M&A Opportunities Where Sectors Converge
The intersection of the healthcare, consumer, and retail sectors provides fertile ground for a growing group of M&A investors. The dynamics driving healthcare—aging populations, increasing access to care, and growing interest in better health and wellness—are creating a new set of opportunities for investors with proven strategies for customer acquisition, brand management, site selection, digital transformation, and myriad disciplines that set the best consumer-facing businesses apart.
These same approaches are proving pivotal to a subset of healthcare businesses in areas like dermatology, dental, med spa, and others who are moving to multi-site, consumer-oriented business models. See our Consumer Healthcare Series for full details on this emerging opportunity.
At its core, consumer healthcare is a human business in which people with in-demand talent and training deliver essential services to people seeking better health and wellness. Success depends upon engaging with both groups more effectively than the competition. Technology, culture, and workforce management all play critical roles and were central to conversations at the 2022 Harris Williams Consumer Healthcare Conference.
Here, we share key insights from panelists and senior Harris Williams bankers on how consumer healthcare companies can make better connections with employees and consumers, growing into the considerable white space this sector offers.
Harris Williams Consumer Healthcare Conference
September 20, 2022, Washington, D.C.
Lessons Learned from Retail
Gregg Throgmartin, CEO, Skin Laundry
The Importance of Employee Engagement
Stuart Bernsen, CEO, Chiro One Wellness Centers
Todd Latz, CEO, GoHealth Urgent Care
Rich Wachter, Managing Director, Gryphon Investors
Leveraging Digital Strategies to Enhance Customer Engagement
Farhan Siddiqi, Operating Partner, BayPine
Josh Weiner, CEO Dose Spot
Connecting With Customers
Which retail industry success factors are the leading consumer healthcare operators applying to engage more fully with customers?
Site selection and store design are two essential considerations for any consumer-facing business. “Panelists emphasized the challenges in scaling a multi-location business, and how success rates can drop off after the first few ‘non-brainer’ locations are opened,” says Benjamin. “As a consumer healthcare company builds out new stores, it needs to pay close attention to what worked and didn’t work in earlier store openings and be committed to objective ‘post-mortems.’”
In terms of store design, panelists described the need to balance a premium customer experience with durability and cost. “Super high-end stores only make sense if they can hold up to the demands of consumer healthcare and not erode business performance.”
Another important aspect of providing an optimized customer experience is applying a tech-enabled, omnichannel perspective. “Consumers expect to be able to engage on their phones and switch back and forth between digital and physical experiences,” says Pierce. “They want to be able to book an appointment and ask questions online, but still be treated as an individual. Leading innovators are using tech to provide that, and others are following.”
At the same time, a consumer healthcare company’s in-person and behind-the-scenes processes can severely constrain the delivery of a truly modern digital customer experience. According to consumer healthcare leaders at the conference, digital strategy shouldn’t be separated from business strategy—it should be about transforming the business. It encapsulates everything: customer acquisition and journey, channel strategy, value propositions, and differentiation. However, the first step is typically to look at the customer journey and identify friction points.
“Healthcare lags retail and consumer in terms of the customer experience,” notes Dixon. “Even though this is widely acknowledged, many healthcare companies still operate inefficient and painful customer-facing processes.”
Clearly, there are many opportunities to improve this process, several of which will benefit providers as well as patients. Better post-care follow-ups, for example, would make life easier and better for patients while helping improve outcomes for providers, a critical consideration in today’s value-based care paradigm.
"Panelists reinforced the fact that digital strategy isn’t just about the customer journey,” says Linsalata. “It’s equally important to focus on the provider experience and all underlying processes. Otherwise, you’re just showing patients the inefficiencies of your operating model, which are what create friction.” Knier says conference participants listed scheduling, electronic records management, and inputting patient information during an exam as examples that can make the provider’s life more difficult and compromise the patient experience.
Build or Buy?
Consumer healthcare companies seeking consumer-facing digital transformation face a dilemma: build or buy the right solutions? Linsalata says the answer is different today than it was just a few years ago.
“Six or seven years ago, the off-the-shelf solutions that could help providers build a better patient and provider experience just weren’t there,” he explains. “That’s not the case today. There are several purpose-built EMR applications that focus on the friction points of healthcare delivery, and the era of the DIY solution is probably waning.”
According to conference participants, one of the most significant obstacles for custom software is the growing array of integrations required with other constituents in the ecosystem, whether payor organizations, payment processors, pharmacies, or others.
"We see many provider organizations that just haven't been able to crack the nut on some of those external organizations outside their four walls,” says Linsalata. “And that's where you get into this spiral of trying to fix your platform with Band-Aids when there are better off-the-shelf solutions available. Conversely, many software vendors in the space are experts in getting disparate systems to work together.”
Another important consideration is which professionals are part of the transformation. Benjamin adds that a non-healthcare perspective can be a key ingredient to digital transformation. “Panelists noted that it’s valuable to have someone on the team who's been through digital transformation in a leading industry, not one that lags. There are people who've done this in retail, they've done it in airlines, they've done it in hospitality. Successful consumer healthcare companies know that tech professionals can learn the industry and apply their understanding of technical architecture, capabilities, and available solutions.”
Deep healthcare experience is essential too, says Knier. “You need to engage people who understand the patient experience, the provider experience, the commercial aspects. Commercial leaders from healthcare also should be involved in evaluating solutions, not just the CIO.” Read how Forefront and DOCS are creating a provider-focused experience in dermatology.
How are leading consumer healthcare companies measuring the success of consumer-facing digital transformations? Conference participants said it was important to start with business metrics.
"We heard that digital metrics are important, but they should be supporting business performance,” says Smith. “How much does it cost to acquire a customer? How many patients are we losing? Those are business metrics that digital strategy should be focused on.”
Panelists also discussed the value of clickstream analytics: Evaluating the quality of the digital experience based on the number of clicks and complexity involved in key tasks like making an appointment.
"A consumer healthcare company can have the world’s best technology, but our panelists emphasized the importance of providing a simple, intuitive digital experience that works for the widest possible population of users,” notes Benjamin. “That’s one of the most important lessons healthcare should take from leading retailers.”
Clicks Versus Bricks
An optimized digital experience will be a waste of effort if the in-person experience falls short. While much of the work done to improve business processes for the sake of the digital experience will also yield benefits for the office experience, employees clearly play an essential role.
"To some extent, less onerous processes will improve morale and efficiency and let doctors, nurses, and staff provide better service,” says Knier. “However, employees must also feel good about the workplace and their position in it and be fully bought-in to the mission and value proposition. They should be the best and brightest talent available. That’s how great service and care become ingrained in an organization.”
How can consumer healthcare companies attract and retain this best-and-brightest talent and set such teams up for success? Coming out of a historically tough labor market—paired with the unprecedented challenges of COVID-19—conference participants brought deep insights to this conversation.
As one panelist observed, competition for talent now extends beyond healthcare into foodservice, retail, and other non-healthcare sectors, with signing bonuses and higher wages thrown into the mix. At the same time, burnout is at record levels for doctors, nurses, and staff following the grueling ordeal of the pandemic. A final influence is growing exposure to and demand for remote working arrangements and flexible schedules, neither of which is a traditional staple of a career in healthcare. Read how People, Pets & Vets is boosting recruitment and retention.
Ramping up Recruitment
Making recruiting more efficient is one strategy conference participants pointed to in their quest to bolster talent. "To recruit people who fit into the culture and will be good long-term hires, consumer healthcare businesses must have the right recruiting team and processes,” says Robertson. “Line managers must be trained on the right interview questions and techniques. Otherwise, the business will hire people and within days, weeks, or months, they leave.”
All that investment in finding talent is lost if the business can’t find the right people to begin with. Panelists said online assessments tailored to specific roles can reduce time spent interviewing applicants unlikely to pan out. They also emphasized the value of exit interviews and data analysis when employees leave that can help the business quantify and understand turnover, as well as identify better candidates upfront.
Some conference participants described running the recruitment process more like a sales process, using tech to track candidate flow, follow-ups, acceptance rates, and job offer rejection trends all with the goal of improving yield.
Culture is clearly a major factor in employee recruitment, engagement, and retention—and it has been compromised by COVID-19 in many consumer healthcare businesses. “Panelists told us culture was the top thing keeping them out of the spiral of constant hiring, yet having people working remotely and even wearing masks has hurt interpersonal connections,” says Smith. “Many are now making a concerted effort to rebuild culture and rekindle working relationships.”
“The challenge is reconciling that effort with employees’ new desire for flexibility,” adds Dixon. “Participants mentioned using tech to find a middle path, particularly video conferencing, newsletters, and apps that make communication and scheduling easier. Yet the consensus was that those things are no substitute for human contact.”
From Ladder to Lattice
Panelists also agreed that part of a differentiated culture is having clear career paths. That can be a challenge in consumer healthcare, which sometimes lacks the clear advancement ladder found in many non-healthcare businesses.
“Great nurses often want to continue being great nurses—they may not see a managerial role as an attractive option,” says Smith. “And there may be a limited number of those. The same can be true for doctors and for staff.”
Panelists described several ways to combat this situation, including well-defined “lattice” structures that allow diagonal moves, as well as the potential to learn and practice new disciplines. In all cases, the opportunity to increase earnings even without a role change is a critical factor in today’s inflationary market. Continuing education was another important lever for panelists, who said offering online classes helped employees in different offices connect with each other while advancing their careers.
No Bad Bosses
High-quality management is more important than ever, said several panelists. “We heard loud and clear that in this environment, employees will not stick around for a lousy boss. Empathy, listening skills, and employee advocacy are table stakes.”
Similarly, work-life balance is an increasingly important topic among consumer healthcare leaders. “This can be hard to define, and varies from place to place, and even employee to employee,” says Knier. Knier adds that options to improve lifestyle were discussed by panelists: “Some healthcare workers are seeking lower-intensity roles and willing to take less money. That’s a new shift that seems to be a result of what these teams have been through in recent years.”
Viewing the same issue from another angle, several conference panelists discussed their efforts to help employees work more efficiently. “Technology is a lever here,” says Linsalata. “Telehealth, for example, allows providers to treat patients from more locations and saves a trip for patients, not to mention eliminating the waiting room.”
“We also heard from multisite consumer healthcare businesses using a ‘money ball’ approach to staffing,” says Smith. “They are analyzing data on patient volumes to predict where staff and clinicians will be needed most and sending them to those locations.”
Smith says telehealth, digital queuing systems, AI, and predictive analytics all play a role in helping the most sophisticated operators actively manage spikes in demand and avoid overloading their teams—simultaneously minimizing patient wait times.
Where Retail and Healthcare Meet, Investors See Value
Steady foot traffic, essential products and services, and powerful demographic tailwinds are putting a range of healthcare subsectors on retail and consumer investors’ radar. Proven customer acquisition and retention strategies, efficient multi-location growth approaches, and effective employee engagement techniques are high on the priority list for many healthcare companies.
The convergence of these sectors is creating a wealth of value creation opportunities for M&A investors. As participants in the 2022 Harris Williams Consumer Healthcare Conference made clear, now is a great time to be involved.
Harris Williams integrates expertise in consumer, healthcare and life sciences, and technology to advise premier companies across the consumer healthcare landscape. To learn more, see our Consumer Healthcare Series.