Sector Spotlight: Healthcare IT/Healthcare Information Management Systems

Healthcare IT is a massive market comprised of many distinct segments and technology demand drivers. Clients may be inpatient or outpatient healthcare providers, payors, medical device companies, or pharmaceutical/life sciences companies. Solutions may be patient-facing, clinician-facing, or operational, or they could be focused on R&D, safety, revenue cycle management, or risk management (see figure).

Across these categories, M&A opportunities are plentiful—when buyers and investors can identify the segment-specific innovations that represent the best growth potential. 

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Harris Williams collaborates across its sector groups and geographies to help clients achieve outcomes that support their specific objectives and value-creation goals. The Harris Williams Technology and Healthcare & Life Sciences Groups work together to advise premier companies across the healthcare IT landscape. Here, Harris Williams executives from both of these groups share their views on investor themes for the year ahead across several sub-segments of healthcare IT.

Patient-facing solutions: The next best action

Linsalata: With any chronic health condition, there is a series of actions and interventions that need to happen across a number of specialists over time. Payors and providers have an interest in solutions that prompt and incentivize a patient or plan member to take the “next best action” in their treatment journey. It’s about helping the patient to take small positive steps that will result in greater treatment compliance and higher-quality care at a lower cost.

Feneley: Any tools that help along that patient pathway are opportunity areas. The pathway begins when a patient is diagnosed with a medical issue. What happens next, how quickly, and at what cost? How is that data collected, used, and disseminated, and at what level of granularity? For example, diabetes patients now have smart phone apps that can tell them at any time what is happening with their blood glucose and what is likely to happen if they decide to go to the gym in an hour. Winning companies will have solutions along the patient pathway that can help patients ascertain what the next best action is. They will also have the depth of data around individual patients and their broader cohorts to understand the right timing and modality to engage with that patient.

Care delivery solutions: Clinical communication and collaboration tools

Linsalata: In the care delivery area, sector innovators continue to target solutions that solve niche operational challenges, while established players maintain a concentration on enhancing core operations. For example, healthcare providers want tools that help them address attrition and overall labor costs by finding more qualified candidates and optimizing the efficiency of the labor force they have. This includes tools that help with scheduling as well as those that enable better clinical communications, such as those designed to facilitate real-time communication between physicians as they’re making handoffs seeing a patient.

Feneley: Patient discharge and follow-up are other critical areas where tools can help to optimize patient flow and manage capacity. Providers are interested in technology that facilitates continuity of care from the hospital into other care settings that may not necessarily be affiliated with the hospital. That technology may help ensure that a patient goes to the most appropriate next setting of care, such as a rehabilitation hospital or long-term care facility and ensure, when the patient arrives, that the facility has an appropriate view of the patient based on his or her record and clinical notes.

Owens: Care delivery solutions also include specialties such as dental and veterinary technology, which are top-of-mind to many investors. In these segments there are large incumbents with entrenched positions yet dated technology offerings. Many providers are lagging in adopting purpose-built systems of record. We are seeing a lot of innovation in pockets of these segments, where scaled businesses are building specific technology applications.

Revenue cycle management: Complex claims management

Linsalata: Increasing patient deductibles and a changing regulatory environment have driven healthcare providers to demand greater flexibility in their revenue cycle management solutions. Some of those platforms help providers manage complex claims, or those not covered by a traditional health insurance plan. For example, after a car accident, a clearinghouse sends the medical claim from the hospital to the driver’s insurance provider or to the state workers’ compensation agency. It facilitates the payment from that payor back to the hospital. There are also special tools for attaching the clinical records to the hospital patient record, which is required in workers’ compensation.

Population health: Value-based care, risk and transparency

Owens: The ongoing shift toward value-based care is driving demand from providers and payors for solutions aimed toward consolidating large data sets to better manage risk across populations. Further price transparency laws come into effect next year, which will mandate that providers make their pricing directly visible to consumers. Consumers haven’t had that level of information access in the past. The shift is spurring innovation in areas such as analytics and dashboards to help consumers see and understand their options.

European Healthcare IT

Feneley: Europe is beginning to see PE-led consolidation across inpatient as well as specialties and operational capabilities. The market is evolving from geographic and country-specific champions to regional champions. Large players in Europe, traditionally focused on inpatient solutions, are enhancing their footprint to outpatient and other care settings. Innovative platforms are coming online, and growing and expanding rapidly, not just within their base country but across the continent. Disruptors with truly innovative technology are growing fast and becoming a driving force in cross-border consolidation.

Conclusion

Many underlying sector-wide and segment-specific trends are driving growth in demand for healthcare technology solutions. Buyers and investors are focused on the space because its leading participants provide a meaningful ROI and defensive moats. Ultimately, the advancement of healthcare IT will also advance the standard of healthcare because providers, payors, and consumers will have more actionable and timely information with which to make decisions. For many investors, that makes now an exciting time to be a part of this important sector.

To learn more, please contact our senior bankers.

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