Mansa Capital

Welcome to Mansa Capital

“Summertime, and the living is easy.” Those words from George Gershwin’s legendary musical score of the classic story “Porgy & Bess” were certainly not true of the opera’s characters. Nor are they true today for those of us engaged in the search for value in the vast and growing healthcare economy.

Our Strategy section leads with a clip from Forbes Magazine proclaiming that "healthcare is the world’s largest industry today—it is three times larger than the banking sector” and “is revitalizing and transforming itself faster than any other vertical.” One has to run hard and fast to keep up with the pace of growth and innovation. All the articles in that section point to the trends, which have guided Mansa’s investment strategy in recent years: Care Personalization, Interoperability, Decision Support, Gaming Technology and Social Media within the healthcare sector.

Mega mergers in the healthcare insurance and retail sectors are the “big story” in the Industry Activity section. In the Research Section, we find references to some studies, which confirm Mansa’s investment thesis on several fronts. First is some new research from Accenture, which projects that digital health tools will save the U.S. healthcare industry more than $100B over the next four years–mostly thanks to things such as improved medication adherence, behavior modifications and fewer emergency room visits.

Then comes a new report from the Government Accountability Office calling for 'urgent action' – and private sector assistance – to achieve interoperability for all government IT projects. The government spends more than $80B a year on information technology. The Research section closes with a clip projecting that the worldwide “Internet of Things” market will grow from $655.8B this past year to $1.7T in 2020 with a compound annual growth rate of 16.9%. Devices—such as home sensors for remote monitoring for early intervention–are expected to represent 31.8% of the total.

As always, we open this edition of our newsletter with the Policy Section, which includes a look at the transformative nature of the Medicare program on its 50th birthday.

We hope you enjoy these updates on the trends that shape the healthcare economy. We will spend the summer working hard on finding, creating and monetizing value in that environment. In the immortal words from the summer of 1966: “See You in September.”

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

Policy

Federal

  • If Supreme Court upends health law, critics and backers mobilize for next action
    "With a Supreme Court decision looming that could lead to the loss of health insurance for millions of Americans, supporters and opponents of President Obama’s healthcare law…are mobilizing for the next stage of the battle…At issue: is it legal for the government to provide subsidies to consumers in the almost three dozen states that haven’t set up their own…exchanges and…rely on the federal marketplace? Many conservative critics say that the subsidies should be struck down and that such a ruling could be the first step in overhauling a flawed law…The American Enterprise Institute (AEI) supports a temporary extension of subsidies for [those]…receiving them but not for new enrollees. The group also backs alternative ways to help people pay for insurance..."
  • Community health centers brace for more uninsured
    "The nation's 1,200 federally qualified community health centers would be hit hard by a possible...Supreme Court ruling…eliminating premium subsidies for federal exchange-plan enrollees. Such a ruling would have a major effect on the clinics, which are required by law to serve all patients for free or on a sliding-scale basis. They then would have to provide far more uncompensated care, clinic leaders say. Given the shortage of primary-care physicians, community health centers have been key primary-care providers for Americans who have received expanded private and Medicaid coverage under the ACA. 'The vast [amount] of people with exchange coverage who are getting care at health centers are low income, below 200% of the federal poverty level,' said Dan Hawkins, policy director for the National Association of Community Health Centers. 'If they lose that subsidy, they lose the ability to afford their coverage.' [He] estimated that community health centers [serve] nearly 1M patients covered by [federal exchange] plans…"
  • Fifty years in, Medicare has transformed healthcare. What's in store for the next fifty?
    "This year marks the 50th anniversary of the enactment of Medicare. Before President Johnson signed the program into law …in July 1965…less than half of Americans 65+ had health insurance...in part because so many had pre-existing conditions that precluded them from purchasing it. But even if they could, seniors…had to pay three to four times the premium of younger adults. Since [then], more than 95% of all of us over the age of 65 have health insurance. A remarkable achievement..."

State

  • States and Congress urged to act if justices rule against health law [Nationwide]
    “The Obama admin’s top healthcare official said [recently] that if the Supreme Court stopped the payment of health insurance subsidies to millions of Americans, it would be up to Congress and state officials to devise a solution. 'The critical decisions will sit with Congress and states and governors,' HHS Secretary, Sylvia Burwell, said at a hearing of the House Ways and Means Committee. [She] and the White House have said that they have no contingency plans to deal with the chaos that could result if the court strikes down subsidies in the pending case, King v. Burwell. The plaintiffs in that case, four Virginia residents, contend that federal law allows subsidies only in states that have established their own…marketplaces, not in states that rely on the federal exchange. Republicans in Congress are drafting legislation to respond if the court blocks subsidies in more than 30 states where people buy insurance through the federal marketplace, HealthCare.gov…”
  • Medicaid to subject providers to criminal background checks starting Aug. 1 [Nationwide]
    "Starting Aug. 1, providers considered at 'high risk' for defrauding state Medicaid programs will undergo a criminal background check that includes fingerprinting. By March 2016, all of a state’s Medicaid and CHIP providers must be ranked as having a limited, moderate or high risk of defrauding the program…States must repeat this process at least once every five years [and] will need to use their discretion to rank providers. Only those that pose a high risk will be required to undergo fingerprinting and background checks. The guidance comes roughly four years after the agency released a final rule on the screening, which is one of several provisions in the ACA giving HHS new tools to crack down on Medicare/Medicaid fraud…Last year, Medicaid provided medical services for [about] 60M people at a cost of $310B. [In the] same year…the improper-payment rate was 6.7% or $17.5B. This is an increase of almost 1%, or over $3B from the previous year…"

Strategy

  • The companies disrupting healthcare in 2015
    "Healthcare is the world’s largest industry today—it is three times larger than the banking sector. After lagging behind for almost five decades, this industry is revitalizing and transforming itself faster than any other vertical. Improving the healthcare system requires simultaneous pursuit of three aims (commonly referred to as the Triple Aim): enhancing the experience of care, bettering the health of populations and reducing per capita costs of healthcare. For this to happen, some major shifts will need to take place...Through Frost & Sullivan’s research, [Forbes] has identified nine areas that are expected to see the most disruption and transformation within the eco system…Companies that provide solutions addressing the needs in the following areas will be the winners to come: Artificial Intel Decision-Support Tools; Care Anywhere, Anytime; Care Personalization, Customization; Chronic Disease Management; Cost of Care Operation Innovation, Interoperability, Innovating to Zero (errors, safety, inefficiencies); Patient Engagement, Smart Computing…"
  • Nurses turning to smartphones for clinical advice
    "…A recent poll found that a whopping 88% of RNs consult with their mobile devices at work…A 'micro-survey' from Boston-based market research firm InCrowd found that 95% of nurses responding to its poll owned a smartphone—and 88% used smartphone apps in their daily nursing work. Nearly three-quarters (73%) of nurses reported looking up drug information on their phones; 72% say they use apps to look up diseases information. Nurses reported using their phones for fast access to information across a range of daily tasks, from receiving patient photos of a rash to setting a timer for meds admin...While…respondents stressed that smartphones ‘enhance but don't substitute’ the need for a physician consult prior to administering care…52% said they confer phone instead of asking a question of a nursing colleague…a subset of users asked more detailed questions about their smartphone use—especially if a medication, illness or symptom was unfamiliar…”
  • Games for Health joins with PCHA, HIMSS
    "The Personal Connected Health Alliance and HIMSS are partnering with the Games for Health Project to help increase the role of personal health technology in care delivery, convening clinical leaders and innovators with gamers and game developers. With the partnership, Portland, Maine-based Games for Health will host activities at both the mHealth Summit and the HIMSS16 Annual Conference as it helps spread the use of gaming technology for disease management, behavior change, physical therapy, biofeedback, epidemiology, cognitive health, nutrition and more. 'Gaming technology is becoming an important addition to social media, wearables and mobile health, as well as an adjunct to clinical care management,' said mHealth Summit Director Richard Scarfo, vice president of Personal Connected Health Alliance at HIMSS…"

Industry Activity

  • Health insurance giants are in a frenzied search for merger partners
    "The nation's biggest health insurers are speed-dating one another, searching for a partner worthy of a multibillion-dollar merger. Anthem Inc. and other industry giants are flush with cash and eager to swallow up competitors as they increasingly vie for individual customers on ACA exchanges and government business tied to Medicare and Medicaid. As a result, employers and consumers may be left with fewer choices and little relief from ever-rising medical costs, experts say. The deal chatter started last month with reports of Humana Inc. attracting interest from Anthem, Aetna Inc. and Cigna Corp. The smaller Humana is prized for its strong presence in Medicare Advantage plans, a growing market as baby boomers retire. Then the…frenzy hit a fever pitch this week with news that Anthem made a bid for Cigna, the fifth-largest health insurer by enrollment…”
  • Healthcare M&A stays hot with CVS-Omnicare deal
    "The healthcare deal making machine keeps on churning. CVS Health Corp.'s $10.4B deal for the pharmacy-services provider Omnicare Inc., [lifting] the value of healthcare transactions struck this year to $265B worldwide. That’s up 77% from last year, which was the biggest year on record for healthcare M&A by a wide margin, according to Dealogic. The name of the game in healthcare is size and bargaining power, and that has driven the surge in deal making in the sector. Companies like Omnicare that process prescriptions for insurance co’s, corporations and other groups that pay for drugs need size to improve their negotiating position with both drug makers and pharmacies…"

Research

  • IT could save $100B for US healthcare
    "New research from Accenture projects that digital health tools will save the U.S. healthcare industry more than $100B over the next four years. In 2014 alone, it calculates, technology such as Web-enabled devices, digital diagnostic tools and other FDA-approved IT help achieve some $6 billion in reduced costs–mostly thanks to things such as improved medication adherence, behavior modifications and fewer emergency room visits. Accenture expects that number to approach $10B this year and $18B next year–increasing to $30B in 2017 and $50B in 2018 as these technologies take hold, proliferate and evolve. It also predicts that FDA approval of digital health tools will triple by the end of 2018, to 100 (up from just 33 this past year)…"
  • Government needs 'urgent' help on $80B IT projects
    "Even as a couple of Congressional panels are bent on achieving health IT interoperability, where the industry has not yet been able to, it appears the government itself could use a helping hand on this complex matter—and many other aspects of IT work. A new report from the Government Accountability Office, calls for 'urgent action' on all government IT projects. David A. Powner, director of IT management issues for the GAO, testified June 10 before the House Subcommittees on Government Operations and Information Technology, Committee on Oversight and Government Reform. He told the panels that from October 2009 through December 2014, GAO made 737 recommendations to the Office of Management and Budget and other agencies to improve…management and oversight of IT. However, as of January 2015, only about 23% had been fully implemented. The government spends more than $80B a year on information technology…"
  • Spending on IoT to reach $1.7 Trillion (with a T) by 2020
    "Three new reports from IDC forecast 'explosive' growth in spending on the Internet of Things in the coming years, with healthcare one of the biggest investors in connected devices and networked tech. The worldwide IoT market will grow from $655.8B this past year to $1.7T in 2020 with a compound annual growth rate of 16.9%. Together, devices, connectivity technology, and IT services are projected to account for more than two-thirds of the worldwide IoT market in 2020, [per] IDC, with devices (modules/sensors)…representing 31.8% of the total. IDC expects that IoT purpose-built platforms, app software, and 'as a service' offerings will see…more growth in the years ahead…"

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. 2015 Mansa Capital©

Mansa Partner