August 2019 M&A activity highlighted continued momentum on several compelling themes:
- Hospice. The hospice M&A market continues to see increasing amounts of activity, driven by top strategic providers seeking to expand their offerings through acquisitions. The majority of healthcare spending is related to end-of-life care, and hospice provides a relatively low cost / high quality of care setting that will be heavily favored and utilized as the baby boomer generation continues to age. In fact, from 2015 to 2060, the number of senior citizens is expected to more than double, from 45M to 98M, and the percent of the population older than 65 will increase from 15% to 24%. Given these factors, there is broad bipartisan support for hospice care, which is an industry that is ripe for consolidation and continued M&A activity into 2020 and beyond.
- Care Coordination and Navigation. As the healthcare industry continues to evolve, navigating and coordinating care is rapidly becoming a complex topic that is fueling M&A activity for companies in this vertical. As noted by a Frost & Sullivan report, the U.S. care coordination software industry is currently valued at $1.6B, and is estimated to grow to $3.2B by 2022. This expansion is being fueled by inefficiencies in referral management and increased consumer demand for coordinated medical insights on treatment plans. In fact, 80% of clinical errors occur due to lack of coordinated communication during transition periods; providers lose up to 55% of their potential total revenue due to inefficient referral management. However, given recent policy changes that promote interoperability across the continuum of care, in conjunction with the adoption of developing technologies (i.e., artificial intelligence), we expect to see increasing market activity in the care coordination vertical.
- Medical Imaging Software. The medical imaging software industry is benefitting from increased provider and patient demand for more advanced and customized imaging software, fueling a market that is expected to grow from $2.9B in 2018 to $4.5B in 2023 according to Mordor Intelligence. Additionally, growth has been bolstered by the trend of utilizing electronic health records to store, distribute, and manage patient health information in the form of medical images. Due to its competitive nature, players in this industry are constantly working to gain a competitive advantage through M&A. Given the growing number of elderly individuals, burden of chronic diseases, increasing data requirements, and adoption of medical imaging equipment, we expect to see more medical imaging software market activity in 2020 and beyond.
Several transactions announced in August align with these themes:
- St. Croix Hospice, a leading Midwestern hospice provider and Vistria Group portfolio company, has acquired Hometown Hospice & Homecare, a provider of hospice and home care to patients through three locations in eastern Wisconsin. St. Croix, which now has 27 branches across the Midwest and serves nearly 2,000 patients, will use the acquisition to provide its best-in-class service to a broader base of patients. Financial terms of the transaction were not disclosed.
- Addus HomeCare Corporation (NASDAQ: ADUS), a provider of comprehensive home care services focused primarily on non-skilled care, has announced the signing of a definitive agreement to purchase Hospice Partners of America (HPA), a multi-state provider of hospice services, headquartered in Birmingham, AL, and a portfolio company of New Capital Partners, for a cash purchase price of $130M. HPA currently serves an average daily census of approximately 1,000 patients through 21 locations. The acquisition supports Addus’ strategy of adding hospice services in markets where it already has a personal care presence. TripleTree acted as the exclusive financial advisor to HPA for this transaction.
- Experian, the global information services company, announced in August that it has signed a definitive agreement to acquire MyHealthDirect, which offers a digital care coordination platform that optimizes scheduling for providers, payers, and consumers. MyHealthDirect's intuitive technology guides patients to the right care and enables real-time scheduling through any digital access channel: on the web, in call centers, and in provider offices. Financial terms were not disclosed.
- Accolade, the healthcare technology company, unveiled its new product Accolade Total Care, which was made possible by its acquisition of MD Insider. Accolade Total Care operates a machine learning platform with access to data on millions of healthcare providers, acting as an extension of Accolade’s core employee healthcare navigation offering. The company is combining MD Insider’s data with a staff of nurses who help guide patients in picking a healthcare provider, while also coordinating care for people with more than one provider. Financial terms of the transaction were not disclosed.
- RadNet, a national leader in providing high-quality, cost-effective, fixed-site outpatient diagnostic imaging services, reported on August 2nd that it had created a division to further its efforts in artificial intelligence. In conjunction with this, RadNet reported that it acquired the remaining 75% stake that it did not already own in Nulogix, an early stage company focused on creating AI solutions for the radiology industry. Financial terms of the transaction were not disclosed.
- Carestream Health, the Rochester, NY-based provider of medical imaging systems, has completed the sale of the company’s healthcare information solutions business to Philips, the global healthcare technology company. Philips will now give providers access to a broader portfolio of healthcare IT systems addressing medical image management, effective collaboration, and enhanced patient care. The transaction will not affect Carestream’s medical imaging systems and X-ray equipment, which will continue to operate under the Carestream brand. Financial terms of the deal were not disclosed.
TripleTree and TT Capital Partners continuously monitor the market to identify the forces and themes impacting the healthcare industry. Thanks for reading and as always, let us know what you think!