Welcome to Mansa Capital
With the Midterm Elections completed and Congress back in session with new Republican majorities in the House and Senate, the pundits are already pontificating on the future of the Affordable Care Act. Not surprisingly, therefore, this edition of our newsletter focuses heavily on policy. In that section you’ll find a selection analyzing the future of Medicaid Expansion in Florida and Georgia among other states, a discussion of the U.S. Supreme Court’s upcoming landmark decision on the federal subsidies provided via state-based exchanges, and a selection examining the new Republican Congressional leadership’s support for healthcare IT initiatives. The Strategy section includes a selection, which asks the question: “What do the midterms mean for the future of mobile health?” and the Research section includes an article that looks at the compounding effect of foregoing Medicaid expansion and the scheduled reductions in disproportionate share payments to safety net hospitals. Policy and politics are not the only topics of this discussion across the healthcare economy. Innovation continues to march forward as illustrated in selections in the Strategy and Industry Activity sections. Healthsense, Inc., one of Mansa Capital’s portfolio companies, leads off the articles this month with a story about its innovative partnership with Fallon Health, one of the nation’s leading sponsors of PACE (Program for All-Inclusive Care for the Elderly). Please enjoy this month’s newsletter and have a happy and safe Thanksgiving.
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
- Healthsense announces partnership with Fallon Health's Summit ElderCare program
“Healthsense, Inc…announced today its partnership with Fallon Health, which offers one of the country's largest Programs of All-Inclusive Care for the Elderly (PACE), Summit ElderCare [which] helps older adults live independently…as an alternative to nursing home care. Summit ElderCare, employing Healthsense's eNeighbor remote monitoring technology…[will enable]…independent living for the community's most chronically ill and frail elders. 'By 2030 there will be 70M people in the U.S. over the age of 65, many of whom will have complex health conditions. The [U.S. health care delivery] system is not prepared to provide the physician, nurse and long term care services these people will need…the…eNeighbor platform provides actionable health status information through the collection of sensor data based on Activities of Daily Living (ADL) such as sleep quality, movement, eating, and other…wellness indicators. The sensors, placed discreetly throughout an individual's home, establish normal activity levels for each client based on…typical daily patterns. Using Healthsense analytics and software, eNeighbor [can] detect significant behavior deviations, resulting in an alert that is sent to a case manager for appropriate care intervention…”
- Could SCOTUS nix the Affordable Care Act after all?
"After considerable back and forth in federal district and appeals courts, the U.S. Supreme Court is going to consider the most audacious and pernicious challenge to the Affordable Care Act—the argument that only state-based exchanges can administer federal subsidies. Three days after a new Republican majority swept into Congress vowing to limit if not repeal the ACA, the Supreme Court has agreed to hear King v. Burwell, one of a family of cases brought with the…help of Cato Institute health policy analyst Michael Cannon and Case Western Reserve law prof., Jonathan Adler. Cannon and Adler scoured through the pages of the ACA and discovered that sections authorizing insurance tax-credits subsidies use the [phrase] 'exchanges established by the State.' The drafters of the ACA specifically intended only for exchange subsidies to be available in state-based exchanges and so the subsidies given to consumers via the federal exchange that operated in 36 states were illegal...While ACA supporters and other legal advocates call the argument ludicrous and the appeals court…agreed with the Obama Admin that state and federal exchanges are equivalent, other federal courts have split and at least four Supreme Court justices think the challenge is worth hearing…"
- How the Republican election victories impact health IT reform
"The Republicans will take over leadership of the Senate and will have an expanded majority in the House when the 114th Congress begins in January. Shifts in committee leadership, especially in the Senate, increase the likelihood that health IT reform legislation will be considered by Congress in 2015. Rumors of a full repeal of the Medicare Sustainable Growth Rate (SGR) and the passage of legislation focused on cyber security and information sharing have increased, even as agenda-setting for the lame duck session has begun. Why It Matters: With an author of the ‘REBOOT’ report and a long-time health IT champion, Sen. Lamar Alexander (R-TN) and Sen. Orrin Hatch (R-UT), likely to assume the chairmanships of the Senate HELP and Finance committees, respectively, health IT advocates are optimistic about…legislative reforms that could be considered by these two committees…[including] cyber security, the Meaningful Use Program, telemedicine, software regulation, quality measurement and patient safety reporting…"
- Small firms start to drop health plans
“Small companies are starting to turn away from offering health plans as they seek to reduce costs and increasingly view the [ACA’s] marketplaces as an inviting and affordable option for workers. In the latest sign of a possible shift, WellPoint said…its small-business-plan membership is shrinking faster than expected and it has lost about 300K people since the start of the year, leaving…1.56M in small-group coverage…The No. 2 insurer [projects] a five-year migration to ‘significantly reduce’ small-employer membership, but it now thinks the drop-off will be compressed into two years. Going forward…small employers will likely re-evaluate exchanges as an option…said Wayne DeVeydt, WellPoint’s CFO…Aetna Inc. CFO, Shawn M. Guertin, said the company is seeing ‘some erosion at the bottom of the market’ among employers with two to 10 workers. Kaiser Permanente is seeing 'some contraction' in the small-group market, particularly…where insurers are offering cheap individual plans. The [ACA] doesn’t penalize companies with fewer than 50 workers that don’t offer coverage, and those with fewer than 100…won’t face fines until 2016…"
- Digitizing healthcare on the state level [nationwide]
"A state initiative spurs digital healthcare innovation, blurring the lines between healthcare and human services. The immediacy, accessibility, and personalization of digital interactions have changed people's behaviors and expectations in many aspects of their lives, and healthcare is no exception. Digital is making an impact at every level of the healthcare system. It is transforming traditional patient-provider relationships by enabling capabilities such as self-management, healthcare literacy, and remote monitoring—allowing people to be more proactive and accountable for their well-being. In public health, digital tools are beginning to connect people to medical and human services professionals in profound ways, going beyond traditional interactions with healthcare delivery to address social and behavioral determinants of health. At a state level, the CMS has created a $1B initiative to fund participating 'State Health Innovation Plans,' which aim to improve delivery systems and payment models across Medicare, Medicaid, and the Children's Health Insurance Program. The program awarded 25 states with the first round of funding in 2013 to design models or test improvements. A second round of funding was announced in May 2013…"
- Medicaid expansion unlikely in 5 states [Florida, Georgia, Kansas, Maine, Wisconsin]
“The re-election of Republican governors in closely contested races in Florida, Georgia, Wisconsin, Maine and Kansas dims the chances of Medicaid expansion in those states…In Florida, Republican Gov. Rick Scott has supported Medicaid expansion, but has done little to persuade state lawmakers to extend the program to 850K residents…Meanwhile, the future of Arkansas’ ‘private option’ Medicaid expansion could be in trouble with the election of Republican Asa Hutchinson as governor and GOP gains in the state House and Senate. Hutchinson replaces Democratic Gov. Mike Beebe, who had championed the state’s expansion plan and who was barred by term limits from running…”
- 8 innovative health IT startups
“…By mid-year 2014, investment in health tech companies grew to $2.3B, up 176% from 2013, health-tech funding firm Rock Health reported. In that period, 146 digital health companies each raised more than $2M. Most health IT startups fall into one of six categories: payer admin, which raised $211M, Q1-2, 2014; digital medical devices, generating $206M; analytics and big data, raising $196M; healthcare consumer engagement, which reaped $193M; population health mgmt, raising $162M; and personalized medicine, $150M…[8 Startups:] BioBots…uses 3D printers to engineer biology [including ears]…OhMD allows doctors/patients to securely text each other and integrate those messages into an org's electronic health record (EHR)…Drop Diagnostics wants to replace…painful, time-consuming blood tests with a…fingertip prick in a doctor’s office…Butterfly Network…is…an inexpensive handheld medical imaging device that will create 3D images in real-time…[with the] RistCall…wristband…patients [can] safely call for help…Tissue Analytics and Healogram…have [mobile apps] to monitor wound care…[Vida’s app connects consumers] to dieticians, nutritionists, physicians…specialists [who can] help them…get/stay fit, detox, lose weight, lower cholesterol…reduce stress, cut blood pressure, prevent diabetes...Omicia is a genome interpretation platform [is] for disease research; diagnostic testing; clinical trials; drug reporting…”
- What midterms mean for mHealth
“Now that the Republicans have wrestled control of the Senate away from Democrats and maintained their lead in the House…what does this mean for mobile and telehealth?...While the [ACA] was at or near the top of many a [GOP] agenda, those now taking office or staying in office have generally conceded that the president's sweeping healthcare reform package will be tough to reverse…What may take a hit is Medicaid. While the ACA expanded the program to cover more people, 23 states have opposed that expansion, arguing that it's too expensive and the federal government won't be able to support it long-term. With more Republican governors and state legislatures now in power, expect that backlash against Medicaid to continue...This is where mHealth could find some common ground. While healthcare leaders have…argued that mobile and telehealth…will only advance if Medicare/Medicaid pick up more of the reimbursement slack, many pilot projects have been proven to cut costs, improve access to healthcare and…clinical outcomes. So…while doctors won't be seeing any more money for using mHealth to connect with the underserved population, they could see the technology as a better means of doing more (and better) with what they have. The reimbursement angle will be a tough sell–even tougher now, going forward–but this could force mHealth advocates to be more convincing about the clinical benefits..."
- Telepsychiatry brings help to remote patients
"Telehealth tech is expanding access to affordable mental health services. In many regions, qualified professionals are scarce, insurance coverage varies, wait times are long, and appointments are [often] scheduled during work/school hours. Only about 20% of adults with mental health disorders see mental health specialists. Others go untreated or see general practitioners for help. 'There's a lack of available qualified providers. There's a terrible access problem…Stigma is also huge,’ said Dr. Jennifer Gentile, MM, PsyD, instructor in psychology at Harvard Medical School and head of Amwell Therapy Associates. Short-staffed state healthcare organizations send psychiatrists on extensive drives across sparsely covered districts, where they can manage to see only a small number of patients each day. Mark Binkley, general counsel at the South Carolina Dept. of Mental Health, told us these departments frequently try to recruit mental health professionals to work in rural areas, vying against the allure of private practice or organizations in more populated regions. The SC Dept. of Mental Health…has [over] 30 vacancies for psychiatrists…Studies suggest telepsychiatry saves at least $1,400 per episode of care. Binkley said there's an improvement of more than 200% in patients' mental health, since they are much more likely to seek post-release follow-up care.”
- Urgent care M&A brings retail focus
“Hospital Corporation of America is acquiring CareNow, an urgent care clinic network in greater Dallas-Fort Worth, for an undisclosed sum. It’s the latest evidence of health systems facing an urgent need to improve and diversify their overall customer experience. CareNow operates 24 walk-in clinics in the…Dallas-Fort Worth region, offering care for minor emergencies like cuts, sprains and burns, as well as family and general care, for immunizations, physicals and EKGs…Today, CareNow accepts insurance from 30 health plans…But with the specter of Walmart, CVS and dozens of walk-in and urgent care chains becoming a central part of people’s healthcare, these offerings are needed to compete in the new health economy…CareNow will become a division inside of HCA and could give it a large urgent care foothold and hospital and physician referral buoy in one of its largest markets. In [Dallas-Fort Worth] HCA operates 11 hospitals and [50+] ambulatory sites, with [5k+] physicians…”
- HealthCare.com raising $7.5M as HealthCare.Gov begins again
“HealthCare.com, a company that provides an online market for insurance, is raising $7.5M in funding to expand its services—just as the U.S. government’s healthcare.gov begins its second year of enrolling patients under Obamacare. Backers of the closely held site include Jeffrey Boyd, chairman of Priceline Group, and Robert Mylod, that company’s former vice chairman. Priceline is the owner of travel sites priceline.com and Kayak. HealthCare.com, founded in 2006, will be able to capitalize on demand for clear information as consumers move from employer-sponsored insurance plans to coverage under the [ACA], Boyd said in a statement. The government’s Centers for Medicare and Medicaid Services opened healthcare.gov for ‘window shopping’…letting consumers compare prices, and will start accepting enrollment for 2015 on Nov. 15. The website is operating well and has undergone extensive testing to avoid the bugs that plagued it when enrollment started last year, Andy Slavitt, the agency’s deputy director [said]…”
- Intermountain, Healthbox join forces
“…Intermountain Healthcare is teaming up with Healthbox for a venture initiative meant to drive collaboration among inventors, entrepreneurs and others in the healthcare industry to improve quality and lower costs...Intermountain, with its 22 hospitals and 185 physician clinics, has long been…focused on affordability and quality outcomes. Healthbox, a business accelerator focused on health IT, will partner with Intermountain to further foster relationships with the entrepreneurial community…inside and outside of the healthcare system…helping Intermountain test new ideas inside the organization and become an early adopter of innovative outside technologies. ‘We have a responsibility to always improve the healthcare available to the communities we serve,' said Bert Zimmerli, Intermountain’s CFO. 'Collaborating with Healthbox provides us not only with the foundation to expand the impact of their solutions but the means to form relationships with [tech] entrepreneurs…that will improve quality and reduce…cost of care for our patients.'…”
- Partners HealthCare M&A deal under scrutiny
“Partners HealthCare, which is the top private employer in The Bay State with about 60K workers and a dozen hospitals in its provider network, is a not-for-profit health system based in Boston. It was founded 20 years ago by two of the most prestigious academic medical centers in the country: Massachusetts General Hospital and Brigham and Women's Hospital. Partners' quest to acquire three more suburban hospitals has drawn fire from insurers and other critics, who are pressuring Massachusetts AG Martha Coakley to toughen an anti-trust settlement deal she cut with the health system in May. The pact includes price caps and growth limits on Partners for several years...”
- Healthcare employment bouncing back
“Healthcare hiring continues to rebound from a slump that slowed, but never halted, job growth. The sector added 24,500 jobs last month and nearly 257,000 jobs during the prior 12 months. New hiring in healthcare dipped last year and remained weak this year, but has gained momentum in recent months, federal employment data show. The latest data of October, released by the U.S. Bureau of Labor, suggest that the hiring rebound continued. The October data are preliminary and won’t be final until January. As of October, healthcare employed 14.8M workers. Economists with the Altarum Institute highlighted the accelerated hiring last month, and questioned whether employment gains were strongest in states with broader expansion of health insurance under the ACA…”
- EHRs will save healthcare industry $78B over five years
“Electronic health records (EHRs) are expected to save the global healthcare industry $78B between 2014 and 2019, according to a new report from Juniper Research. The report, Digital Health, Remote Monitoring & EHR Cost Savings 2014-2019, argues that EHRs are crucial as the supporting infrastructure for a wide range of digital healthcare and mHealth projects. New accountable care organization (ACO) initiatives are resulting in a re-think in how healthcare needs should be addressed, supporting the evolution of digital healthcare…The report finds that the medical profession will increasingly rely on EHRs to support disparate elements of digital health: ‘Advanced EHRs will provide the glue to bring together the devices, stakeholders and medical records in the future connected healthcare environment,’ said…author, Anthony Cox…[The] report cautioned that positive developments are being offset by the lack of randomized controlled mHealth trials…Nevertheless, it argued that two key factors are expected to buoy the digital healthcare sector. Firstly, regulatory authorities are embracing the role of digital healthcare…Secondly, the principle of technologically advanced healthcare is becoming popularized through Apple’s HealthKit and Samsung’s SAMI (Samsung Architecture for Multimodal Interactions) user interfaces…”
- Medicaid DSH cuts mean crisis for some hospitals
"Hospitals dependent on Medicaid disproportionate share allocations must discover new financing models for low-income patients, or lobby their state governments to make policy changes. According to…Health Affairs, many struggling American hospitals are reliant on Medicaid disproportionate share payments as a source of revenue, even as these payments fade away and uninsured patients remain so in states that aren’t expanding Medicaid eligibility…[Identified were] 551 hospitals with weak operating margins. Of those, 42% are 'highly reliant’ on Medicaid DSH payments, contributing [over] 2.5% of their revenues…The Medicaid DSH program was intended to offset hospitals uncompensated care costs and gave states the flexibility to allocate it, with the national spending approximating $11B in recent years. The…ACA was intended to bring universal insurance coverage with subsidies for low-income populations and Medicaid eligibility for everyone under the poverty line, and, assuming every state would expand. The DSH cuts were delayed until 2017 by last year’s Medicare payment law (the same…that delayed ICD-10 until 2015) but the cuts are still set to come and will be substantial, totaling $35B over [from] 2017 to 2024…Texas hospitals, originally set to see a 5% reduction in their federal allocation, will now see them fall 20%...The decision of 25 states not to expand…[Medicaid]…‘combined with residual coverage gaps, may leave as many as 30M people uninsured, and hospitals will bear the burden of their uncompensated care costs,’ they wrote…”
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©