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Americans continue to be divided over the Affordable Care Act (ACA) – commonly known as “Obamacare.” So entrenched in their respective positions, Congress “shutdown Government” and left millions of federal workers without pay. Supporters see Obamacare as a positive change that ultimately will bring costs down and make affordable health insurance coverage available to nearly all Americans. Indeed, those with pre-existing conditions can benefit greatly from The Act, as can those in need of physical and occupational therapy, mental health services and pediatric dental care. Hispanic Americans – who comprise our nation’s most uninsured population – stand to gain affordable coverage through new insurance exchanges or with Medicaid’s expansion in many states. Moreover, millions of asthmatics and hypertensive patients can finally get the wellness and prevention services they deserve.

Opponents generally lead with the description of Obamacare as a ‘job killer’.  Under the law, most employers with 50 full-time employees or more must provide health coverage consistent with specific federal standards – or pay a tax. The government would use that tax revenue to subsidize premiums for low-income families and to cover emergency care for the uninsured. The more low-income families choose to buy coverage – a primary goal of Obamacare – the higher the tax needed to subsidize their insurance costs. The ever-increasing tax, so the opponents argue, siphons dollars needed to fund growth and create jobs. Because seasonal and contracted employees are not counted toward the 50 FTE threshold, companies can replace full-time positions with temporary labor to avoid the tax penalty. This creates an “insecure” labor pool, which is apt to spend prolonged periods of unemployment between seasonal or contracted work. One result, for example, would be the inability of the now temporary workers to qualify for home mortgages – thus weakening the housing market. That would have negative impact across many economic sectors.

As an investor, labor economist, former Senior Advisor to the Secretary of the U.S. Treasury as well as the former COO and Deputy Administrator of the Centers for Medicare and Medicaid Services, I find both arguments valid. Obamacare can help millions Americans gain affordable insurance that meets their specific needs. It can also be a drag on economic and job growth. The battle over Obamacare is a battle over America’s relative priorities. Regardless of the outcome, Mansa Capital is perfectly positioned for continued success. Our investment strategy is reflective of the trends which are independent of The Act’s ultimate fate: age and ethnic demographics, advances in clinical science, innovations in information technology and consumer demand for value. Please enjoy this month’s collection of the stories that illustrate the strength and diversity of the U.S. healthcare economy.

Ruben J. King-Shaw Jr. is Managing Partner and Chief Investment Officer of Mansa Capital

Policy

Federal

  • Government shutdown causes more than half of HHS’ employees to be furloughed
    The Congress failed to pass legislation to continue funding the federal government. As a result, the Department of Health and Human Services will now be forced to furlough more than half (around 52.0%) of its employees. Medicare, Medicaid, health insurance exchange and units with “a substantial direct service component” like Indian Health Service (IHS) will maintain most of their staff while employee-intensive and grant-making agencies, like AHRQ and SAMSHA, will be operating without the majority of employees
  • New bill removes the license requirement for telemedicine treatment
    The "TELEmedicine for MEDicare Act" bill, introduced in Congress will help reduce bureaucratic and legal barriers between Medicare patients and their doctors as it seeks to update current licensure laws to allow healthcare providers to treat veterans across state lines without the need for additional licenses
  • CMS issues final DSH rule on Medicaid payments
    According to Healthcarefinancenews, the Centers for Medicare & Medicaid Services (CMS) issued a final rule on Medicaid payments which outlined its methodology on how the DSH payment reductions would be made to disproportionate share hospitals (DSH) last week. The rule cuts approximately $1.1 billion from the program over the next two fiscal years. The rule covers payments for 2014 & 2015 only, while CMS will reduce payment by $18.1 billion between 2014 & 2020
  • Mid-tier health insurance plan to cost $328.0 a month under Obamacare
    Per Reuters, the Obama administration said that the average monthly premium for a mid-tier health insurance plan under the new health reform law would be $328.0, 16.0% lower than the previous projections. Reuters' findings are based on the data for approved insurance plans in 48 states and is a national estimate of how much Americans will pay under Obamacare
  • White House announces health care information security measures
    As reported by Yahoo news, the Obama administration announced a high-level effort which includes a toll-free telephone number, an identity verification system and an education campaign to reassure Americans about the privacy and security of the information submitted under the new health care law
  • ACP calls for meaningful use Stage 2 delay
    According to Healthcareitnews, the American College of Physicians, the largest medical specialty organization and the second-largest physician group in the United States, has added to the growing calls for a delay in Stage 2 meaningful use requirements because it believes an aggressive timeline combined with overly ambitious objectives may limit the success of the Meaningful Use EHR Incentive Program and has asked for less prescriptive requirements
  • White House proposes new rules on employer mandate
    As per Boston.com, White House has come out with new proposals on employer mandate wherein the Treasury Department is seeking comments through early November on options to reduce or streamline reporting by employers, insurers and health plan administrators and to eliminate duplicative reports and lesser detail

State

  • CMA petitions Supreme Court to review 10.0% Medi-Cal pay cut
    According to California Healthline, the California Medical Association has petitioned the U.S. Supreme Court to review a federal court ruling that upheld a 10.0% cut to Medi-Cal reimbursement rate retroactive from June 1, 2011. The cut will start at $917.0 million for fiscal year 2013-2014 and one year later will increase to $1.4 billion
  • New Mexico companies to lose money under Medicare home health funding cuts
    A report by Bizjournal states that with the proposed cuts to the Medicare home health funding of 3.5% a year from 2014 to 2017 (and $22.0 billion over the next 10 years), more than three quarters of New Mexico’s home health care agencies would lose money and would have to cut staff since Medicare does not pay for much of the infrastructure required for treatment
  • New Jersey to forgive student loans to retain doctors
    According to Nj.com, in an effort to decrease New Jersey's physician shortage, the state Senate Education Committee on Thursday passed a bill that would forgive student loans for doctors who work in under-served areas of New Jersey for at least 10 years

Strategy

  • Walgreen to move its workers to private health insurance exchange
    Businessweek states that Walgreen Co., the biggest U.S. drugstore chain, will move its workers to a private health insurance exchange run by Aon Plc. to buy company-subsidized coverage. This private exchange, similar to Obamacare’s public exchanges, is not linked to the Affordable Care Act
  • Health care spending slows, but out-of-pocket costs grow
    According to Health Care Cost Institute’s 2012 Health Care Cost and Utilization Report, overall health care spending grew 4.0% in 2012, driven largely by increased spending on outpatient services and pharmaceuticals. At the same time, out-of-pocket costs rose 4.8% to $768.0 per person
  • US unions demands for major changes to the Affordable Care Act
    As reported by Businessweek,  US unions who were among the biggest helpers to President Obama in getting the Affordable Care Act passed in 2010 are not happy with the way Obamacare is being implemented. The member unions of the AFL-CIO passed a resolution that has called for major changes to the law at the organization’s quadrennial convention and demanded for tax subsidies for their members, exemption from reinsurance fees, and no discrimination between full and part-time workers
  • U.S. health spending to jump by 6.1% in 2014
    According to CMS projections, National Health Spending will accelerate in 2014, jumping to a 6.1% growth rate, as more individuals access health insurance under the Affordable Care Act and the expectation that the economy will gain steam. The ACA will be responsible for 1.6 percentage points of the total spending increase
  • Data analytics continues upward trend
    According to a new Chilmark Research report, the shift toward new value-based healthcare payment models has a growing number of healthcare organizations focusing their attention on population health by analyzing the troves of data contained in electronic health records with a major share of buyers consisting of large payers and healthcare systems with financial wherewithal and further market development will depend on hospital margins
  • FDA To Regulate Mobile Health Apps
    According to mobile-tech-today, the FDA will start monitoring a handful of apps that turn smartphones into devices, like a heart monitor, or medical attachments that plug into smartphones, like arm cuffs that measure blood pressure but will leave out the majority which do not pose a risk if they malfunction
  • Smartphone-based fitness and mHealth device users to rise to 100.0 million by 2018
    As per the report, ‘Mobile Health & Fitness: Monitoring, App-enabled Devices & Cost Savings 2013–2018′, there will be 96.0 million users of app-enabled mHealth and mobile-fitness hardware devices by 2018, up a total of 15.0 million on this year. In the healthcare sector, app-enabled mHealth will be used to drive services ranging from remote patient monitoring to mobile ultrasound services
  • Healthcare prices remain steady through August
    According to the Bureau of Labor Statistics, the August PPI report indicated that prices across the range of healthcare industries remained steady since July, although they were 1.1% higher than a year ago
  • Obamacare causing a shift in the insurance market offerings
    As per Bizjournals.com, the federal health insurance marketplace under Obamacare is causing a shift in the industry and will blur the boundary between commercial and government health insurance as companies such as CareSource with a long history managing Medicaid start selling individual plans for the first time
  • Healthcare hiring to increase despite uncertainty over costs
    According to a survey conducted by  Boston-based CFO Magazine and Duke University, while chief financial officers are wary of expenses related to the federal health care overhaul, they still expect to increase full-time domestic hiring by 2.0% in the next year
    Moody's reports weaker hospital finances
    A recent Moody’s report states that expense growth surpassed revenue growth for the first time since 2008 but the median total operating revenue growth rate slowed to 5.2% in 2012 compared to the improved 2011 rate at 5.4%. The median net patient revenue growth rate for not-for-profit hospitals declined to 4.7% from 5.3% in 2011
  • Reports ask for change to cancer care delivery for improvement and affordability
    According to Institute Of Medicine report, changes to care delivery and payment models need to happen in order to improve the cancer care delivery system and prevent it from going out of reach of most by using quality measurements and models such as bundled payments, accountable care organizations, etc. to reward high quality and efficient treatment
  • Office of the National Coordinator offers certification targeting non-MU providers
    As per Healthcareitnews, the Office of the National Coordinator has drawn up a certification guidance aimed at technology developers serving specialized providers, who practice in long-term and post-acute care setting and are ineligible for Medicare and Medicaid EHR incentive payments, to serve as a building block for federal agencies and stakeholders as they work with different communities to achieve inter-operatable electronic health information exchange
  • American Medical Association publishes toolkit to help docs meet HIPAA rules
    According to Healthcareitnews, with huge new revisions to federal privacy and security regulations set to take full effect Sept. 23, the American Medical Association published a new toolkit, HIPAA Omnibus Final Rule, which provides guidance to help physicians review and update their existing HIPAA policies and procedures with an easy to understand breakdown of the revised rule, including encryption safeguards for electronic patient information
  • Navigators question GOP Lawmakers’ Information Requests
    Kaiserhealthnews reports that  the organizations that received the latest round of health law navigator grants say the letter from House Republicans, which requested that the organizations provide extensive new documents about their participation in the program and schedule a congressional briefing by Sept. 13., could strain the efforts to hire and train outreach workers to sign up Americans for health insurance by Oct. 1
  • Healthcare jobs rise rapidly in August
    According to the Bureau of Labor Statistics’ jobs report, the healthcare sector added 32,700 jobs in August. Ambulatory healthcare services had the most growth, with 26,600 added jobs, while hospitals saw the least growth, adding only 900 jobs in August. Home healthcare services and nursing and residential care facilities continued to be solid, adding 9,500 jobs and 5,200 respectively

Portfolio Companies

Industry Activity

  • Vista Equity Partners acquires Greenway Medical Technologies Inc. for $644.0 million
    Reuters reports that Vista Equity Partners has acquired Greenway Medical Technologies Inc., which offers revenue cycle management and other cloud-based healthcare platforms, for $644.0 million paying a premium of 19.0% on Greenway’s stock. The combined business will serve nearly 13,000 medical organisations and 100,000 providers
  • Gentiva acquires Harden Healthcare for $408.8 million
    A recent report by Bizjournals states that Gentiva will acquire Harden Healthcare, which runs home health and hospice services in 13 states, for $408.8 million in a deal which includes $355.0 million in cash and $53.8 million in Gentiva common stock
  • Quality Systems, Inc. acquires Mirth Corporation to boost interoperability
    A recent report by Healthcareitnews, Quality Systems, Inc. has acquired Mirth Corporation, one of the most adopted, open and globally trusted interconnectivity platforms, in a bid to boost the interoperability of its NextGen electronic health record subsidiary and broaden its accountable care and population health capabilities
  • Kindred Healthcare acquires TherEX Inc. for $14.0 million
    According to Bizjournals, Louisville-based Kindred Healthcare Inc. has acquired Franklin, Tenn.-based TherEX Inc., a hospital-based rehabilitation provider, for $14.0 million. TherEx would be incorporated into Kindred’s Rehab Care division which is the nation’s largest contract rehabilitation manager
  • TransUnion Healthcare acquires eScan Data Systems
    According to Bizjournals, TransUnion Healthcare has acquired eScan Data Systems of Austin, which develops software to help hospitals and health care systems discover and reduce uncompensated care costs. After the acquisition is completed, eScan will provide expertise to the TransUnion’s reimbursement efforts to reduce costs from uncompensated care using automated systems to replace analog record-keeping practices
  • Presbyterian Healthcare Services acquires The Solutions Group
    According to Bizjournals, Presbyterian Healthcare Services has acquired The Solutions Group, an Albuquerque wellness and employee assistance company, in an effort to expand its wellness programs to smaller employer groups. The deal will allow them to offer wellness services to all employer groups instead of large ones currently
  • Mednax acquires Northern Westchester Anesthesia Services in all cash deal
    According to Bizjournals, Mednax has made its eighth acquisition in 2013 by acquiring Northern Westchester Anesthesia Services. The NY based practice is the second anesthesiology group in the state to join the Sunrise-based company and was paid cash in the deal, but didn’t announce the actual amount
  • PracticeMax acquires Medi-Data Service amid expansion towards MidWest
    As per its press release, PracticeMax has acquired Medi-Data Service, one of the oldest most respected medical management firms in the Chicagoland area. With the acquisition, PracticeMax, a national provider of medical practice management and technology services, continues its expansion towards Midwest U.S.
  • HealthStream acquires Baptist Leadership Group for $8.5 million
    As per Bizjournals, HealthStream has acquired Baptist Leadership Group, a health care consulting practice owned by Baptist HealthCare.  HealthStream paid approximately $8.5 million for BLG's assets, subject to a working capital adjustment, where $8.0 million was paid in cash and $0.5 million was paid in HealthStream's common stock
  • Teladoc acquires Consult A Doctor, expands service offerings and member base
    Teledoc, the nation’s first and largest telehealth provider with more than 6.0 million members, announced in its press release that it has acquired Consult A Doctor,  a telehealth company founded in 2007, which will help expand its service offerings and member base to individuals and employees of small- to medium-size businesses through its national network of U.S. board-certified, state-licensed physicians
  • WellCare Health Plans Inc. acquires Windsor Health Group Inc. giving it access to low income beneficiaries
    Bizjournals reports that WellCare Health Plans Inc. will acquire Windsor Health Group Inc., a health specialty management company and part of Munich Re group, in a deal that could give WellCare access to Windsor’s 59,000 low income medicare beneficiaries and those dually eligible for Medicare and Medicaid. The deal is expected to close within 3 to 4 months
  • MedSolutions acquires Triad Healthcare
    A recent article by Bizjournals says MedSolutions, a medical cost management company, announced that it has acquired Triad Healthcare, a musculoskeletal specialty benefits management company. These areas account for 18.0% of commercial payers' costs, 17.0% of Medicare costs and 10.0% of Medicaid costs. MedSolutions which started with radiology benefits management, has been expanding its offering

Research

  • Medical Identity theft on the rise
    According to a report by Ponemon group, medical identity theft victims, totaling 1.84 million, paid $12.0 billion out of pocket last year due to misdiagnosis, inaccurate treatment, delay in treatment and wrong prescription drugs. Some 313,000 new cases of medical ID theft were reported last year in addition to the many unreported
  • Medical loss ratio rule hits profits of individual market insurers, spares group health plans
    A study published in Health Affairs found that the operating margins of group health plans to some extent are compensating for declines in the individual market. Among the individual health plans studied, the median loss ratio increased by 5.5% between 2010 and 2011— meaning they either paid more in claims or provided refunds — while the median administrative ratio fell by 2.6%. The median operating margin for for-profit individual plans fell 1.3% between 2010 and 2011 while for group health plans it increased
  • Federal incentives prompt higher EHR investments
    As reported in a cost survey released by the Medical Group Management Association, federal incentives have made physicians make EHR investments and hence the median expenditure per full-time equivalent physician rose from $15,211.0 in 2008 to $19,439.0 in 2012
  • Nearly half of the hospitals have not started testing for ICD-10
    According to Health Revenue Assurance Holdings, while CMS recommended that hospitals start testing for ICD-10 in 2013, nearly half of hospitals it surveyed weren’t planning to begin until between January and April of 2013 and the other half have not begun training or providing document improvement education to their staff which could adversely affect revenues
  • HIMSS feels hospitals ready for meaningful use now
    According to a new analytics survey by HIMSS, approximately 68.0% of hospitals have purchased technology from a software vendor that has been certified to the 2014 Edition certification criteria and around 70.0% of respondents across all metrics are actively moving toward meeting Stage 2 meaningful use requirements
  • 41.0% of Americans could consider physician switch for EHR Access
    A survey conducted by Harris Interactive states that as patient engagement grows a growing number of U.S. consumers (41.0%, 1000 sample size) would be willing to switch doctors to gain online access to their own electronic medical records while doctors are not as eager to make the change
  • Decline of independent doctors expected to accelerate
    According to a report by Deloitte Consulting LLP., the acquisition of independent physician groups by hospitals is expected to grow by 71.0% in the next three years, a trend driven by the Affordable Care Act and the need among younger doctors for more balance in their lives leading to an acceleration in the decline of independent doctors
  • HHS says Medicare recovery audit contractors can do better
    As per HHS, recovery audit contractors identified about 1.1 million Medicare overpayments during fiscal years 2010 and 2011, half of all claims they reviewed. Just over 6.0% of the overpayment determinations were appealed by providers, and less than half of those were overturned in the providers' favor.  However, the OIG did not determine the accuracy of the Medicare RAC’s improper payment decisions, but argued that the Centers for Medicare & Medicaid Services could do a better job evaluating its own efficacy
  • 40.0% of uninsured adults in North Carolina likely to miss out on affordable care
    As per a report released by Commonwealth Fund, 40.0% of uninsured adults in North Carolina  won't have affordable health coverage options since 26 states including North Carolina have chosen not to expand eligibility for Medicare next year
  • Institute of Medicine suggests CMS not to adjust Medicare payments geographically
    Institute of Medicine through its report “Variation in Health Care Spending: Target Decision Making, Not Geography”, recommended that the Centers for Medicare and Medicaid Services should not adjust Medicare payments geographically and instead should continue to focus on value-based payment reforms, such as patient-centered medical homes, bundled payments, and accountable care organizations
  • Death from Heart disease is preventable in 25.0% of cases
    According to CDC, at least 200,000 or 25.0% of deaths a year in the U.S. from cardiovascular diseases are avoidable, if people quit smoking, limit salt intake and adopted other healthy habits
  • Increased need to rationalize the eligibility process with implementation of the Affordable Care Act
    According to a report from Healthfinancenews, as potentially millions more patients lining up for care, there will likely be an increased need for providers to rationalize the eligibility process and reduce the number of layers of authorization for a transaction and increase cost transparency

Website:  http://www.mansaequity.com/


About Mansa Capital:
Mansa Capital is a health care private equity investment firm specializing in high growth companies in the health care services and health care technology sectors. Mansa focuses on companies as they prepare for expansion, acquisition, privatization or IPO. We integrate strong expertise in health care policy, regulation, and reimbursement with vast experience in health care 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 hange 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