easy task, he is optimistic that Thoreau could find a way to bridge those gaps by building solutions that work across multiple sectors.

He noted that the formation of Thoreau reflects another broad trend: the biggest companies in healthcare are often those that operate at the intersections of multiple markets or stakeholders. Standalone companies thrive in certain niches, such as therapeutics with high unmet needs, but integrated platforms are increasingly positioned to offer more value in a fragmented healthcare landscape, Cheatham explained.

Simplicity over complexity

Unlike traditional private equity investments, which typically focus on asset value and profitability, Thoreau is likely betting on the value of integration and a streamlined user experience, pointed out another analyst — Zachary Klein, health policy and market access strategist at Avalere Health.

“Thoreau’s mission aims to capitalize upon the current legislative and regulatory attention to healthcare inefficiencies. Each of these subsidiaries’ missions addresses at least one contributor to inefficiencies — interoperability and infrastructure, patient and customer identification and engagement, payment and cost management, operations, and EHR,” Klein stated.

To be successful, Klein said Thoreau will need to demonstrate that health tech can offer consolidation and simplicity without the loss of quality and accuracy.

He also highlighted the fact that the new venture’s namesake, author Henry David Thoreau, was well known for works about simplification, abandoning modern excesses and challenging consumerism. 

“Holt’s Thoreau seems to be embodying that ethos in its venture — by combining multiple subsidiaries, each executing upon a specific need within health technology, into an integrated entity that cuts away the noise and fragmentation,” Klein declared.

In naming the venture Thoreau, Holt seems to signal that, in a fragmented healthcare market, less can indeed be more. There is some irony, though — Thoreau championed minimalism and freedom from material possessions whereas this new entity, should the parties sign on the dotted line, would be a healthcare behemoth very much about profitability.

Photo: ChatGPT