Mansa Capital

Welcome to Mansa Capital

Happy New Year! With 2014 comes a host of questions and perhaps a few answers.  How will hospitals respond to continued pressures on reimbursement rates? Will the Exchanges gain enough enrollments to spread the risk and justify the premiums? How far can we go with digital connectivity while still preserving data security and patient privacy? Which among the now 360 Share of Savings ACOs will actually demonstrate sustainable savings? In a stronger economy, can employers continue to push more of the cost of care onto employees and families? What states will continue the battle against Medicaid Expansion? Will more states embrace private options for their Medicaid programs? These are among the topics we will cover in our Annual Meeting in Miami on February 6th. We hope you will join us.  In the meantime, please enjoy this month’s sampling of issues, which are shaping the US healthcare economy.

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

Portfolio Companies

  • Mansa Capital Management obtains additional $15M for healthcare fund
    Mansa Capital Fund I, along with our portfolio companies E4 Health and Independent Living Systems are mentioned in recent news covered by the Wall Street Journal, PEHub, and other outlets. Fund commitments total $50 million raised by a notable combination of state pensions, high net worth individuals and family offices in the U.S., Caribbean and Latin America.

Policy

Federal

  • December surge for HealthCare.gov, but millions left to sell
    Healthcare[dot]gov and state health insurance exchanges have sold about 20% of the health plans that budget officials think is enough for a sustainable risk pool. They’re hosting open enrollment through March 31, the new deadline for meeting the individual mandate for the 2014 tax year. By then, the Congressional Budget Office (CBO) estimates the exchanges (combined) should have enrolled at least 7M Americans in private health plans and 8M more in Medicaid and CHIP.
  • ACA's risk programs may benefit insurers
    Risk management programs instituted by the Affordable Care Act (ACA) may make older, higher-cost members more profitable for insurers than expected. Under the “3Rs” – the two-year reinsurance and risk corridor programs limiting losses and the permanent risk adjustment program transferring funds from low-risk plans to higher-risk plans – HHS will be trying to ensure premiums do not surge by sharing risk, with transfer payments of $10B in 2014, $6B in 2015 and $4B in 2016.
  • Supreme Court halts contraceptive mandate for religious group
    Justice Sotomayor granted a last-ditch plea to block the birth control mandate for the Little Sisters of the Poor Home for the Aged in Colorado. They are part of a larger effort by Catholic-affiliated groups from around the nation to halt provisions of the ACA that provide free access to contraceptives, sterilization, abortion-inducing products, and related education and counseling for employees.

State

  • 123 ACOs join MSSP model [Colorado, Texas, et al.]
    The Centers for Medicare & Medicaid Services announced 123 affordable care orgs have joined the Medicare Shared Savings Program for a three-year term that began Jan. 1. These partnerships (doctors, hospitals and other healthcare providers) bring the total of MSSP ACOs to 360. Per HHS, the ACOs will bring high-quality, coordinated care to an additional 1.5M Medicare beneficiaries.
  • CMS okays another Medicaid private option [Iowa]
    The Centers for Medicare & Medicaid Services largely met Iowa’s Governor halfway on his proposal to expand Medicaid under the ACA through the state-federal partnership insurance exchange. Now, about 100K Iowans newly eligible for Medicaid are set to get private insurance coverage through a government-approved demonstration project, the second Medicaid private option OK’d in 2013.
  • Independent hospitals form alliances [Georgia, Nebraska, Tenn, et al.]
    Alliances between independent hospitals may be a trend to watch in 2014. Since its 2013 formation, Georgia's Stratus Healthcare has grown from 23 to 29 hospitals, many smaller “rural” facilities. Allies meet to compare IT, clinical services and how to manage community health. Stratus members may eventually evolve from loose alliances to joint ventures or joint operating agreements.

Strategy

  • Digital health in 2014: the imperative of connectivity
    Healthcare industry experts and consumer tech pundits are quoted re: the challenges and promises of digital connectivity in healthcare including Apple, MDLive, Clinician & Health Futurist, Patient Conversation Media, Qualcomm Life Fund, Qualcomm Ventures, and Start-Up Health, which said, "whether it's a pill bottle, a thermometer, a scale or a Bandaid, it will be connected in 2014."
  • Stage set for big interoperability push
    The push for meaningful use Stage 3 has reached a point where a confluence of power structures—IHE USA, ONC and S&I Framework— are ready for more breakthroughs. Integral to the initiative is the New Directions program, which aims to get all orgs moving in the same direction, and will debut in Orlando, FL, at the Connectathon and Interoperability Showcase during HIMSS14, Feb. 23-27.
  • RFID yielding savings for hospitals
    Hospital admins are finding that inexpensive and unobtrusive radio frequency identification tags are saving money and increasing quality of care. RFID has saved the Texas Health Alliance $65K/mo. just in rental fees in 2013. All equipment is tagged. Nurses simply press a button that alerts the rental co. to pick up the item while a real-time location system enables the rental co. driver to find the facility.
  • Voice recognition speeds EHR use
    In addition to reducing doctors' note-taking burden, Dragon Dictate software saved the Norman Regional Health System $1.8M in transcription services last year. Dragon is used mostly in the emergency department in combination with Nuance's Powermic, a noise-canceling microphone capable of working amid chaos, proving its value even during a crisis such as the 2013 OK tornados.
  • Medicine: Will the tech bubble break?
    David Voran, MD, predicts that big data, mobile, and social media will converge in healthcare and hopes that, “We in healthcare will seize the opportunity to leverage technology and move away from ridiculously expensive disease care to immensely profitable and valuable healthcare.” He says, “If we do, the bubble is just beginning to fill. If we don't, then healthcare is the next bubble to burst.”

Industry Activity

  • 4 key drivers of healthcare M&A activity
    For many, the post-reform era is the age of innovation. It is a catalyst for stakeholders to work together in new ways with the goal of delivering cost-effective, patient-centric, value-driven care. Whether it’s to positively impact the bottom line, help each other grow in scale/scope, expand on the pool of providers that can appropriately manage health, outcomes and payments or empower consumers to manage their own health, providers want to forge strategic partnerships post-ACA.
  • IMS Health files for IPO of up to $100M
    Backed by TPG Capital Funds LP, IMS Health Holdings Inc., which provides prescription data to pharma, medical device makers, government agencies and others in the field of healthcare, filed to raise up to $100M. In a preliminary prospectus the CT-based IMS told the SEC that JP Morgan, Goldman Sachs, Morgan Stanley and BofA Merrill Lynch were among the underwriters for the IPO.
  • Michigan hospitals ally with LifePoint
    Bell Hospital, a 25-bed critical access hospital in MI was acquired by LifePoint, a hospital co. with about 60 hospital campuses in 20 states. LifePoint will pay off Bell’s construction debt and make $5M in capital investments in Bell over the next 10 years. The price was not disclosed. At the same time the Bell deal was finalized, a joint venture was announced between LifePoint and Portage Health, which runs a 36-bed acute care hospital and a 60-bed skilled nursing unit, also in MI.
  • Reforecast: Organizational culture key to successful hospital mergers
    Months after merging to become the second-largest not-for-profit U.S. healthcare system, with $13B in operating revenue, $19B+ in assets, CHE Trinity Health is beginning to enjoy the benefits. The two Catholic faith-based health organizations are enjoying a stronger footprint together. They don’t geographically overlap and leverage each other’s skills, scale and best practices to lower costs with the goal of cutting $300M over the next three years. Their combined revenue: $13B

Research

  • Study shows EHRs help docs boost care
    Health Services Research found nearly 75% of physicians using electronic health records in 2011 said there were clinical benefits when patients' medical histories were kept in digital files. Jennifer King, chief of research and evaluation at the Office of the Nat’l Coordinator for Health IT, said “A majority of physicians said they were alerted to a potential medication error or critical lab value and about one-third said EHRs helped them identify needed lab tests or facilitated direct comms with patients.”
  • Medical connectivity to grow over 800%
    Transparency Market Research projects a 38% compound annual growth rate for medical device connectivity through 2019, from $34B in 2012. The report projects this trend could lower healthcare costs more so than taxpayer fueled EHRs, which hold data mostly entered by humans as opposed to devices “speaking” (and transferring data) directly to each other. Great analysis, a must read.
  • Medicaid expansion increases ER use
    An increase in insured hospital patients due to Medicaid expansion led to a 40% rise in their visits to the emergency room, according to a study published in Science. The researchers separated ER visits based on time of day and whether or not they led to an admission. Approximately 90% were defined as outpatient visits and increased visits from Medicaid enrollees were "solely in outpatient visits."
  • Nonprofit healthcare providers feel heat of negative pressures
    According to a recent Standard & Poor’s ratings report, nonprofit healthcare providers may be at a tipping point with mounting negative pressures and more downgrades anticipated in 2014. S&P says hospitals must be more aggressive in managing appropriate staffing levels to match volume, budget accurately and convert facilities once designed for inpatient use to outpatient care delivery. Per S&P, M&A’s were the source of many rating changes in 2013 and the merger trend will continue in 2014.
  • Healthcare due for big changes in 2014, not all from Obamacare: study
    PricewaterhouseCoopers’ Health Research Institute report says that healthcare will have to become more consumer-friendly, forcing providers to rethink their strategy. Insurers will be under pressure to be more competitive as private exchanges will rise up alongside the ACA’s public exchanges. Consumers who face the prospect of higher deductibles and co-payments will demand more price transparency from insurers as well as medical suppliers and health providers.

Website:  http://www.mansacapital.com/


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. 2013 Mansa Capital©

Mansa Partner