There has never been a more exciting time for the health care industry. As innovative technology changes the way care is provided, patient outcomes are improving — and investors are taking note. With this dynamic climate in mind, Pepper Hamilton hosted its first Mid-Atlantic Health Care IT Forum on May 17 in partnership with the Philadelphia Health IT Circle. The event featured an investor panel, which provided insight into the deal climate in health care IT, and a showcase of some of the region’s groundbreaking companies.
Thomas Dwyer, a partner in Pepper Hamilton’s Corporate and Securities Practice Group, member of the steering committee of the firm’s Emerging Company and Technology Practices, and member of the firm’s Health Sciences Department, kicked off the inaugural event by recapping recent health care IT successes and the healthy deal landscape.
“Last year there was $6 billion in funding for health care IT, so there are a lot of opportunities out there,” he said.
Dwyer then served as moderator for the investor panel, which featured Nishita Cummings, partner, Kayne Anderson Capital Advisors; James Hill, vice president, Edison Partners; Matthew Plevelich, vice president, NewSpring Healthcare; and Jeff Smith, vice president, Ballast Point Ventures.
The discussion began with the panelists explaining what their funds were looking for in investments.
Cummings noted that Kayne Anderson looks for B2B enterprise software companies, particularly in the health care space. Their portfolio companies generally fall into two categories — evolutionary or revolutionary tech —with Kayne Anderson providing expansion capital.
Cummings added, “there are a few areas where we’re seeing a lot of activity recently: senior care and nursing care and telemedicine.”
Hill said Edison Partners’ interests are diverse, ranging from fintech to enterprise software to health care IT. Their portfolio companies touch on various areas within health care, including payors, providers, patients and pharmaceuticals.
Plevelich noted that he works for NewSpring’s health care-specific fund, which focuses on “businesses that touch the patient.” Like Cummings, he said senior care has been a particularly hot area for investment.
Smith said Ballast Point looks for growth-stage companies with about $3 million in revenue. Their investments are split between software-enabled services and health care, with half of their health care investments going to health care IT companies.
Dwyer then asked the panelists whether they are seeing any overarching trends in the industry or their firms’ investments.
Smith identified value-based health care as something Ballast Point is looking at closely. Under a value-based model, the price of medical goods and services is tied to the benefits they deliver to patients.
“When choosing an investment in health care IT, we are looking at whether the technology can succeed in both the traditional fee-for-service model and a value-based model,” Smith said.
Plevelich added that a move toward value-based care appears likely, even in today’s uncertain political climate. “Both parties have acknowledged that we need to shift to fee-for-value, instead of fee-for-service,” he said.
Hill continued the discussion by noting that patient outcomes are often driven by events and behaviors outside the continuum of care. His firm is looking for investments in care coordination as well as companies and technology that improve patient adherence.
“We’re looking for that business that is the holy grail of getting people into their provider and making sure they get the care they need and follow instructions to make sure that care is effective,” he said.
The panelists were next asked why they were attracted to investments in the Philadelphia region — the location of the Mid-Atlantic Health Care IT Forum.
Cummings answered from the perspective of a West Coast-based investor. She noted that Kayne Anderson had been looking at the Philadelphia area for about a decade, but investment in the region had increased in the last five years.
“There’s an entrepreneurial mindset here that resonates with our firm’s philosophy,” she said.
“The entrepreneurs here are very capital-efficient,” Smith added.
The panel next discussed the strong deal flow in health care as well as available capital, noting that private equity firms are sitting on large amounts of dry powder and are looking to deploy their capital in areas like health care IT.
“We see ourselves as price takers,” Smith said. “There’s a lot of capital out there and a lot of people interested in this market.”
Following the investor panel, Christopher Miller, partner and member of the Leadership Team in the Health Sciences Department at Pepper Hamilton and chair of the firm’s Technology Practice, introduced the company showcase. The showcase featured presentations from six groundbreaking companies in the health care IT space:
The event concluded with a networking reception, where investors, presenting companies and attendees could make connections and discuss the latest developments in health care IT.