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In this month’s edition of our newsletter we highlight three trends, which have been of long-standing interest to us at Mansa. One of these is the use of so-called “gaming theory” to enhance patient engagement. Essentially, these new applications—often available through a mobile device—reward patients for learning about their personal healthcare condition and their treatment plan and for taking specific action to support better health outcomes for themselves. The rewards can be gift items, a waiver of a co-payment or simply points. A second trend is the emergence of social media as a valuable tool for providers and patients alike. Providers increasingly leverage social media for their own peer-to-peer collaborations while patients progressively use social media to connect with other patients about their patient experience—and to assist in choosing a provider. A third trend is toward a wider use of activity-based cost analyses as a means of driving down costs as a result of declining revenues. The Mansa team has monitored these trends—among others—for the past few years and is excited about their potential to drive much needed change in the way we purchase and provide healthcare. Please enjoy this addition of our monthly sampling of news.

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 Operation Officer

Portfolio

  • Mansa plans to raise SBIC fund to invest alongside main vehicle
    Wall Street Journal covered Mansa Capital’s news regarding receipt of the SBA Green Light letter. Mansa Managing Partner and Chief Investment Officer, Ruben King-Shaw Jr., was quoted as saying, "We will be investing in companies with proven track record that addresses the under-served communities throughout the country." In the interview, King-Shaw Jr. highlighted states like Florida, Minnesota, Texas, Connecticut, New Jersey and California as areas the firm is looking at for opportunities.

Policy

Federal

  • Growing pains for Medicaid managed care expansions
    While states such as Texas and Florida among others are not expanding Medicaid under the ACA, they are expanding managed care, which creates opportunities (as well as challenges) for insurers. Competition from provider-based health plans is increasing. The Florida Agency for Health Care Administration negotiated with and is requiring managed care plans to have robust provider networks, and state Medicaid programs to be the most comprehensive ever. Rollout of the Managed Medical Assistance program—expected to cover over 3M—should be completed on August 1, 2014.
  • Big chill for telemedicine?
    The Federation of State Medical Boards (FSMB) released new guidelines that could potentially have a chilling effect on the growth of telemedicine particularly among rural areas, low-income patients. To safeguard patients’ privacy and ensure high-quality care in the post-reform environment, the FSMB changed the definition of telemedicine to care that “typically involves the application of secure videoconferencing…to provide or support healthcare delivery by replicating the interaction of a traditional encounter in person between provider and a patient.” Per the FSMB, [telemedicine] “is not an audio-only, telephone conversation, e-mail/instant messaging conversation or fax.”
  • EHR certification criteria under fire
    Industry groups including the EHR Association, American Medical Association (AMA) and Telecommunications Industry Association (TIA) are the latest to speak out against voluntary 2015 EHR certification under meaningful use. The EHR Association says the criteria are “neither necessary nor workable” and the AMA and TIA joined the cause. According to AMA’s analysis of the most recent CMS data on meaningful use, approximately 20% of eligible professionals have dropped out of the program, “a figure we expect to rise once all the data for 2013 are tabulated.” AMA said that poor EHR usability is partially due to a disconnect between development of the EHR and real world application.

State

  • Commonwealth Fund Study: National healthcare ROI 'falling woefully short'[Nationwide]
    The Commonwealth Fund’s Scorecard on State Health System Performance was released. Entitled “Aiming Higher,” the scorecard tracked 42 measurements of healthcare access, quality, costs, and outcomes across all 50 states between 2007 and 2012. The scorecard found that, on a significant majority of measures, the story is “mostly one of stagnation or decline.” According to the scorecard, performance worsened on nearly as many measures as it improved in most parts of the country.
  • Massachusetts sees mortality dip in wake of healthcare reform [Massachusetts]
    Despite concerns surrounding the possible implementation of death panels by opponents of the ACA, researchers at the Harvard School of Public Health have reported that less residents of the Bay State are dying in the wake of its 2006 healthcare reform and MassHealth expansion. Public health analysts at Harvard found that in the four years after Massachusetts instituted comprehensive health reform—a model on which the ACA is based—the state's mortality dropped 2.9% compared to states with similar populations and demographics that didn’t expand healthcare coverage and “from the kinds of illnesses where we expect healthcare to have the biggest impact, including infections, cancer, and cardiovascular disease," said lead author, Benjamin Sommers, Harvard School of Public Health Professor of Health Policy and Economics. Also included in their findings: the post-reform decline [in deaths] among minority groups was nearly twice that of whites.
  • Healthcare nonprofit learns patient engagement game [Washington]
    Until 2011, Washington Medicaid patients were treated at Community Health Plan of Washington. Since then, other providers have begun accepting Medicaid insurance while Community Health—for the first time in 20+ years—had to differentiate itself and its services from new competitors. To support this effort, Community Health chose Welltok’s CafeWell app. "When people carry out activities, we link them to rewards…[that] impact the cost of their healthcare—from gift cards...to reductions in premium or waiver of copayments or reduction of deductibles,” said Welltok Chairman and CEO, Jeff Margolis. Members like the service and use it to learn about health topics and to communicate with other patients.

Strategy

  • Where will HIT security be in 3 years?
    The crux of the healthcare security challenge is not about government requirements or even security-compromising mobile devices, but in providing small, often independent medical offices with typically no IT staff full network access to all files and physical building access to its employees and privileges to change/add to such ultra-sensitive data. Many industry insiders say it is possible to provide and even monetize such access, but only if participants agree to take security seriously.
  • UPMC unlocks cost data
    The University of Pittsburgh Medical Center (UPMC) hopes a cost-analysis system from their Italian transplant hospital will become the future of healthcare cost measurement here in the U.S. Currently, most hospitals use charges to measure costs. However, UPMC’s CFO, Robert DeMichiei, said the industry is moving into a new world where more accurate cost data is required by payers, patients and providers. “We are rapidly getting [to] where there will be extreme price deflation. We are realizing we have to lower costs and use fewer resources and we have to understand where we are profitable by product line, DRG, payer or physician.” And according to UPMC, that’s what the new, activity-based cost-analysis program can do. It pulls information from operational and financial systems along with more than 50 clinical activities at the hospital and aggregates it to provide information for each service offered. The custom-built system has been piloted throughout UPMC and by summer, will be implemented at 80% of the providers in its $6 billion system.
  • Social media undervalued in customer service
    In an increasingly mobile, consumer-driven world, payers have to understand that they're at the mercy of their members, and not the other way around, said Amit Shankardass, vice president of marketing for the Teleperformance Group, an international provider of multichannel customer experience management solutions. "The healthcare marketplace is changing. We're seeing more and more of a demand-driven consumer engagement environment…and payers have to adapt..." According to a recent survey of U.S. healthcare payers by Teleperformance's CX Lab found that healthcare consumers would prefer to deal with their health plans by: phone (69%), e-mail (21 %), click-to-chat (8%) or even mobile apps and social media (1%). However, Shankardass said "a fact that's not that surprising," is that mobile apps and click-to-chat are growing exponentially, but he went on to say that payers are slow to accommodate them.

Industry Activity

  • M&A hits record high
    With four bumper deals driving global healthcare mergers and acquisitions value to a record level, many are saying the long-awaited consolidation of the healthcare sector has arrived. So far this year there have been 656 healthcare deals struck worth $162.1B. The four recently announced deals account for 55% of this year's value, according to data provider, Dealogic. The “deal frenzy” could set off the next wave of M&A in the sector as competitors react to the moves. The healthcare sector has this year provided a welcome boost to squeezed investment banking revenues. M&A activity has driven healthcare banking revenues to a record $2.6B in 2014 (up 71% from 2013).
  • Hospitals should expect scrutiny of mergers and affiliations
    In a challenging financial climate, hospitals of all sizes are looking to partner up. However, the effort to increase market share by acquiring physician groups or other hospitals is drawing critical analysis from regulators, particularly if a merger results in eliminating the competition. According to Robert G. Hansen, the senior associate dean and professor of business administration at the Tuck School of Business at Dartmouth College, “If you form an accountable care organization, you can get scrutinized…if you do a merger or if you do any kind of an affiliation, you can get scrutinized. As a result of this increased level of review, it’s important for CFOs, legal counsel, and hospital boards to be briefed on antitrust issues, should have been doing so over the last few years.
  • Accessing capital in growth mode
    For over ten years, Metro Health, an integrated health system in and around Grand Rapids, Michigan, has distinguished itself from other community health systems mostly through its ability to access and leverage capital to support new primary and specialty-care facilities, build a replacement acute care hospital, and create an electronic health records system fully integrated between the hospital and its ambulatory sites. As opportunities ripen for hospitals to access capital through strategies such as public issuance of debts and securities, Metro’s success serves as a best practices template for effective capital acquisition. “Right now the [markets] are very strong for healthcare providers...seeking capital to access funding at competitive interest rates and terms,” said Quintin Harris, a vice president at Lancaster Pollard, which provides financial advice and financing solutions to sectors including healthcare.
  • Fresh with new HIX members, WellPoint starts year upbeat
    After the first open enrollment period, WellPoint is confident that public exchanges will be profitable and “they won't need to be bailing anybody out.” WellPoint, which is the parent company of Blue Cross-licensed plans in 14 states, posted net income of $701M or $2.40 per share, in Q1 2014 on revenue of $17.6B. That $701M is about 20% less than first quarter 2013’s net income of $885M but CEO Joseph Swedish—just over a year into his role with WellPoint—said in a media release it’s “better than expected…our membership is growing across our platforms and we are pleased with the progress we have seen in the exchanges.”

Research

  • Patients want online access to records
    According to a new survey by Accenture, over half of the people with chronic conditions say the ability to get their electronic medical records online outweighs the potential privacy risks. More than 2K individuals were polled (918 healthy respondents, and 1,093 with either asthma, arthritis, cancer, chronic obstructive pulmonary disease, depression, diabetes, heart disease, hypertension, clinically diagnosed obesity, osteoporosis and/or stroke). The vast majority surveyed—87%—said they want to control their health data. However, 55% said they don't have very much or any control over their medical information. Chronic patients—65%—were less concerned about the privacy of their electronic health records than they were about other digitally-stored info such as online banking (70%), in-store credit card use (69%) and online shopping (68%). Although they want to have access to their records online about half with chronic conditions said they don’t know how to do so.
  • Study: Illegal immigration doesn’t cause overuse of healthcare
    Before the ACA was close to passing, it was clear that immigrants illegally living in the U.S. would not be able to take advantage of its proposed benefits. It was said they’d not be allowed to buy health insurance from the online marketplaces, at least in part because opponents argued that illegal immigrants overburden emergency rooms and hospitals. But according to a recent study immigrants in America illegally are less likely to use health services than U.S. citizens and other immigrants here legally. Using 2009 data from the California Health Interview Survey, researchers found that 11% of adults living illegally in California had visited a hospital emergency room in the past year, a rate significantly lower than the 20% of U.S. born adults in California.
  • Healthcare security stuck in the Stone Age
    The Verizon Data Breach Investigations Report highlights a concerning carelessness around healthcare privacy and security. "They [the healthcare industry] seem to be somewhat behind the curve as far as implementing the kinds of controls we see other industries already implemented," said Suzanne Widup, senior analyst on the Verizon RISK team. According to the report, the healthcare industry’s biggest misstep is encryption. After examining some 63K security episodes and upwards of 1,300 breaches from 50 data-sharing partners, Verizon officials found that the majority of breaches—46 percent—stem from physical theft or loss of unencrypted devices, which is the highest percent across any of the 19 industries analyzed in the report. Verizon’s RISK Team says organizations failing to encrypt mobile devices and laptops is a part of the problem, but healthcare employees are also notably negligent with how they handle these devices—leaving them unsecured in personal residences or personal vehicles.

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. 2014 Mansa Capital©

Mansa Partner