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While the conversation in much of the country is dominated by the first playoff series in big-league college football, the discussion among the investment community returns to two familiar theses: Obamacare and healthcare information technology. This edition of our newsletter captures the debate. The Policy section includes a story on the Administration’s “reboot” of its HealthCare[dot]gov website. Also included is a selection describing the cancellation of “non ACA compliant” insurance policies across 12 states. The Strategy and Research sections highlight several of the ways technology is transforming healthcare delivery for Hipsters, Baby Boomers and in Senior Living. The Industry Activity section offers some encouraging trends. Increased investment in healthcare technology firms coupled with sustained M&A activity bodes well for the sector and for the funds—such as ours—which invest in HCIT. We begin this month’s edition, however, with the announcement of a major development at HealthPrize Technologies—one of the newest additions to our portfolio. Please enjoy this edition of our newsletter.

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

Portfolio

  • Hand out prizes for adherence? West and HealthPrize team up to test the ideaI
    “…West Pharmaceutical Services…and HealthPrize Technologies are teaming up on a new, interactive initiative that encourages patients to take their medication and rewards…when they do. [The] program…aims to…prevent…drop-off that leads to skipped refills and bad patient outcomes. Patients not sticking to their prescriptions [costs] the U.S. healthcare system…$290B+ in otherwise avoidable spending, and global revenue loss…adds up to $564B...'The issue of patient compliance has become really critical,' Graham Reynolds, vice president of marketing and innovation at West…Once patients rack up enough points, they can cash them in for rewards. Participants can choose smaller rewards more frequently or keep their eye on a larger prize, but patients tend to like smaller payoffs more often, said Katrina Firlik, HealthPrize's co-founder and chief medical officer..."

Policy

Federal

  • Next edition of HealthCare.gov is unveiled
    “The Obama admin unveiled a new version of HealthCare[dot]gov…with some improvements as well as at least one early mistake and a new challenge. Officials also said that HealthCare[dot]gov won't display premiums for 2015 until the second week of November. Open enrollment [is] November 15th to February 15th. Coverage can start as early as January 1st. On the plus side, the health insurance website will feature a streamlined application for most of those signing up for the first time. Seventy-six screens in the online application have been reduced to 16, officials said. The site has been also optimized for mobile devices…The Spanish-language site had lots of problems last year, ranging from technology issues to clunky translations that left some native speakers puzzled. The admin struggled to sign up Hispanics, the nation's largest minority and more likely to be uninsured than other ethnic groups…”
  • Lawmakers approve $700 million to fight Ebola
    “The Republican chairmen of House panels that oversee the Pentagon signed off…on an additional $700M to pay for the military mission to help fight Africa's deadly Ebola outbreak. [The] action by Armed Services Committee Chairman Howard ‘Buck’ McKeon and Appropriations Chairman Harold Rogers would permit a total of $750M in funds leftover for fighting in Afghanistan to be used to provide logistical help for healthcare workers in W. Africa. The first $50M was released last month. The admin originally requested $1B to send up to 4K troops to Africa. In briefings this week, McKeon said Pentagon officials estimate $750M would cover a six-month mission that would include airlifting personnel, medical supplies, protective suits and equipment such as tents to house Ebola victims and isolate people exposed to the virus…”

State

  • 12+ states plan to cancel healthcare policies not in compliance with ACA [nationwide]
    “More than a dozen states plan to cancel healthcare policies not in compliance with ObamaCare in the coming weeks, affecting thousands of people just before the midterm elections. 'It looks like several hundred thousand people across the country will receive notices…,' said Jim Capretta of the Ethics and Public Policy Center. The policies are being canceled because states that initially granted a reprieve at the request of President Obama are no longer willing to do so. In coming weeks, 13 states and DC plan to cancel such policies, which generally fall out of compliance with the ACA because they don’t offer the level of coverage the law requires. Virginia will be hardest hit, with 250K…to be canceled. And because federal law requires a 60-day notice of any plan changes, voters will be notified no later than November 1…Many of those forced out of their current plans and into [the ACA] may not be able to keep their doctors. They also could face higher deductibles and out-of-pocket expenses, making ObamaCare an election issue on the eve of voting…[on November 4th]…”
  • Healthcare price transparency becomes reality in MA [Massachusetts]
    "Without much fanfare, MA launched a new era of healthcare shopping…Anyone with private health insurance in the state can now go to his/her health insurer’s website and find the price of everything from an office visit to an MRI to a Cesarean section. For the first time, healthcare prices are public. It’s a seismic event…While a few states are moving toward more healthcare price transparency, none have gone as far as Massachusetts to make the information accessible to consumers. Tufts Health Plan Director of Commercial Product Strategy Athelstan Bellerand said the new tools 'are a major step in the right direction.' Bellerand added: 'They will help patients become more informed consumers of healthcare.'…Patients can finally have a sense of how much a test or procedure will cost in advance. They can see that some doctors and hospitals are a lot more expensive than others. [For example] a bone density test would cost $190 at Harvard Vanguard and $445 at Brigham and Women’s Hospital…The most frequent early users of the newly disclosed data are probably providers…[and hopes are it] will generate more competition and drive down prices…"

Strategy

  • Six ways technology has changed healthcare for the better
    “While new technology has been leaving its fingerprints on every field, no sector has been affected more than the healthcare industry…Data consumption: ...From analyzing diagnostic reports to filing patient treatment histories, healthcare facilities are bursting at the seams with information...Improved communication: With their busy schedules and limited free time, as well as the restrictions imposed by HIPAA regulations, doctors can be difficult to get hold of...A new social network called Doximity [connects] doctors…currently, 40% of U.S. physicians are on the site. Another technology, Omnifluent Health, is a translation software that instantly converts a doctor’s spoken words into another language. Portal tech: medical providers [can now] provide patients [with remote] access to their personal information [enabling] them to take greater control...Remote monitoring:…can be used by patients in the comfort of their home to reduce the time and costs associated with recurring visits to the doctor. Using a small device designed to measure a particular health issue, remote centers can analyze a patient’s data and alert them if something’s wrong…”
  • How technology is going to disrupt healthcare
    “In 1000 BC, the only early test for diabetes was whether…urine attracted ants. In 2012, 25.8M United States residents with diabetes spent $245B on [the disease] a figure…rising by 7% per annum. But the cost of testing blood-sugar levels is rapidly falling as a handheld device in the home takes over from a laboratory visit and analysis. [Such] ‘point-of-care’ (POC) technology, now obviates expensive testing in healthcare facilities. But POC tech has many [other] potential benefits…Exponential growth…in healthcare may be possible due to two factors: (a) the emergence of newer POC technologies that are lowering the costs of diagnostic/treatment tools and replacing healthcare workers/pros; and (b) increasing growth in chronic disease and…opportunities…for lifelong use of new products for diagnosis/treatment in…the world’s most lucrative industry.”
  • Future of senior living business success depends on getting the right tech
    "Savvy financial officers at senior living facilities know that…the future…is [in] care coordination. Trouble is, [they] can’t unlock that future because the technological key, a comprehensive electronic medical record system, is not yet available to the senior living market. One provider, though, is trying to change that. The recent merger of Emeritus Corporation of Seattle, Wa., and Brookdale Senior Living, headquartered in Nashville, Tenn., created a national full-spectrum senior living solutions powerhouse with enough scale to gain the interest of large technology players…The merged company…now has more than 1,100 communities in 46 states. To maximize their business model [as] a full-service senior living solutions company, it needs an EMR system that connects business functions internally, makes clinical connections to and between physicians, hospitals and patients…while there are small-scale EMRs for senior living, no traditional EMR vendor has a product that can offer the sweep of solutions Brookdale is looking for…[to] make money for the company…”

Industry Activity

  • In quest for next windfall, tech funds look to healthcare
    “…Overall, venture capital funding for healthcare tech firms is up 176% so far this year, at $2.3B, versus the same period last year, according to Rock Health…Most of the funds have gone to companies focused on payment management and data analytics. Andreessen Horowitz, Qualcomm Ventures and Google Ventures are among the venture capital firms that have invested in healthcare technology firms this year, [as reported by] Rock Health, while Intel Corp, GE Co. and Medtronic Inc. have acquired digital health companies. Mutual funds are moving in the same direction. Among all growth funds, healthcare investments have increased 14% over the last three years, to make up 16% of portfolios, according to Lipper, a Thomson Reuters company. The average actively managed tech mutual fund has doubled the portion of its portfolio in healthcare co’s over the last three years, but to only 4%, [per] Morningstar. Fund managers are finding health tech a reason to like even industry leaders such as Apple Inc., [which] has hired several senior medical technology executives who focus on sensor technology that can monitor health, ranging from blood-sugar levels to sleep quality…”
  • Investors agree: Attractive M&A environment in digital health right now
    “There’s no question that funding for digital health companies is high—a recent report from Accenture predicted funding for digital health startups will reach $6.5B by the end of 2017, up from $3.5B in 2014. But that doesn’t mean it’s smooth sailing for digital health investors or the companies seeking funding. At…Health 2.0 in Santa Clara, CA, a panel of digital health investors and startup veterans…discussed some of the unique circumstances of healthcare investing. One point several of the panelists agreed…it’s not just about getting the most money possible from investors. The relationship with investors is important too, and sometimes companies can get in trouble by raising too much money and then not being able to deliver—a real concern when valuations are getting higher and higher. 'You have to be careful,' John de Souza, Pres. and CEO of MedHelp said. He went on to say: You overreach on your first round it could be your last…You have to be careful. The funding is not the exit and I think…some people forget that...”

Research

  • Study: Wearable technology & preventative healthcare
    “…Since wearable fitness devices, such as the FitBit and Nike+, began to appear on the market, the healthcare community has recognized their potential to provide unbiased, accurate insight into patient activity…[Per a national survey of 900 adults by TechnologyAdvice Research]…419 adults were surveyed on their specific reasons for not using tracking devices or apps. Key findings: 74.9% of adults do not track their weight, diet, or exercise using a fitness tracking device or app. The most commonly cited reason for not tracking fitness or health is a general lack of interest (27.2%), followed by concerns over device cost (17.7%)…43.7% respondents did not have a specific reason for not tracking their fitness…57.1% of non-tracking adults said that the possibility of lower health insurance premiums would make them more likely to use a fitness tracking device…44.3% said that better healthcare advice from their physician would be an incentive to use a fitness tracker…"
  • How to engage baby boomers in healthcare technology
    “As baby boomers age [they] will place a high demand on the healthcare industry. Advances in technology may help ease that burden, but only if developers use the right tools and platforms, according to a recent study…published in the Journal of Medical Internet Research, [which] looks at the degree to which…baby [boomers are] prepared to embrace, or currently embracing, consumer health tech. Respondents of all ages, from 18-64 years, were surveyed for the study. The findings show that boomers are more likely than those age 64 and up to embrace five technologies: websites (84.5%), email (81%), call centers (52%), video conferencing (49.6%) and texting (49.6%). However, baby boomers are wary of using technologies like podcasts (38.6%), smartphones (34.5%), and wikis (21.3%) for health…purposes…For boomers, familiarity breeds adoption…The lesson: Consumer health tech [development] should be designed around tech with high adoption rates, not emerging tech…Author and futurist Ian Morrison, Ph.D., wrote…‘We need to harness the innovation that entrepreneurial companies can bring…encourage large-scale delivery systems to deploy them’…”
  • Reform Update: Using Medicaid for prisoner healthcare saves states millions
    “…Since 1997, states have been allowed to bill Medicaid for the care of inmates who required treatment at a hospital or nursing facility for longer than 24 hours. The provision has drawn new attention this year as millions of Americans, including those serving time in correctional institutions, have become newly eligible for Medicaid under the Patient Protection and Affordable Care Act. 'Everybody is interested in cost containment,’ said Dr. Fred Osher, director of health systems and services policy at the Council of State Governments Justice Center. ‘All departments of corrections have seen health-related costs grow significantly in relation to their overall budgets.’ States' spending on correctional healthcare totaled $7.7B in fiscal 2011, according to Pew Charitable Trusts. And even though it ebbed from 2009 to 2011, most states have seen their costs increase 2007-2011 [and] expect them to rise substantially as the inmate population grows older and sicker...In expansion states, beyond correctional facilities relying on Medicaid to pay for inpatient care, they are also making a greater push to get those leaving the system to enroll in Medicaid. This is especially crucial for prisoners who were being treated for chronic conditions and mental illness…"

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