Welcome to Mansa Capital
While snow, ice and arctic temperatures continue to harass the eastern half of the nation, the Partners at Mansa continue to work hard at finding exceptional opportunities for growth investments within the US healthcare economy. This month’s edition leads off with a message on 2014 portfolio operations followed by a clip announcing our most recent investment. Skipta, the leading provider of online specialty and disease state medical communities for verified healthcare professionals, became Mansa Fund I’s fifth portfolio investment. We look forward to bringing you exciting news of the company’s rapid growth and development as social media strategies to support quality and care management proliferate.
In the Federal Policy section, healthcare information technology is the lead topic and ‘book ends’ the current conversation. The first selection notes how Congress is seeking to streamline the rules and enable broader application and sharing of data to improve population health. The second highlights the growing concerns for cyber security as more data is distributed across more users. Meanwhile, the State Policy selections offer a reminder that the implementation battles over Obamacare are not yet over. That section also notes the continued adoption of telehealth as a viable healthcare delivery option. The Strategy and Industrial Activity sections offer encouraging news that investment in the healthcare sector is expected to remain strong in 2015 and that companies using rewards and incentives (often called gamification) will continue to be desired assets. Like social media, gamification is an emerging strategy in healthcare with strong growth trends. Mansa is well positioned with investments in both areas.
The first selection in the Research section illustrates Mansa’s distinctive advantage in the areas of regulatory compliance and risk management. According the latest poll, nearly 95% of health IT professionals say complying with regulations is the chief driver of their decision-making. Mansa’s reputation for understanding—and often influencing—regulatory policy is highly valued among management teams. Furthermore, with a 77% majority of hospitals and other healthcare enterprises seeking partners to help them maintain high reliability, Mansa’s nearly completed investment in Accreon, a healthcare IT professional services firm, bodes well for the Fund’s continued strong performance. Please enjoy the issue, and let’s all look forward to the warmth that comes with spring.
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
Message on 2014 Portfolio Operations
2014 was an outstanding year for the Mansa Capital Portfolio. We ended the year at five (5) portfolio platform investments in Mansa Capital Fund I, up from two (2) in the prior year.
Strong operating performance across our consolidated portfolio drove record revenues and earnings growth in 2014. Total revenues increased $56 million—or 63% year-over-year and Earnings Before Interest Taxes and Depreciation (EBITDA) increased $18.5 million—or 208% year-over-year. Membership growth, geographical expansion, gross margin improvement and cost efficiencies yielded the following results: 93% revenue attainment and 139% EBITDA attainment, on a consolidated basis, across aggressive growth plans.
Financial performance was not the only highlight for 2014. We added to the depth and breadth of our Human Capital across the portfolio as well. The portfolio added one (1) new CIO, one (1) new Marketing Leader, two (2) new CFO's, one (1) new COO and five (5) new Sales Leaders. In total, we added over 230 full-time employees across all portfolio companies.
These types of results are leading Mansa to emerge as one of the best-known and highly respected brands in the healthcare growth private equity asset management marketplace. We are achieving our goal to become the preeminent PE firm in the healthcare growth sector by pursuing a clear strategic vision; maintaining a disciplined, long-term viewpoint; and preserving sound values while we grow successful companies as well as our own team.
Skipta secures $2.5M in Series A funding from Boston-based Mansa Capital
"Skipta, the leading provider of online specialty and disease state medical communities for verified healthcare professionals, announced…that it has received Series A funding in the amount of $2.5 million from healthcare-focused private equity firm, Mansa Capital. As part of the transaction, Mansa Capital Partner, James Renna will join the Skipta Board of Directors. The funding will be utilized to accelerate network development, increase community membership, and expand the company’s executive team. Skipta will continue to invest in enhancing its technology platform, deepening member engagement and diversifying its unique product portfolio…"
"…The HITECH Act has done much to advance the use of health IT…Congress is taking both near- and long-term actions regarding…innovation and standards [including] recently directing the Office of the National Coordinator to report progress around interoperability and data sharing, and asking the Government Accountability Office to report on health information exchanges. Congress has also launched the '21st Century Cures' initiative to help laws keep pace with health innovation. Among other measures, this initiative would consolidate meaningful use, quality reporting and value-based payments into one program—potentially the most significant move related to population health by Congress to date. HHS released the Federal Health IT Strategic Plan, a coordinated effort among more than 35 federal departments and agencies to advance the collection, sharing and use of electronic health information—the cornerstones of population health management…"
"Representatives from the public and private sector gathered at Stanford University on February 13, to call for greater sharing of cyber security information amid lingering mistrust arising from involuntary information sharing programs run by intelligence agencies, both domestic and foreign. The absence of four top tech leaders invited to the White House Summit on Cyber Security and Consumer Protection—Facebook CEO Mark Zuckerberg, Google CEO Larry Page, Google exec chairman Eric Schmidt, and Yahoo CEO Marissa Mayer—may convey something of that mistrust, or may merely reflect scheduling conflicts...Earlier this week, the administration announced the creation of its Cyber Threat Intelligence Integration Center. And at the Summit, President Obama signed a new executive order to promote better cyber security information sharing…”
"The Obama admin announced that 8.6M people had signed up for coverage in the 37 states using HealthCare.gov and estimated that an additional 2.8M had signed up in states operating their own exchanges during the ACA open-enrollment season [that has closed]. The vast majority of those who signed up are expected to pay their premiums and enroll in…plans. Beneath these numbers lies significant variation in the enrollment experiences in the states using HealthCare.gov. The aggregate national enrollment figures get a lot of attention in Washington and in the media amid the ongoing debate about the health-care law—but the state numbers can be more revealing. As the chart…shows, in six states more than half of the potential market signed up, but in seven states less than 30% did. Florida led the way, with 64% of the potential market and 1.6M people signed up. Iowa was at the bottom of the list, with 20% and 45K people signed up. Enrollment also varied a lot within states, with some counties reporting large gains late in the open-enrollment period…"
"Should the U.S. Supreme Court invalidate tax subsidies to purchase insurance in more than three dozen states later this year, it would likely have a devastating impact on healthcare spending moving forward, particularly at the hospital level [per] a new study by the Urban Institute…funded by the Robert Wood Johnson Foundation. It estimated that some 8.2M Americans would lose their…coverage as the result of an adverse ruling…including 445K enrollees in the Children's Health Insurance Program and another 300K with employer-based coverage. The study also estimated that as many as 1.2M Americans who purchase individual coverage without subsidies would also drop their coverage because the loss of the others from the risk pool would cause premiums to rise and make their policies unaffordable. The case, King V. Burwell, pivots on whether wording in the ACA permits the 38 states that do not operate their own exchanges to allow their residents to use tax subsidies to purchase coverage. Congress could change the wording to make it more straightforward but both of its houses are controlled by [the GOP] most of whom oppose the ACA…"
“Insurers in one of the country's largest markets will now have to pay for telehealth...New York Governor Andrew Cuomo has signed the nation’s most recent telehealth law, requiring private insurers to reimburse for the service, as they are in 21 other states. The New York law mandates that insurers reimburse not only physicians, but also physician assistants, social workers, dentists and psychologists...Other states where legislatures are pondering changes to telemedicine include Indiana, Iowa and Tennessee. Meanwhile, private insurers in states with and without telemedicine laws are entering the fray and crafting their own policies...For 2015, New Jersey’s Horizon Blue Cross Blue Shield unveiled…[24/7] online video access to a physician…Anthem Blue Cross expanded telemedicine…to 10 of the 14 states it operates in…Another Blue insurer, Premera Blue Cross, is combining two main telehealth models, and giving members the option to have digital consults with their primary care physician, a children’s pediatrician, or with a doctor they’ve never met online…”
"Healthcare IT professionals are in for another busy year in 2015, as medical organizations look for ways to build on the groundwork they've already laid with their investments in electronic health records (EHRs), early big data and analytics trials, and experiments in patient engagement and population health. They'll also need to address federal mandates including Meaningful Use Stage 2, the push-pull of ICD-10 deadlines, and…demand for healthcare systems interoperability. No matter who resides at the White House after the 2016 election, throughout 2015 healthcare orgs should act as though the…ACA...will survive...Of course, healthcare orgs will continue investing in cloud, security, mobile (i.e. wearables), and messaging. They will lobby for laws such as the MEDTECH Act, which concerns regulation of patient records and decision-support software...Telehealth will gain even more traction as lawmakers, payers, and providers knock down…remaining boundaries…"
"A startup health insurer trying to capitalize on digital services and simplicity is now offering members [wearables] and incentives for activity...[NYC-based] Oscar Health Insurance…is offering members free Misfit wearable fitness trackers and up to $20/month in Amazon.com cash for those who meet walking goals. 'Everybody walks in NYC. Oscar members get paid for it,’... Starting in January, the company [made] the Misfit Flash device, which sells for around $50, available to its 16K members free of charge. Members can wear a Misfit watch or clip a device to their clothing and get paid $1 for each day they walk at least 10K steps, or about five miles, with a limit of $20/mo. The device, made by a company of the same name based in Burlingame, California, syncs with Oscar’s Apple iOS app (an Android version is coming next year) to track a user’s steps. The steps needed to get the reward will start at a more reasonable 2K per day and gradually increase to 10K…"
"Have you ever gone to the doctor for a simple blood test and waited days for the results? It was annoying, right? Have you ever had a potentially fatal disease that could be diagnosed by a blood test, and waited days for those results? Now we're talking life or death. That's why there's so much promise in a new wave of blood-testing attachments for smartphones. Yes, your smartphone. We'll soon be able to monitor blood sugar, check forewarning signs of stroke, track basic metabolism, and even detect HIV and syphilis in a matter of minutes, using attachments on our phone that are not much bigger than a card reader. This is going to spur far-reaching changes in the way healthcare is done in this country and around the world...The most exciting news in this field came out...from Columbia University, which announced that it has created a smartphone dongle that, in 15 minutes, can provide blood test results screening for HIV (the virus that causes AIDS) or syphilis…"
"Peter Reikes, vice chairman at Stifel, has worked in healthcare investment banking for 30 years, but says the current market is about as 'open and robust' as he’s ever seen. 'The market is in exceptional shape right now,' he said. All healthcare subsectors—services, IT, medical devices and life sciences—are benefitting from open equity and demand for products and services. The spot he predicts to have the biggest boom in 2015 is life sciences, particularly biotech and specialty pharmaceuticals. This is based on the fact that 2014 was a 'high water mark' in terms of IPO activity. Last year saw the highest number of IPOs in biotech and life sciences since 1978…"
"Since the recession began, credit rating agencies have generally held a negative outlook on not-for-profit healthcare providers in the U.S…The ACA has altered the traditional income paradigm for healthcare providers from a model where the institutions were paid for services to now where they are rewarded for the value of these services—the patient outcomes. With all payers injecting quality scores into their payment formulas, the revenue predictability that hospitals once enjoyed has been replaced by income uncertainty and worse—lower revenues overall. This is the conclusion of Standard & Poor’s. The ratings agency posted a negative outlook in December for the not-for-profit healthcare sector, attributing it to a multitude of factors, including top line revenue constraints leading to operating margin and coverage compression, the impact of healthcare reform readiness activities, soft demand for the financially important inpatient business and emerging changes in the payment environment to value-based payments from fee-for-service payments…"
“Boston-based Partners HealthCare has abandoned plans to acquire South Shore Hospital in light of a court ruling spiking its deal with state regulators to address antitrust concerns. Partners will also hold off on acquiring two other suburban hospitals covered in that agreement…Partners and South Shore have decided not to proceed with the acquisition of South Shore Hospital in suburban Weymouth, Mass., according to the filing. The state will continue to evaluate Partners' proposed acquisition of Hallmark Health System, which operates hospitals in the Boston suburbs of Medford and Melrose, [also per] the court filing. 'We have listened and heard the public concerns, and in conjunction with the leadership at SSH, we have decided that the best approach is not to proceed with our plan to bring SSH into Partners,' Partners President and CEO Dr. Gary Gottlieb said…"
"Nearly 95% of health IT professionals say complying with regulations influences is the chief driver of their decision-making, according to a new poll. Worse, a majority saying too many government mandates are having an adverse effect on their work...Other findings: A 77% majority of hospitals and other healthcare orgs are seeking partners to help them maintain high reliability; 70% of respondents said they need partners to assist with security and data privacy concerns. About 50% of healthcare IT co’s say they use a third-party integrator or partner to assist them with their IT strategy. Among those, 70% cited depth of technical knowledge as the top reason; 60%, meanwhile, said third-party partners alleviate the time and resource constraints on internal IT staff…"
“…Consumerization, an industry trend prompted by the increased shifting of financial risk from insurers and employers to patients, means individuals have become more proactive than ever about medical decisions, seeking out specialists and arming themselves with knowledge about specific medications...Statistics from the Florida Hospital Association bear out Satter and Gottlieb’s claims. Total discharges dropped to 2.4M in 2013 from 2.6M in 2011, while total patient days fell to 10.9M in 2013 from 11.8M in 2011. Inpatient surgeries, meanwhile, slipped to 557,238 in 2013 from 671,787 in 2011…Many healthcare providers—including urgent care centers, specialists, diagnostic facilities and small hospital branches—are now setting up shop in both freestanding and ‘end-cap’ spaces in retail plazas. Subleasing by tenants of large private hospitals is becoming more common as medical practices seek to cut costs and steer patients to their facilities…”
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©