INDUSTRY PERSPECTIVES

Trendwatch 2024: A More Holistic, Longitudinal, and Personalized Healthcare System

As we look back at 2023, we saw markets begin to rebound from 2022 where M&A activity had slowed resulting from high inflation, a bear market triggered by the Fed tightening credit policies, pandemic hangover, and increased diligence from investors and buyers. Last year, TripleTree was fortunate to be one of the most active investment banks in healthcare, advising on more than 20 closed transactions. Across the continuum of closed healthcare services and technology transactions, the market favored companies with demonstrable solutions, sound business fundamentals with strong management teams, and continued upside and opportunity to scale as innovative companies addressed some of healthcare’s long-standing challenges: quality, affordability, and accessibility.

For 2024, we center our perspective around the patient – as the patient is what drives the business of healthcare. That said, we take a more expansive view of the patient, broader than the traditional view of ‘patient-centered healthcare’ or patient centeredness, and focus on the services, technology, and pharma sectors that will advance a more holistic, longitudinal, and personalized healthcare system. As we think about healthcare M&A activity in the coming year, we are focused on several themes transforming how healthcare is administered, managed, and delivered – and creating a less fragmented system that can better serve the individual person engaging with it.
 

• Theme 1: Investing in care delivery to advance value-based care
• Theme 2: Improving clinical and administrative infrastructure to better focus on the patient
• Theme 3: Evolving pharmaceutical services market dynamics to support drug development, patient access, and drug delivery
• Theme 4: Rallying around employers to lower costs and improve benefits

  

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Theme 1: Investing in care delivery to advance value-based care

Theme 2: Improving clinical and administrative infrastructure to better focus on the patient

1. Patient Engagement – At the forefront of the ongoing shift towards more wholistic, patient-centric healthcare is more personalized and convenient engagement with patients. The ability for providers to communicate, educate, and involve a patient in their care journey through convenient, “digital-first” modalities will be front and center in the year to come. By enabling patients to engage with the health system more efficiently, coupled with cutting-edge clinical data analytics and educational content, providers can improve patient satisfaction and clinical outcomes. The continued push towards value-based care creates even more momentum for organizations focused on patient engagement, both in clinical encounters and across payments/financial transactions. Several noteworthy companies that continue to lead and innovate in the patient engagement ecosystem include Artera, CareNet, Clarity Software Solution, eVideon, Icario, LeadingReach, Loyal, mPulse, Press Ganey, RevSpring, TeleVox, TigerConnect, Upfront Healthcare, and Zipari.
2. Data Analytics, Interoperability, and Artificial Intelligence – Because a more personalized healthcare system closely correlates to increased patient satisfaction and improved outcomes, provider organizations are highly focused on infrastructure and technological capabilities that enable customers to access their individual healthcare analytics in a multi-modal, “omni-channel” way.  Predictive analytics as another example, can both reduce administrative burden for provider organizations (e.g., forecasting and patient flow management) as well as drive improved clinical outcomes by enabling a prospective care plan approach. According to the Philips Future Health Index 2023 report, 39% of healthcare leaders plan to invest in artificial intelligence (AI) to predict outcomes, up from 30% in 2021. The application of AI in healthcare has already enabled improvements to the depth of data analytics capabilities and has allowed for automation of historically labor-intensive workflows and healthcare tasks. This automation in turn reduces the administrative burden on healthcare providers and professionals, freeing up incremental bandwidth to enable increased patient engagement and personalized care. Examples of exciting, near-term AI-deployment in healthcare that will facilitate improvements to administrative burden and increased patient engagement include automated EHR documentation and summarization of patient visits. We expect that the recent growth and innovation in generative AI technology will further fuel these enhanced efficiencies and capabilities in 2024. Several companies across AI, data, and healthcare analytics we are keeping an eye on include: Cohere Health, Commure, Datavant, Exponential AI, Hippocratic AI, IMO, Intelerad, Iodine, Janus Health, Lab Genius, MedaLogix, Merative, Microsoft/Nuance, 3M/M*Modal, PM360, Qventus, Redox, Rhapsody,  ViLabs, VirtualHealth, and VMS BioMarketing. With so many companies exploring advanced AI and advanced analytics technologies across the healthcare sector, it is simply impossible to name them all.
3. Specialty EMRs –More efficient appointment scheduling, seamless digital check-ins, reduced administrative burden and paperwork, remote visits, and omnichannel communications with providers between visits are all elements of an enhanced, patient-first, and more holistic experience that specialty EMR vendors and EMR technology solutions are facilitating. As a result, we anticipate capital and investor interest will continue to flow in this direction in 2024. As technology and data capture have evolved, specialty EMRs have enabled enhanced accessibility, integration across care settings and healthcare technology platforms, and interoperability between EHRs and EMRs. These enhancements have resulted in more satisfied patients and a better patient care experience, as patients are now able to take a more active role in their care plan and are equipped with the data and analytics that historically have been provider-facing only. According to a recent Deloitte report, 92% of health system survey respondents cited achievement of better patient experiences as their top desired outcome of broader digital transformation efforts.  The efficiency and intelligence that Specialty EMR technology underpins are at the fulcrum for these broader shifts across healthcare, and we’re excited about their prospects.  Specialty EMR and practice management  platforms are well positioned to leverage their expertise / footprint in their respective areas to proliferate a vertical strategy within their core customer base (via new / innovative tools, patient engagement and payment capabilities, BI / benchmarking, revenue cycle management, and value-based care and population health management opportunities) as well as a broader network strategy leveraging their unique access to data, clinical and quality insights, and ability to commercialize and/or action this intelligence within the provider's workflow.  Several companies focus on specialty EMRs across primary care (athenahealth eClinicalWorks, Tebra), behavioral health technology vendors (Kipu, Qualifacts, Netsmart, simplepractice, TherapyBrands, and TherapyNotes), as well as post-acute and clinical subspecialty and pharmacy focused platforms (Capterra, MatrixCare, ModMed, Nextech, Outcomes, PointClickCare, PrimeRx, and RedSail).
4. Healthcare Payments and Automation in the Revenue Cycle – Similar to other industries, the ‘experience’ of healthcare touches the full continuum of touchpoints, before, during, and after the actual delivery of care.  One additional, and key, component of overall positive patient experience is the pre-and-post visit billing and payments interaction. Technology and technology-enabled solutions that enhance data access and drive actionability within the workflow, in addition to overall heightened demand for advanced technologies and integrated solution capabilities, are enabling significant enhancements to reimbursement, reducing costs to providers, and optimizing compliance while simultaneously mitigating risk.  Noteworthy innovators in this space include AGS Health, Aspirion, CarePayment, CorroHealth, Elevate Patient Financial Services, EnableComp, Ensemble, Knowtion Health, OfficeAlly, Revecore, and Waystar.  We anticipate that healthcare businesses offering digital-first and customized payment modalities will become increasingly attractive to investors and strategic acquirers. As we look to 2024, we expect investment dollars to gravitate towards solutions that offer end-to-end coverage of the patient care journey, using data captured along that workflow to inform and predict the best approach to a satisfied and engaged patient / customer.
5. Resurgence of Business Process Outsourcing – As healthcare becomes more comfortable with cloud approaches to software and data, we are seeing a renewed interest in leveraging BPaaS  (Business Process as a Service) platforms to consolidate key administrative and clinical software functions to a single vendor. This is especially true outside of the largest of large payers and providers who need to be smarter about resource allocation and the requisite effort to manage an ever-increasing list of solution vendors. Additionally, the allure of consolidating multiple functions to a single best-in-breed BPaaS platform vendor resonates to many healthcare organizations that desire more accountability from a single vendor – the “one neck to choke” analogy. Traditional healthcare services platforms including Cognizant are materially evolving their messaging in support of BPaaS while we see healthcare industry focused companies such as UST HealthProof and RAM Technologies are gaining traction by demonstrating their industry expertise and dedication to healthcare process workflows.
6. Advancements in healthcare workforce management – Major labor supply-demand imbalances, exacerbated by the pandemic, have placed a great strain on clinical resources working within the U.S. healthcare system. Looking back on the pandemic almost 3 years later, the labor challenges are here to stay, with LEK stating the gap in Hospital RN FTEs alone could reach 400,000 by 2027 and the American Medical Association coming out with a recovery plan for America’s physicians, which includes an initiative to reduce physician burnout. The shift to better healthcare labor options fosters an environment conducive to delivering higher quality of care to the patient, emphasizing the relationship between healthcare workforce well-being and patient outcomes. It’s a departure from the narrative of burnout to a narrative of sustainability and fulfillment in the healthcare profession. The state of the physician wellbeing continues to remain low. For the third year in a row, six in ten physicians have felt burnout, compared to four in ten before the pandemic in 2018. This has opened the doors for many Human Capital Management (HCM) companies to disrupt the healthcare labor market given that burnout has been directly tied to inappropriate physician staffing levels and the supporting staff for the physicians. Healthcare organizations facing the greatest labor challenges are those located in underserved and rural communities. In addition to the outsized turnover seen in these communities, they typically see higher rates of chronic diseases or comorbidities, making it imperative that healthcare organizations have access to the best labor talent found in their or other geographies. Software and tech-enabled staffing services have allowed underserved and rural healthcare organizations to be served the best labor talent regardless of where the healthcare organization is located. Companies like AMN, American Health Staffing Group (AHSG), CareRev, Hallmark Health Care, IntelyCare, Ludi, Nomad, Prolucent Health, QGenda,  ShiftKey, ShiftMed, Symplr, and many more software and tech-enabled staffing companies are continuing to address the healthcare labor shortage head on through further investing in their technology capabilities to further provide automated solutions and along with additional services.

Theme 3: Evolving pharmaceutical services market dynamics supporting drug development, patient access, and drug delivery

• eClinical Platforms – The pharmaceutical industry is critically focused on patient identification, diversification, and retention in clinical trials and there is a general consensus that the outsourced platforms, particularly the eClinical solutions, will provide the innovation needed to deliver results. 2024 will be an active area across eClinical platform investment and M&A activity. We are paying attention to several companies in the space including Axiom Real-Time Metrics, CRIO, and YPrime among others.

• Clinical Research Sites – There has been a significant acceleration in the clinical research site market in the last few years with the number of sponsor-backed platforms increasing from 20 in 2020 to more than 32 today including such names as Florence Healthcare, Javara Research, and Velocity Clinical Research. With ~95% of clinical trial sites in the US as single sites and several clinical trial site platforms expected to come to market in 2024, there's a massive consolidation opportunity. Additionally, the sector is still in the early stages of tech-enablement and other value creation strategies, providing runway for material innovation and sub-sector growth.

• Life-Sciences Focused Consultants – Consultancies such as Aventria Health, Avalere Health and Inizio that are focused on pharma, biotech, and medtech are becoming key pieces of the overall drug development strategy spanning clinical trials, the regulatory approval process, and commercialization. Consultancies with proven regulatory (pre- and post-approval), market access / payor contracting support, HEOR, and/or medical affairs expertise are at the forefront of helping pharma manage thru evolving dynamics around patient-centric trial design and ensuring newly commercialized drugs are available and reach the targeted patient population as quickly as possible. As such we see several of these groups garnering additional market attention in 2024 as indispensable pieces of the pharma services value chain.

• Data / Analytics Platforms – The data sourced from the patient across all therapies (RWD/RWE, patient-reported data, closed-claim data, EMR / clinical / Rx data, etc.) will be a critical piece of the puzzle to better understand the impact and cost equation of a drug(s) on a patient’s healthcare journey and health outcomes. We are seeing traction across multiple pharma-focused analytic companies including Atropos, Evidation, Komodo Health and TriNetx among others. Consistent regulatory updates to broaden the use cases for RWD/RWE, proprietary data sources and analytics on patient populations will fuel growth in this space and provide opportunities for value creation. TripleTree believes the market has an acute focus on this space, noted by some recent high-profile trades including CorEvitas to Thermo Fisher and the recapitalization of IntegriChain, and we expect to see several data / analytics platforms coming to market in 2024. 

• Hub Services Platforms – The Pharma Hub Services subsegment was a hotbed of activity in 2023 with some notable platforms coming to market and/or trading throughout the year. We expect this momentum to continue in 2024 with interest in the space centered on the idea of patient-centricity since the Hubs have meaningful connectivity with patients already. Interestingly though, the various Hub platforms including groups such as ConnectiveRx and Mercalis are taking different paths to differentiate away from their historical role focused on patient services (affordability, access and adherence) into more diversified platforms spanning the value chain from HCP engagement, to digital hubs, to market access services. Furthermore, we also see a blurring in the lines between the services performed by the Hubs and services performed by other platforms and technologies servicing specialty pharmacies. We believe these worlds will continue to collide and accelerate new partnership or M&A opportunities in the Hub Services space across 2024.

• Pharma Supply Chain & Logistics Focused Companies – Recognizing the opportunity for additional efficiency gains, the extended pharma supply chain is coming into focus as an area for growth-oriented investment and M&A activity. The interconnectivity amongst various constituents created in the supply chain, the lagging adoption of scaled, value-additive technology, and the role that outsourced supply chain and logistics platforms such as Knipper and ParcelShield can play in improving efficiencies and lowering drug costs a patient-centric drug development-to-delivery strategy are all fueling market attention in this space. 

Theme 4: Rallying around employers to lower costs and improve benefits

1.  Controlling rapidly rising drug costs: An ongoing focus on ways to better manage drug costs including a growing voice on the need for more transparent drug costing models, increased cost containment solutions for high-cost drugs, most recently GLP-1s which can cost over $1000 per month, and even higher cost gene cell therapies are further accelerating attention to prescription drug costs as a major driver of health insurance coverage. While the cost of medications and new drugs has been in the national conversation for years now, the noise has reached new levels more recently as payers, patients, and elected officials look for solutions to lower healthcare costs.

While the major PBMs are always in focus to help employers manage prescription drug costs, we will continue to see more specialized, nimble pharmacy benefit management companies push innovation in the group market.

Even the largest PBMs are touting new more transparent pricing programs. As an example, CVS very recently announced that it will be implementing a new ‘cost plus’ prescription drug pricing program throughout 2025 called CostVantage which is built around a clear markup fee and a per-script administration fee while other large PBMs have touted new pricing programs aimed at lowering the price of high-volume drugs such as Insulin. These new cost-transparent approaches to pricing suggest a trend towards looking at healthcare costs from the lens of the patient, supporting the healthcare industry’s push towards patient centricity within the pharmaceutical market.

Beyond the PBMs we are also tracking other technology-enabled approaches to help employers manage prescription drug costs. Emerging Therapy Solutions is working with carriers and employers to help them define drug coverage policies while solutions from groups like RazorMetrics look at costly prescribed medications and work with providers to find more affordable therapeutic equivalent alternatives to help control drug costs. Employers are also introducing new care management programs to better manage specialty drug costs, including the newer weight loss drug therapies. A recent Reuters article highlighted the high cost of a new class of weight loss drugs including Wegovy and the newly approved Zepbound and discussed wellness programs being put into place in partnership with virtual care providers including Omada, Teladoc, and Wondr Health that aim to onramp employees more slowly into these expensive prescription medications and manage sustainable long-term approaches to weight loss. 2.  Plan design innovation to control costs: Continued focus on novel plan designs including optionality to provide employees flexibility to select broader PPO networks or more cost optimized narrow network plans, continued discussion and experimentation in reference-based pricing designs, commercial focus on value-based plan design, as well as a continued focus on traditional cost containment solutions for utilization and case management, payment integrity, and care navigation. The challenge for employers is sorting through all the vendor solutions across these areas and managing a solution that delivers meaningful ROI, especially with so many specialized solutions focusing on select components of the cost savings equation. Several vendors we are paying attention to include Accolade, AMPS, Benecon, Carrum, Centivo, Employer Direct, Imagine360, Included Health, HealthJoy, Phia Group, Occunet, Quantum Health, 6Degrees, Valenz, and Zelis.

Beyond innovations in plan design features, we are also seeing momentum on financing innovations for employer benefits, especially in the smaller end of the group market. Level-funded plan designs (a plan design that combines elements of self-funded plan design with broad stop-loss coverage to reduce employer risk) are gaining attention in the small and mid-sized market as employers look to offer competitive benefit plans relative to their large employer peers competing for the same employee base yet better control the risk associated with self-funding. Options for level funded plans, like those offered by companies like Gravie or group captive supported plan designs, like those from Benecon and ParetoHealth, give the smaller group market employers more benefit options while limiting financial risk. Alternatively, many employers in the smallest group market appear to be looking at exiting health benefits altogether while still providing coverage benefits for their employees. Centene is reporting success with ICHRA plans (Individual Coverage Health Reimbursement Arrangements, or plans that allow employers to reimburse employees on a taxed advantaged basis for premiums that employees pay for health insurance they purchase on the ACA exchanges). Gravie and Take Command Health are working with employers to understand and implement ICHRA coverage options, which by statute would exclude options for those employees to select into traditional group coverage. 3.  Employee mental health – we are seeing a growing realization in the commercial segment that mental health of both employees and their dependents is both a driver of the high cost of health insurance and also an important part of the solution for controlling overall healthcare expense. While mental health support has long been discussed, the COVID-19 pandemic and spillover impact is serving as a catalyst for employers to increase investment into solutions addressing employee wellbeing and 81% of workers have indicated that employer support of mental health is an important consideration for them as they seek employment according to a recent American Psychological Association survey. Solutions that address mental / behavioral health needs are just as important to managing whole person health and related healthcare expense as solutions addressing physical health issues. Workplace health continues to gain attention in the marketplace. The Surgeon General’s Framework for Mental Health and Well-Being in the Workplace, is a framework to encourage employers to think about employee support for mental health issues. This is why TripleTree expects to see additional investment and innovation in employee mental health solutions in 2024 across a range of categories including employee assistance programs (Compsych, Telus Lifeworks, Uprise, and Workplace Options), to guided programs (BetterUp, Lyra, Spring Health and Talkspace), to broader employee wellness platforms (Omada and Virgin Pulse).

The Surgeon General’s Framework for Mental Health and Well-Being in the Workplace

Given that employer covered healthcare accounts for over one-third of all US health expense, this is a high area of TripleTree’s focus in 2024, especially as the commercial solution market remains innovative and an important overall component of healthcare cost control. Investors and strategics alike recognize the importance of these type of solutions and employer desire for more industry consolidation in order to 1) better manage an overall solution approach from fewer more strategic vendors and 2) address cost control issues from a more holistic, patient centric approach. We have no doubt that investment activity and M&A activity in employer healthcare, especially into solutions that help address the ever-escalating cost of health benefits, will accelerate throughout 2024 and we will be paying attention to and active with investment banking across this landscape.

Conclusion