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Healthcare IT takes center stage in this month’s issue of our newsletter. Each of the five standard sections—Portfolio, Policy, Strategy, Industry Activity and Research—offer selections illustrating the diversity of perspectives on the topic. At the federal level, the Department of Homeland Security and the Veterans Administration each make big commitment to HCIT as you’ll see in the Policy and Strategy Sections, respectively. At the state level, regional multistate agreements—known as compacts—are allowing physicians who are licensed in one state to use a streamlined process to be quickly licensed in another. The movement aims to promote more use of telemedicine to increase access to care in rural areas. A selection in the Industry Activity Section shows how HCIT continues to attract new entrants from the private sector. Apple’s iPhone and iWatch are teaming up with Mayo Clinic to explore ways to improve patient engagement and care management. Yet not everyone is jubilant over the prospects of HCIT to contain costs while improving quality. Even as the Centers of Medicare and Medicaid Services (CMS) is encouraging greater adoption of EHRs by offering flexibility to comply with Meaningful Use Stage 2 (see Policy Section), recent research suggests that 65% of providers surveyed have experienced financial losses due to EHR implementation, and 73% would not purchase their current system again if given the chance (see Strategy Section). Similarly, another selection in the Strategy Section states that although interoperability is poised to radically transform the healthcare system, achieving it poses unique challenges and barriers to success that are problematic around the world. Two selections (one in the State Policy Section and another in the Research Section) suggest that increased investments in HCIT can have short-term negative effects on local labor markets. To further complicate the picture, we offer two articles, which attribute the prolonged pressure on hospital financials to the combination of two aspects of the ACA: the proliferation of high deductible plans that curtail utilization and lower reimbursement rates. Notwithstanding, you will find plenty of good news in this month’s newsletter. The pace of healthcare M&A remains strong, the retail healthcare sector continues to expand rapidly and investments in population health featuring patient-centric strategies and value-based care models are attracting new capital. We hope you enjoy this edition of our newsletter as much as we enjoyed preparing it for you.

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


  • Healthsense raises $10M for remote patient monitoring system
    "...Healthsense makes a remote monitoring system for people with chronic diseases. The systems are sold to healthcare providers [that] need to keep track of the health of these patients and intervene if they detect that something’s going wrong. If they can detect it early…they can keep the patient healthy and avoid expensive hospital re-admissions. Healthsense has raised a $10M funding round led by Mansa Capital. Previous investors Merck Global Health Innovation Fund, and Radius Ventures also threw in…[the company] says it will use the new funds to sell into more managed care and home health companies. Humana Cares/Senior Bridge and Fallon Health are already piloting the system…Home monitoring has began a key focus area for digital health and devices companies. With the Affordable Care Act, healthcare providers will increasingly be reimbursed based on how well they can keep patients, and how well they can keep them from utilizing health services…”
  • HealthPrize raises $3 million for medication adherence platform
    "…medication adherence platform company HealthPrize has raised $3M in a new round of funding led by Mansa Capital to help it expand globally. The investment firm has the option to invest an additional $2M over the course of the next year, according to…Dow Jones...HealthPrize’s mobile and online offering uses education and rewards to help patient take their medications, while also collecting information like accurate prescription-histories and market research about patients verified to be on particular therapies, for their pharmaceutical customers. HealthPrize offers branded pharmaceutical programs for conditions including hypertension, acne, and diabetes… HealthPrize Chief Medical Officer Dr. Katrina Firlik said, “Many adherence interventions (reminder apps, in particular) don’t verify prescriptions at all, which puts us ahead of the game...”



  • Homeland Security taps eClinicalWorks
    “The DHS has gone live with eClinicalWorks' cloud-based electronic health record system at 23 sites across the country. One thousand medical professionals who help manage care at all 23 U.S. Immigration and Customs Enforcement detention facilities are using the technology to [store] patient records and share data between facilities…eClinicalWorks has been working with ICE to rapidly deploy this solution with features that are unique to this organization. As eClinicalWorks execs see it, using its EHR helps ICE streamline processes and improve care and also help providers employ chronic and preventative care measures, including those that are unique to the setting such as intake screening process flows, electronic medication administration and infirmary management. eClinicalWorks is working with Harris, the prime contractor, and ICE to develop additional functionalities and integration with its current laboratory, radiology and pharmacy systems…”
  • MU Stage 2 offers 2014 flexibility
    “The Department of Health and Human Services published a final rule for Stage 2 meaningful use…that offers hospitals and physicians flexibility for 2014…‘Millions of dollars will be lost due to misguided government timelines,’ said CHIME CEO Russell Branzell. The new rule allows eligible providers to use the 2011 Edition of certified EHR technology or a combination of 2011/2014 Edition for the 2014 Medicare/Medicaid EHR Incentive Programs. Come 2015, all eligible providers will be required to use the 2014 Edition of certified EHR technology. By bending the rule a little, more providers would be able to participate and meet important meaningful use objectives such as drug interaction and drug allergy checks, providing clinical summaries to patients, electronic prescribing, reporting on key public health data and reporting on quality measures, HHS officials [said]…”


  • Streamlined doc-licensing process offered to states [Nationwide]
    “In a move seen as facilitating the growth of telemedicine and speeding increased healthcare access to residents in rural areas, the Federation of State Medical Boards has released model legislation licensure to create a multistate agreement, or ‘compact’ system [where] physicians who are licensed in one state can use a streamlined process to be quickly licensed in another. If enough states [join], it could quiet…calls to replace state-based physician licensing with a national program. The model legislation [spearheaded by The Wyoming State Board of Medicine] calls for at least seven states to participate in the compact and with participating states to have representatives on a governing commission. Once enough states have joined the effort, [participants]…would share credential and disciplinary information on physicians licensed by their states with other states so they could quickly issue their own licenses without collecting the usual load of paperwork…The commission would not have any licensing authority…but would serve as the information hub...”
  • N.Y. healthcare workers feel cost-cutting pressure [New York]
    “Brooks Memorial Hospital and its largest union reached a tentative contract…but only after a federal mediator was brought in, there was picketing outside the Dunkirk, N.Y., facility and a union voted to authorize a strike. In Niagara County, the jobs of as many as 60 full-time employees are in jeopardy as Eastern Niagara Hospital ended inpatient care at its Newfane site...The healthcare workforce long has been a bright spot in the region's lackluster jobs market, and it is a rare source of good news for private-sector unions whose memberships have shrunk recently. But many workers feel under siege today, because the state and federal governments are prodding the industry to provide better care at lower costs. At some facilities, workers face contentious contract negotiations, job cuts and growing demands on those left on the payroll—the nurses and aides...Spending on [U.S.] healthcare hit $2.8T in 2012 [which] rose by 70% from 2002 and [accounting] for 17% of our gross domestic product…For all of that spending, however, the U.S. ranks poorly among the world's industrialized countries when measuring health outcomes…”


  • Health IT Interoperability Requires Industry Collaboration
    “…The healthcare industry is at a critical point—although interoperability is poised to radically transform the healthcare system, achieving it poses unique challenges and barriers to success that are problematic around the world…Progress recently has been achieved at a federal level; at the Office of the National Coordinator for Health IT's recent monthly HIT Policy Committee meeting three-, six- and 10-year interoperability milestone plans were laid out, with the goal of achieving more efficient health information exchange, improving industry quality and lowering costs, and incorporating medical devices and patient-generated health data, both to increase automation of exchange and to scale broadly across the country…It's time for all industry stakeholders to collectively recognize the barriers to interoperability—whether core technical standards, certification of health IT products/services, regulations around business, clinical and cultural aspects of healthcare, or privacy and security protections—and take charge of identifying…solutions...”
  • CFOs, CIOs must partner to boost care coordination
    “A growing number of health systems and physician practices have grown disappointed with the results of their electronic health record (EHR) implementations and believe the ongoing support burdens are draining much-needed working capital. In fact, recent research suggests that 65% of providers surveyed have experienced financial losses due to EHR implementation, and 73% would not purchase their current system again if given the chance. Many organizations are currently in the midst of ‘rip and replace’ implementations in hopes of finally realizing previously unmet health IT promises. This disillusionment partially arises from the fact that many EHRs were built to enable an electronic flow of data within the four walls of the hospital or clinic, and with little regard for the growing need to connect with community partners…Health system CFOs…[face] a new…mandate: find…solutions—ones that…live outside of EHRs—that can…unlock incremental revenue streams.”
  • Everyone wants a piece of pop health
    “[According to] Chilmark Research…Healthcare orgs…continue to struggle with rapidly evolving…reimbursement [models] while vendors have yet to effectively build-out their solution capabilities to fully meet market needs...Migration to value-based reimbursement models that increasingly link reimbursement to clinical outcomes is a key market driver for uptake of population health technology across the healthcare sector. To effectively compete in this environment, healthcare orgs have to leverage data (clinical, claims, demographic, and others) far more effectively to improve care delivery and manage risk, according to Chilmark [which] found more than 100 vendors claiming to address analytics for population health management, but few delivering on the promise. Researchers also found that a growing number of EHR vendors are offering data analytics for population health management, offering to work with clients to create applications. EHR vendors, however, lag significantly behind best of breed vendors…”
  • VA: Mobile Is 'Value-Added' To Health Programs
    “The Department of Veterans Affairs (VA) is moving ahead with an ambitious effort to provide mobile wireless services to both veterans and the clinical staff who serve them. Under a set of interconnected programs, veterans can use a variety of applications to access their medical records, to request services such as prescriptions, and to schedule appointments. The VA is issuing tablet computers and smartphones to clinicians to allow them to access patient records while making their rounds and to collect patient data directly into the department's electronic health records system…To connect patients and medical personnel, the VA created a series of applications and services to help patients manage their medical conditions…An example is the PTSD Coach app, which helps patients track symptoms associated with the aftermath of trauma. These self-care capabilities mesh with the second category of allowing veterans access to their medical records and a range of services, such as arranging appointments and filling out prescriptions with their mobile devices.”

Industry Activity

  • Capital climate heats up
    “…Attitudes toward healthcare financing have been fairly conservative ever since the general economy collapsed with the stock market in 2008. New construction projects were typically put on hold in the aftermath and loans for just about any building activity were hard to get, even for proven entities. Six years along, the investment community has gradually increased its interest in the sector and dollars are flowing steadily into healthcare projects of all kinds…Among them: real estate investment trusts, public lenders, private equity firms, commercial banks, life-term companies, pension funds and commercial-backed mortgage securities. As the lending field gets more crowded, Biron says…rates are [getting] more competitive…[and] everyone is starting to sharpen their pencils. ‘What differentiates you? What is your value add? What is your brand? How do you demonstrate your value? Don’t just talk about it – document it…Every org must be outcomes-focused. Prove you have outstanding outcomes. Show you have the…tech that enables quality care delivery,’ Robert Kramer, pres. and CEO of the Nat’l Investment Center for the Seniors Housing & Care Industry…”
  • How healthcare M&A push consumer-centric, value-based care
    “While the value of health services deals showed positive increases and the volume maintained a consistent pace from the first half of 2013 to the first half of 2014, several health sectors saw reductions while other saw upticks in deal volumes during the same period and could indicate the early effects of the ACA. Those findings come from a recent a PricewaterhouseCoopers (PwC) US Health Services Deals Insights Quarterly. Compared to 289 total deals during the first half of 2013, the first and second quarters of 2014 included 143 and 138 announced deals, respectively. While the volume is down, the value is up—rising from $17.2B in 2013 to $24.6B [over Q1 and Q2 2014). While the numbers are…close, [they are] the result of several changes across health services sectors. On the downturn are decreases in the volume of deals for hospitals (-50%), behavioral health (-50%), home health (-25%), and physician practices (-7%). On the upturn are managed care and long-term care, which saw increases of 160% and 20% respectively…the large upswing in managed care deal volumes is tied to attempts at adapting to the early effects of the ACA on revenues…”
  • iPhone 6: Apple And Mayo Clinic Partnership Could Be Smart Medicine
    “…Mayo Clinic helped influence the design of Apple’s new Health app and HealthKit API...The health system has been piloting several healthcare applications for the iPhone. Mayo Clinic currently is testing a service to alert patients when their Apple apps detect abnormal health results, and help schedule them for follow-up visits...And both organizations have ambitions to go further, which could make their partnership especially fortuitous. For Apple, Mayo Clinic offers legitimacy—and a high-profile teammate—as Apple makes its first concerted push into the multi-trillion dollar health care industry… But there are real questions—and legitimate risks—about Apple and Mayo Clinic’s shared aspiration. Some analysts argue [the] new iPhone, iWatch, and health apps will help revolutionize…healthcare…but those are heavy expectations for devices that likely need FDA approval before debuting any groundbreaking technologies…Apple’s push into the healthcare space also comes just days after an embarrassing breach of the company’s iCloud platform…if there’s a data breach involving Mayo Clinic health data, [it] stands to be more than embarrassed [and] runs the risk of damaging its 150 years of hard-won brand equity, built around patient sensitivity.”


  • Health spending projected to speed up
    “National health spending is not looking so dire – at least compared to older trends, says the Centers for Medicare & Medicaid Services...After almost two decades of rapidly increasing healthcare spending – an average increase of 7% each year between 1990 and 2009 – the average growth rate will hover around 6% through 2023...In 2013, health spending grew at a notably slow rate of 3.6%, and this year, Medicare is spending $1,000 less per beneficiary than the Congressional Budget Office had expected in 2010. Though down a fair amount from the last 20 years, last year’s 3.6% growth rate is still above the national inflation rate of 1.5%. Much of lower growth may be explained by a slow economic recovery...While health spending may rise as a proportion of U.S. GDP over the next decade, the increase should be at a slower rate than its historical average...With healthcare spending projected to grow at least 1 percentage point faster than the economy as a whole over the next decade and healthcare’s share of GDP expected to rise from 17.2% in 2012 to 19.3% in 2023, cost containment will likely stay high in the minds of lawmakers and regulators, CMS concluded.”
  • The impact of transition rocks nonprofit hospitals' financials
    “Nonprofit hospitals posted their second straight year of revenue declines in 2013 and their dismal rate of revenue growth broke records, according to a Moody’s Investors Service report...Moody’s said that median revenue growth was 3.9%, down from 5.1% in 2012 and a shocker compared to historical growth rates that have exceeded 7%. Moody’s also noted that hospital expenses outstripped revenue growth—a situation the agency described as ‘unsustainable.’ While Moody’s said it expects more of the same for 2014, it did note that hospital liquidity improved in 2013 as hospitals reduced capital spending and returns on equity investments were strong. Factors continuing to put pressure on revenue growth include low rate increases from commercial payers; continued cuts in reimbursement from the federal government; increases in high-deductible health plans contributing to bad debt and lower demand for services; and more observation stays from inpatient admissions and a shift to lower reimbursed outpatient services…”
  • Hospital recruiting efforts shift to data and outpatient services
    “The currents of health reform and consumerization are getting more treacherous for incumbent hospital businesses, according to a new report by Standard and Poor’s Rating Services. With an influx of newly-insured populations and the growth of Medicare’s baby boomers, American healthcare continues to be a massive market for goods and services. The landscape, however, is shifting for better and worse, depending on the market segment. The new norm of high deductible plans is ‘causing some headaches for healthcare providers—keeping utilization depressed.’ Retail companies, meanwhile, ‘are realizing quickly that this consumerization trend is an opportunity, even beyond their existing pharmacy businesses.’ Traversing this new landscape with a dependence on traditional fee-for-service business models, hospitals…face a negative credit outlook in S&P’s view…Retailers, especially drug stores like CVS…could make new forays into other areas of healthcare...Some even have cash on hand to make acquisitions, like Rite Aid, which recently bought 30 RediClinics. For payers, the new landscape is mixed but mostly positive, according to S&P…”


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