Mansa Capital

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Finally! Spring arrives in New England. While the rest of the US mainland has nearly completed its spring cleaning, we here in Boston are just getting started.

Yet, it is the US Congress, which offers the most significant breakthrough of the season. Following a parallel vote in the House, the U.S Senate passed the bill to permanently end the sustainable growth rate (SGR) formula that threatened to cut physician Medicare reimbursement by 21%. President Barack Obama has said he would sign the bill. The end of SGR formula opens the door more widely for outcome-based reimbursements and increased use of HCIT in physician offices.

In the State Policy Section, we see two divergent approaches to one of the hottest debates since passage of the Affordable Care Act: Medicaid expansion. One selection reports that 15 states are increasing Medicaid payment rates to ensure patient access to care. The other reports that in the Lone Star Republic (Texas) lawmakers are adamantly opposed to a Medicaid expansion and put at risk $4B in healthcare for poor Texans. In the Strategy section, two familiar themes return. First, “smart” healthcare devices are again touted as an essential component of effective care management. Then, a second article reports on a partnership between United Healthcare Group and Walgreens to use rewards and incentives to promote patient engagement and healthy behaviors.

Both selections in the Industry Activity section speak to the strong outlook for healthcare M&A over the next 12 months. The second selection goes further to stress the premiums paid for companies, which can support the acquirer’s “strategic and growth objectives.”

The Research section begins with a look at “healthcare affordability” in the four most populous states. When juxtaposed with the goals of the ACA, the data is most interesting. The next article reports that employer spending on wellness programs is at an all-time high at nearly $700 per worker. That’s up from up from $594 last year and $430 in 2010. Employee wellness is one of the areas of strategic focus in Mansa Fund I. This section closes with an article again predicting the arrival of Medicare reimbursement for home-based care. Connected health strategies featuring remote monitoring and managed care programs are clear examples.

This edition starts out with the Portfolio section and the announcement of our most recent investment in Accreon. The firm supports healthcare organizations across North America by integrating and managing various health information systems. Consistent with our proven investment methodology, Mansa has recruited to the Accreon board of directors “A-Listers” from the worlds of IT solutions providers, government and insurance.

We hope you enjoy this edition of our newsletter – perhaps during one of your breaks from spring cleaning.

Ruben J. King-Shaw Jr., Managing Partner & Chief Investment Officer

James Renna, Operating Partner and head of the Mansa Operations and Advisory Group

Jason P. Torres, Partner and Chief Operating Officer


  • Mansa Capital takes interest in health tech company Accreon for U.S. expansion
    “Mansa Capital…has taken a majority stake in Accreon Inc…The firm…made the [$5.5M] investment alongside the company's new management team and…original founders. As part of the deal, Boston-based Mansa appointed Eric Demers, previously president of Accreon's U.S. operations, as the company's president and chief executive. Tom Burlin, a former COO for…Affiliated Computer Services Inc., will serve as the company's new chairman. William Winkenwerder Jr., a former U.S. Assistant Secretary of Defense for Health Affairs, will join the…board. [He] most recently served as the chief executive of healthcare insurer, Highmark Inc. Accreon…focuses on helping healthcare orgs across North America integrate and manage health information, connecting various IT systems. 'If you are a hospital or a care coordinator or an insurer, there is a series of disparate systems that rarely speak to each other, or at least not very well,' said Jason Torres, a Mansa partner. 'We think of Accreon as the last mile, connecting everything together to get the data or analytics you want.’…"



  • Senate passes SGR bill 92 to 8, avoids April 15 payment cuts
    "Closing in on two hours before the midnight deadline, the U.S. Senate in a vote of 92 to 8 passed the bill to permanently end the sustainable growth rate formula that threatened to cut physician Medicare reimbursement by 21%. President Barack Obama has said he would sign the bill. Senate Finance Committee Chairman Orrin Hatch, R-Utah, urged bipartisan support. Senators initially voted on six amendments and all failed except one, a motion to waive the budget rules to add billions to the deficit in passing the bill. The bill ends years of 'doc fixes' to stop mandatory physician pay cuts from taking effect under a SGR formula for controlling costs, a measure most agreed never worked. The Senate voted the night before the CMS planned to reduce physician reimbursement by 21.2%, as mandated by SGR. The House in late March overwhelmingly approved the H.R. 2 bill to replace the sustainable growth rate. The pressure went to the Senate, which recessed for two weeks prior to debating the bill…The SGR fix moves Medicare reimbursement further in the direction healthcare of value-based reimbursement over fee-for-service…"
  • CMS innovator: New models are changing healthcare
    "Innovation is driving a significant amount of change in the healthcare industry, Patrick Conway, Deputy Administrator for Innovation and Quality and Chief Medical Officer at the Centers for CMS said [at HIMSS15]…putting the onus on providers to take action or fall behind. 'We are people think about healthcare investments, in a good way’…Conway says, CMS programs that focus on alternative payment models such as ACOs, which currently serve 8M people…are moving a fragmented system tied to fee-for-service into a future where costs are controlled…care improved. 'We’re trying…to get there,' he said [with programs including] meaningful use and the Medicare Shared Savings accountable care model. For example, [he] said the Pioneer ACO model showed more that $384M in savings in the second year, while comprehensive primary care initiatives are leading…practices to operate in new ways. Even safety measures dictated by CMS have seen good results, Conway said. The industry has seen a 17% reduction in patient-harm events from 2010 to 2013, saving $12B. Innovation is also happening at the state level. In Minnesota, providers are making major investments in community health by setting up accountable health communities, something Conway said is leading the CMS to think about community-level ACO models…"


  • 15 states extend health law’s higher Medicaid payments to docs [Alabama, Colorado, etc.]
    "Fifteen states are betting they can convince more doctors to accept the growing number of patients covered by Medicaid with a simple incentive: more money. The ACA gave states federal dollars to raise Medicaid reimbursement rates for primary care services—but only temporarily. The federal spigot ran dry on Jan. 1. Fearing that lowering the rates would exacerbate the shortage of primary care doctors willing to accept patients on Medicaid, the 15 states are dipping into their own coffers to continue to pay the doctors more. It seems to be working. In Indiana, which is spending about $40M a year in state dollars to keep the higher reimbursement rate, an additional 335 doctors have started accepting Medicaid patients since the beginning of this year. So have more than 600 other medical providers, such as nurse practitioners and physician assistants..."
  • $4B in healthcare for poor Texans at risk as doubts rise about Medicaid agreement [Texas]
    "Texas stands to lose some $4B in annual funding to care for the poor unless it can convince federal authorities to renew a Medicaid waiver due to expire in September 2016. But federal officials signaled…they may no longer be willing to pay for uncompensated care for people who could be covered by expanding Medicaid under the ACA. With Texas lawmakers adamantly opposed to a Medicaid expansion, the waiver expiration creates a potential showdown between state and federal healthcare officials that, if not resolved, threatens to unravel the state's healthcare safety net. 'It would be a disaster,' said Dr. Paul Klotman, president and CEO of Baylor College of Medicine, which provides staffing to Ben Taub, the largest charity hospital in Houston. 'I would not be surprised if safety net hospitals just folded.' Texas and federal officials negotiated the current arrangement, known as a Section 1115 waiver, in 2011, allowing the state to move additional beneficiaries into Medicaid managed care plans. The waiver created two funding pools, one for uncompensated care and another to fund projects aimed at increasing access to care for low-income people. The waiver was intended to serve as a launching pad for the expansion of Medicaid in Texas…starting in 2014…"


  • Company says devices are making healthcare smarter
    "The news is good for developers of ‘smart’ healthcare devices: Consumers are willing to change their unhealthy habits. That’s the view from Alexis Normand, head of healthcare development for Withings…maker of smart watches, scales, [and] blood pressure monitors…According to Normand, the reward that consumers get when seeing the progress of their activity spelled out in daily and weekly data reports drives the desire to keep using the devices. [He said at HIMSS15] smart devices are driving population health…The company has…launched interactive maps of France and the US that show health indicators such as obesity and activity by state so you can see what areas are outperforming others when it comes to health. ‘…Studies…show that when patients are actors in their own chronic disease, the outcomes improve,' he said… With [Withings’] devices, companies can track [employee health]...even compare…their workforce [with] competitors. Normand said many hospitals, including the Mayo Clinic and Stanford University Medical Center, are also interested in what Withings is doing in tracking data to help treat diabetes, hypertension and COPD…"
  • UHG piloting rewards for health in app collaboration
    "UnitedHealthcare [UH] is testing the waters of consumer rewards and digital engagement, in a new partnership with Walgreens that's aiming to spur better health choices. UH’s fully insured members in Arizona and Illinois will be able to earn Walgreens Balance Rewards points for completing health activities like walking. The two companies are collaborating with a pilot integration of the UnitedHealthcare Reward Me program, via its Health4Me app, and Walgreen’s Balance Rewards loyalty program. Arizonans and Illinoisans insured through UH’s full-risk plans can use Walgreen’s ‘first-of-its-kind program’ to take simple steps, or ‘micro-habits,’ to improve their health and wellbeing—daily activity, regular walking, meals with lots of fruits and veggies, taking an 8-hour sleep—and then earn discounts on Walgreens products in stores or online…Under the pilot, currently just being used with UH, health plans can define activities for their members to earn Balance Rewards points to meet both health goals and HEDIS and Medicare Advantage quality ratings…”

Industry Activity

  • Healthcare M&A to skyrocket, dealmakers predict
    “Dealmakers forecast soaring growth in healthcare M&A over the next 12 months, as buyers continue to seek innovations to meet the market demands created by the ACA, according to M&A’s Mid-Market Pulse (MMP), a forward-looking sentiment indicator, derived from monthly surveys of approximately 250 executives and published in partnership with McGladrey LLP. The 3-month composite score for the healthcare sector was 91.2, the highest score…seen since launching the MMP in the May 2014 issue of M&A. The 12-month composite score of 85.3 for the sector was also high. Transaction pros were also bullish on overall M&A. The three-month composite score for overall M&A was 80.6, and the 12-month score was 74.1. The factors cited as contributing to the optimism: consumer confidence, which reached a 10-year high in Q1; an uptick in actionable leads; and an urgency to close deals before a potential rise in interest rates later in the year…”
  • Healthcare M&A premiums soaring
    “The healthcare industry is delivering large deal premiums as the pace of consolidation picks up and buyers look for targets that meet strategic and growth objectives. A MarketWatch story...said there have been $89B in healthcare mergers and acquisitions so far this year, compared with $56B during the first quarter of 2014, according to S&P Capital IQ. [In just one Monday] a spate of healthcare companies announced deals, including three with 'hefty premiums, helping to send major stock indices soaring.' In the first deal, Horizon Pharma agreed to buy Hyperion Therapeutics for $46 a share in cash, or about $956M...The premium was 8% from [that Friday’s] close, while Hyperion’s 30-day takeout premium was 71% and the 90-day premium was 120%, [per] FactSet…”


  • Study: Medical bill problems continue in the largest states
    "The Commonwealth Fund recently studied healthcare coverage among residents of the four largest states in the U.S., Florida, Texas, New York, and California, and found notable variations in the percentage of adults with medical-related financial struggles in 2014. Four of 10 adults in Florida and Texas reported they had trouble paying their medical bills or were paying off medical debt over time in 2014, compared to one of four in California and three of 10 in New York…based on findings from the Commonwealth Fund 2014 Biennial Health Insurance Survey of working-age adults. The study also found higher proportions of people in Florida and Texas had trouble getting needed healthcare because of the cost than in California and New York. More than four of 10 in Florida (43%) and Texas (43%) said they did not see a doctor when sick, did not fill a prescription, skipped a test, treatment, or follow-up visit, or did not get needed specialist care in the past 12 months for cost reasons, compared to three of 10 in California (31%) and New York (30%.) The differences in bill problems, debt, and cost-related access problems remained even when taking into account demographic variations across the states. Medical debt remains a huge market in the credit and collection industry. In fact, healthcare-related debt accounted for nearly 38% of all debt collected in 2013 and 52% of all debt collected in 2010, according to surveys by the Association of Credit and Collection Professionals (ACA International) and Ernst and Young…"
  • Employer wellness programs spend record $693 per worker
    "American employers are spending more on wellness programs than ever, but also backing away from penalties, as consumers respond with skepticism and researchers keep probing ROI evidence. Almost 80% of employers are offering [such] programs, spending on average a record $693/worker [per] a survey by Fidelity Investments and the National Business Group on Health. That’s up from $594 last year and $430 in 2010. Large companies with 20K+ employees are spending the most—some $878 per worker, up from $717 in 2014—while mid-size firms with between 5K and 20K are spending around $660, up from $493 last year…The record [spending] comes at the same that the programs are more controversial than ever, despite the ACA’s blessing for employers to tie up to 30% of…premiums to a worker’s participation in health improvement activities…Among the most common features: 72% of the surveyed employers offer incentives for biometric screenings, 70% offer incentives for health risk assessments and 54% offer incentives for physical activity programs. Among those employers, only 6% use disincentives for not taking a health risk assessment and only 5% use disincentives for not getting a biometric screening—down from 11% and 12% [in 2014]…"
  • As home medicine advances, an opportunity for insurers
    "A sustainable Medicare payment for home-based medicine is on the horizon…But health plans could be doing more, especially in Medicare Advantage. Later this spring, the results of the Medicare Independence At Home Demonstration will be released, and home medicine advocates are hopeful that the data will go a long way to expand the field and reimbursement for it. Between America’s retirement wave, the crisis of health quality and spending and the rise of consumer technology, home-based medicine is 'really at the sweet spot at where everything is going in healthcare,’ said Constance Row, executive director of the American Academy of Home Care Medicine…One of many Medicare pilot programs in the ACA, the three-year [study] was launched in 2012 to test the effectiveness of comprehensive primary care provided to high-cost, high-risk and home-limited seniors in their homes. Among the 15 participating providers are…Cleveland Clinic and North Shore Long Island Jewish Health Care, and dedicated home medicine practices like Housecall Providers Inc. in Oregon and the Visiting Physicians Association, in Michigan, Wisconsin and Texas…”


About Mansa Capital:
Mansa Capital is a healthcare private equity investment firm specializing in high growth companies in the healthcare services and healthcare technology sectors. Mansa focuses on companies as they prepare for expansion, acquisition, privatization or IPO. We integrate strong expertise in healthcare policy, regulation, and reimbursement with vast experience in healthcare operations, marketing, finance, and medical administration. Mansa makes equity investments in operating companies with enterprise values up to $150 million. We build shareholder value by working with management to implement strategic initiatives that grow top-line revenues. Mansa's Managing Partner and CIO, Ruben J. King-Shaw Jr., directs the firm's investment activities, in addition to managing the firm's equity portfolio. The firm has offices in Boston, MA, New York, NY, and Miami, FL.

This newsletter is provided for information purposes only. The information is believed to be reliable and is based on publicly available information, but Mansa Capital does not warrant its completeness or accuracy. Opinions, estimates, and assumptions constitute our judgment as of the date hereof and are subject to change without notice. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. 2015 Mansa Capital©

Mansa Partner