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It is March and the calendar says its spring. Yet, at 18 degrees Fahrenheit in Boston, the thermometer here still says: “Winter!” Nonetheless, like the men’s and women’s NCAA basketball tournaments known world over as “March Madness,” the US healthcare economy seems to be warming up for another nice run in 2015. This month’s edition of our newsletter highlights the arrival of “interoperability” to the center stage. Three different articles on the issue appear in the Policy, Strategy and Research sections. The pharmaceutical sector is the other “big ticket item” in this edition—literally and figuratively—with four separate articles. In the Strategy section, new specialty drugs are listed as #2 among the Top Five healthcare trends to watch in 2015. In the Industry Activity section, both articles make reference to the size of the pharma sector. In the second of those articles, we find the surprising news (for some) that of the $21B in contracted spending from the US Department of Health and Human Services, big pharmaceutical companies ranked first, second, fourth and seventh.

The growing recognition of remote patient monitoring as a cost- and care- management tool makes its way into the Strategy section, as does a candid assessment on patient engagement. In the opening Federal Policy section, we find data that supports that Hispanic/Latino Americans and African Americans have seen the sharpest declines in uninsured rates. This is an accomplishment sure to be championed by contenders for the Democratic presidential nomination who generally support the Affordable Care Act.

Perhaps the most intriguing series of articles appear in the State Policy section. After a discussion of the likely effects of President Obama’s immigration policy on state healthcare budgets, we see how two large Republican states—Florida and Texas—are taking two very different approaches to Medicaid expansion. With one Texan already having announced his bid for the Republican Presidential nomination and at least one Floridian expected to do so shortly, these stories foreshadow the intense debates on healthcare policy, which lie ahead. We hope that you find this edition both informative and relevant. Enjoy the “Madness!”

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

  • ACA lowers uninsured pool by 16.4 million
    "Approximately 16.4M uninsured Americans have received some type of health coverage since the ACA was passed five years ago...The large drop in those without health insurance indicated that the healthcare law is reaching its intended goals…But the law and many of those who gained coverage face an uncertain future [with] pending U.S. Supreme Court case, King v. Burwell, which could upend subsides paid to many of these new policyholders so they could afford to purchase insurance...The drop in…uninsured primarily came from the ACA's health insurance exchanges and expansion of Medicaid to people who earned up to 138% of the federal poverty level…About 14.1M adults gained…coverage through those two provisions or through employers. Another 2.3M young adults aged 19-25 were able to stay on their parents' health plans until they turned 26…Excluding the younger population, the figures are close to a previous nonpartisan projection. In May 2013, the CBO estimated 14M…would gain insurance coverage by 2014 [and] would rise to 20M by 2015. The uninsured rate fell most precipitously among African-Americans and Latinos. The uninsured rate declined 12.3 percentage points for Latinos, 9.2…for African-Americans…5.3 for whites. At the end of 2014, about 30M adults remained uninsured, according to the Kaiser Family Foundation…”
  • Interoperability (finally) takes center stage in Congress
    "It's been almost six years since the Senate HELP Committee has revisited EHRs and interoperability, and at a hearing…on Capitol Hill, there was an overarching theme among industry stakeholders: that talk is long past due…The near two-hour hearing…brought together physicians, researchers and vendor voices, and rounded up the big takeaways: The EHR Incentive Programs did some good. But not enough. Sure, CMS has paid out nearly $30B in meaningful use to date to hospitals and providers…but the regulatory requirements have been a…burden for many physicians who are time and resource-strapped already…What's more...many docs may now have these EHR systems [but they] don't even talk to each other...Vendors have no incentive to share data and create more interoperable systems. 'In more competitive markets, hospitals don't want to share data…there’s no business case for it…Incentives can change that,’ said Julia Adler-Milstein, assistant professor of information at University of Michigan's School of Public Health…"
  • If fee-for-service is a problem, what's the solution?
    “The fee-for-service payment model for healthcare treatment may be withering, but there's little hard evidence that alternative payment models such as ACOs will provide better care at a cheaper cost, experts agreed in a forum…convened by the FTC…The original crop of 32 Medicare ACOs–known as Pioneers–have achieved mixed success in terms of holding down costs and boosting quality. The CMS announced last year that Pioneer ACOs lowered Medicare spending by $817M during the first two years of operations. But 13 of the original 32 ACOs have dropped out of the program after struggling to hold down costs and facing the prospect of having to pay back money to the federal government. The Medicare Shared Savings Program—a broader test of accountable care launched in 2012 under the ACA—added 89 additional participants in January. There are now more than 400 ACOs in that program providing coverage to roughly 7.2M Medicare beneficiaries…"

State

  • Immigration changes wouldn't solve health issues [Nationwide]
    “President Barack Obama’s controversial executive action on immigration has highlighted a thorny healthcare issue for states: Potentially millions of immigrants could legally stay here and work, but still lack health insurance. Unauthorized immigrants have limited access to healthcare coverage, and the president’s action likely will make them ineligible for most Medicaid services and bar them from purchasing insurance on the federal and state exchanges created under the ACA. Some states have sought to solve the problem for low-income immigrants with…state-funded insurance programs. Those that have not are wrestling with the consequences of a population that is going without routine care, which can drive up costs when preventable illnesses become serious health emergencies…Treating kidney disease as an emergency condition, for instance, costs almost five times what it would with routine care denied to…immigrants...[who] present other problems for states. In Maryland, for instance, state attorneys face cases of criminally insane defendants who are no longer deportable but can’t get the follow-up care required for release into the community…"
  • Florida Senate panel pushes Medicaid expansion forward, but still a long shot [Florida]
    "A state Senate panel [has] approved a sweeping proposal that would allow Florida to use billions of federal dollars to expand healthcare coverage to about 800K low-income residents—if it’s able to overcome two big hurdles. The bill (SPB 7044) won the unanimous support of the Senate Health Policy Committee and applause from the audience when it passed. 'It’s a watershed day in the Florida Senate and, hopefully, in the Florida Legislature,' said Senate Democratic Leader Arthenia Joyner, D-Tampa. The bill remains a long shot. Even with the support of the influential Associated Industries of Florida and various hospital groups, it is unlikely to be considered by the more conservative Florida House. 'They’re going to have conversations that we probably won’t be having over here,' House Speaker Steve Crisafulli said. The federal government is another potential stumbling block. The CMS would have to grant Florida a waiver in order for the state to get the federal funding. And some components in the Senate proposal have been rejected in other states…"
  • Texas Republicans demand Medicaid flexibility from Obama [Texas]
    “Senate Republican Caucus sent a letter…to the White House demanding that program benefits be tied to work requirements and personal accountability, including cost sharing and fines for missed appointments. The two-page letter also called for Texas to be exempted from some fees and regulations included in President…Obama's healthcare law, the ACA. 'The federal government's continued refusal to grant our state more autonomy over our own Medicaid program leaves us with an unsustainable cost growth trajectory and frustrating, inflexible mandates that prevent effective program management,' the officials wrote. The demands are similar in some ways to what other GOP-led states have requested as part of compromises that have led to acceptances of Medicaid expansion in the ACA. The changes the Texas senators are seeking would go much further, however, because they would apply to all Medicaid recipients, not just those newly eligible for coverage…"

Strategy

  • Top 5 healthcare trends to watch in 2015
    “…Many of the federal policy debates in 2015 will be largely symbolic, resulting in little more than tweaks to existing law. However…a range of issues will play out in the states and the private sector, effectively shaping the future. [Here are the top trends]…1.) From EHRs to clinical measures and decision support tools, providers are inundated with new technologies that automate processes and capture new types of data [but] are limited in their potential because they don’t all 'talk' to one another. 2.) It’s rare to see the insurance industry, patient groups, employers, providers and pharmacies all aligned on a single issue. But the high cost of new specialty drugs has raised fears…Just 1-3% of the population uses specialty drugs, yet spending for these therapies will account for 50% of total U.S. drug expenditures by 2018. 3.) Although almost all attention has focused on federal programs designed to incent greater care coordination, disease management and preventive care, innovations are starting to take root in the states, too. This trend is being driven by two factors: The strain on state budgets, particularly as they absorb the cost of the newly eligible Medicaid population and the need to align with federal programs that push providers toward more coordinated, accountable care. 4.) More and more healthcare data will be made available to public scrutiny in 2015. The newest area of transparency is financial, with Medicare’s release of physician procedure charges across the nation, as well as new data comparing insurance plan premiums and benefits through the health insurance marketplace. 5.) Along with all the attention on ACOs as the leading model for care transformation, this year will see a rapid expansion in bundled payment…”
  • Remote patient monitoring steps toward new era
    “In his session at HIMSS15, 'Mobility and Remote Patient Monitoring: No More Secrets,' Kenneth Kleinberg, will help attendees acknowledge and appreciate the advances in mobile devices such as smart phones, tablets, wireless local area networks…broadband and wireless broadband. Among the topics Kleinberg, managing director of the Advisory Board, will discuss are the algorithms and decision support business intelligence analytics that can be applied to an increasing amount of data that could be collected from people through various monitors and sensors with the hope of improving their care. 'For a provider organization it's increasing their geographic scope and reach. A patient doesn't have to come to their facility, the patient can be a long distance away,' he said. A recent HIMSS analytics study…revealed that 26% of provider organizations are doing some form of remote patient monitoring. According to Kleinberg, remote patient monitoring is improving clinical quality because you're able to pay attention to data from the patient not just when they come into the physician's office that day, but data that can be accumulated over days, weeks and months…"
  • Engaging patients to self empower
    "Patient engagement is essential to manage the health and wellness of populations, but getting patients to engage is often a challenge for healthcare organizations. Healthcare providers are turning to health IT solutions to reach patients. With the right solutions, patients can interact with their care teams and each other and we see operations for healthcare orgs improve…Providers are looking to successfully leverage health IT solutions in their delivery system, but often run up against patients who do not have the skills or confidence to use the technology provided to them. Because often times, patients need guidance to manage their own health effectively, they often become frustrated and disengage—the opposite of what providers are hoping to achieve, said Helen Figge, senior VP of global strategic development at Lumira. ‘Patients with access to their own data and supplied with the right solutions become empowered and are better equipped to interact with their caregivers, ultimately improving their health…and outcomes while reducing costs,' she said…"

Industry Activity

  • Investors in healthcare stocks get rich as M&A booms
    "…There have been 36 healthcare M&A deals, values exceeding $100M since the beginning of 2014, according to FactSet. [This article provides the deal stats on] 10 deals with the highest premiums based on closing share prices 30 days before the agreement date: Ambit Biosciences Corp. (Daiichi Sankyo Co.), NuPathe Inc. (Teva Pharm. Industries, Ltd.), Gentiva Health Services, Inc. (Kindred Healthcare, Inc.), Medical Action Industries Inc. (Owens & Minor, Inc.), Volcano Corp. (Royal Philips NV), Durata Therapeutics, Inc. (Actavis PLC), Auxilium Pharm. Inc. (Endo Int’l PLC), Pharmacyclics Inc. (AbbVie Inc.), Allergan Inc. (Actavis PLC), InterMune Inc. (Roche Holding AG)…"
  • Improving market conditions aid CFOs
    "Concordia Healthcare Corp. [has] announced…that it would acquire assets of private equity backed Covis Pharmaceuticals for $1.2B in cash. Toronto-based Concordia will purchase substantially all of the commercial assets of Covis Pharma S.a.r.l. and Covis Injectables S.a.r.l., including 18 branded and authorized generic products. The deal is expected to be 50% accretive to adjusted earnings per share during this year, according to a statement from Concordia. Covis…based in Switzerland and [with an] office in Cary, N.C.—has a number of products including injectables for ulcers, tablets for cardiac issues and other products for chronic illnesses…The transaction will be financed through a mix of term loans, bonds and equity. Concordia has entered a commitment letter with the Royal Bank of Canada that has credit facilities and bridge commitments of up to $1.6B…"

Research

  • Healthcare spending rate up 5 percent in January, report says
    “The latest round of healthcare spending numbers shows January spending was more than 5.7% higher than January 2014, suggesting the year is getting off to a strong start for the national health industry. According to statistics released by the Altarum Institute, the seasonally adjusted annual rate of healthcare spending was $3.16T last month compared to a rate of $3.15T in Dec. 2014. Hospitals made up 32% of the nation’s healthcare spending in January. For full-year 2104, Altarum said national healthcare expenditures grew by 5% year over year. When it came to growth by sector, the prescription drug field saw the biggest increase…an 11.6% change compared to 2013…Hospitals saw 6% growth…physician/clinical services posted the smallest growth at 2.6%…”
  • HHS spends $21.5 billion in healthcare contracts in 2014, report says
    “The Department of Health and Human Services spent $21.5B on contracts in fiscal 2014, an increase of 6.6% over last year, according to a new report card on government spending. The second annual report card published by analytics firm Govini offers the private sector insights into the buying habits of the public sector. Drug companies, government health insurance programs and IT are among HHS’s top vendors, according to the report. The amount of money to pharmaceutical companies has declined over the past three years, according to Director of Analytics Matt Hummer, though Big Pharma continues to head the list of top 10 vendors. Merck & Co. received $1.4B from HHS in 2014, and Pfizer, $856M, putting those companies in the number one and two spots respectively. GlaxoSmithKline came in fourth at $767.9M. Sanofi Pasteur was listed in the seventh spot at $630.9M, coming up in rank from number eight the year before…”
  • Nurses blame interoperability woes for medical errors
    "Each year, a staggering 400K people are estimated to have died due to medical errors. What's more, each day there's also 10K serious complications resulting from medical mistakes. Part of the blame, nurses are saying, can be attributed to the lack of interoperability among medical devices. That's according to new data published by the non-partisan Gary and Mary West Health Institute, which sought input from nurses nationwide. The results are telling. Some 60% of registered nurses said medical errors could significantly decrease if hospital medical devices were coordinated and interoperable. Even more marked was that half of them said they actually witnessed a medical mistake due to the lack of interoperability of these devices, which include infusion pumps, electronic medical records and pulse oximeters. When looking at the crisis from a cost perspective, West Health Institute officials estimate that a connected, fully interoperable health system could save a potential $30B each year by reducing transcription errors, manual data entry and redundant tests…"

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