HGP Health IT April InsightsMay 02, 2019
HGP’s April Health IT Insights provides a summary of Health IT transactions, news, and public company performance during the month of April. Health IT transaction activity reflected the dynamic nature of the industry in April, with transactions ranging from consumer wellness and lifestyle platforms to AI-based clinical decision support solutions. During the month, CMS introduced new value-based payment models for primary care practices and an expansion of telemedicine benefits for Medicare Advantage plans. Legislation for Medicare-for-All led by Bernie Sanders and co-sponsored by multiple key candidates in the Democratic Primary hammered healthcare stocks during the month. Although investment analysts and the CBO were quick to counter that a shift to a single payer system is very low probability from a cost and political feasibility perspective, the news was enough to rattle investors in health insurance and hospital management companies.
Noteworthy themes in April include:
- Multiple women's health technology vendors raised capital during the month, including Carrot Fertility, Elvie, Cora, Healofy, Kindbody, and NextGen Jane.
- Wellness vendors EverlyWell and Viome raised $50mm and $25mm, respectively, during the month.
- AI was such a dominant theme cutting across all segments of Health IT that there are too many transactions to call out. Noteworthy investments include the $60mm investment in PathAI, the $27mm investment in AIdoc, and the $15mm investment in Enlitic.
Other noteworthy M&A transactions and buyouts include:
- Practice management and medical billing software provider CollaborateMD announced its sale to EverCommerce.
- Urgent care PM/EMR vendors DocuTAP and Practice Velocity announced a merger.
- CPSI announced the acquisition of patient engagement platform Get Real Health for $11mm upfront and $14mm earnout.
- mScripts, a software provider focused on pharmacy patient engagement, announced its sale to Cardinal Health.
- WageWorks, a provider of tax-advantaged spend programs for consumer-directed health, announced the unsolicited acquisition offer from HealthEquity. The $2 billion value implies a 4.2x and 15x estimated 2019 revenue and EBITDA multiple.
- Jenny Craig, a provider of weight management programs, announced its acquisition from parent company Curves by HIG Capital.
- HIG Capital also announced an investment in Medusind, a cloud-based revenue cycle management provider.
Other noteworthy capital transactions include:
- Redox, an integration technology vendor, raised $33mm led by Battery Ventures, marking over $50mm since the company’s seed round in 2014.
- HealthVerity, an analytics and integration vendor serving payers, raised $25mm.
- Among many transactions in the behavioral and mental health category during the month, Valant Medical, a behavioral health EMR vendor, partnered with investor Gemspring Capital.
- CityBlock Health, a spinout of Alphabet and developer of healthcare technology solutions that enables low-income urban residents, raised $65mm.
- SoYoung, a $90mm revenue China-based plastic surgery social network and e-commerce app, filed for an IPO to list on the NASDAQ.
Noteworthy News Headlines
As part of effort by CMS to increase technological innovation and boost competition among Medicare Advantage plans, the agency is moving to expand the range of beneficiaries eligible for telemedicine benefits. The new rule, which will go into effect in the 2020 plan year, will allow Medicare Advantage to offer telehealth services as part of their basic benefits package, providing patients more options to receive healthcare services from locations like their home.
Cerner Corp. has yielded to pressure from activist investment fund Starboard Value LP, appointing four new members — two picked by Starboard and two by Cerner — to its board in a broader agreement that includes a pledge to increase its margin targets and buy back $1.2 billion in shares. Starboard has a 1.2 percent stake in Cerner and is not new to this kind of agreement.
HHS Secretary Alex Azar announced a new initiative to transition primary care practices from fee-for-service payments to a voluntary, value-based model. The CMS Primary Cares Initiative, which will be piloted next year, will offer providers five payment models under two paths that focus on chronically and seriously ill beneficiaries.
Private multi-asset alternative investment firm Bain Capital is reportedly considering options including the potential sale of revenue cycle management (RCM) company Waystar, Bloomberg reports. In 2018, Bain rebranded RCM companies Navicure and ZirMed as Waystar after merging the two companies together in 2017. Bain has started early-stage discussions about a potential sale that could value the business at more than $3 billion, according to anonymous sources.
Public Company Performance
HGP tracks stock indices for publicly traded health IT companies within four different sectors - Health IT, Payers, Healthcare Services, and Health IT & Payer Services. The chart below summarizes the performance of these sectors compared to the S&P 500 for the month of April:
The following tables include summary statistics on the four sectors tracked by HGP as well as the S&P 500 and NASDAQ for April 2019: