The Nashville Health Care Council’s annual event, “Financing the Deal,” has become almost a prescription for those trying to diagnose the lay of the land and health of various industry sectors.
This year was no exception. In May, the Council brought together a panel of financial experts to offer insights on the new and ongoing trends in access to healthcare capital and the state of the market, M&A activity, and the outlook for funding the growth of Nashville’s $70 billion dollar healthcare industry.
The panel discussion was moderated by Nicole Maynard, Tennessee market president for JP Morgan Chase. The panel featured Robert L. Crutchfield, general partner, Harbert Venture Partners; Benjamin Edmands, managing partner and co-founder of Consonance Capital Partners; Eb LeMaster, managing partner and co-founder of Ponder & Co.; and Phillip Pucciarelli, managing director and head of Health Care Services for BMO Capital Markets.
Pucciarelli noted the more than $92 billion strength of M&A activity that has already occurred in healthcare this year served as a strong predictor of confidence. “M&A discussions are extremely active at the moment, and we’re seeing a whole host of creative approaches. In addition, balance sheets are strong and confidence around M&A is quite evident in the boardroom,” he continued.
The experts gave their picks for further consolidation and pointed out chronic care services, post-acute care providers and population health entities would all need additional technology and resources to support rapid growth. Panel members also made note of Nashville’s large concentration of healthcare companies and unique position to attract capital as a result. The city is home to more than 250 healthcare companies that work on a multi-state, national or international basis, and 15 publicly traded healthcare companies are headquartered in the Nashville area.
“Nashville is the epicenter of healthcare innovation and will continue to grow and expand to meet the changing needs of the market,” Pucciarelli added. “Entrepreneurs should tap into this community of experts and resources, determine the problems inherent in the system, and create disruptive enterprises to address those challenges.”
Some of those challenges include the shift from fee-based payment to value-based care and the consolidation, joint ventures and partnerships necessary to achieve outcomes across the continuum of care. No matter what the Supreme Court decides about subsidies and what the ultimate impact on the Affordable Care Act, the panelists generally agreed the industry has already begun the shift to value-based care. Deviating from that course would be difficult as so many key players in the industry are on board to change the delivery of care in America.
“Hospitals are seeking ways to enhance the quality of care while lowering cost and preparing for this rapidly changing new world,” LeMaster pointed out of a major sector already making changes to ‘business as usual.’ However, he noted, that isn’t to say hospitals wouldn’t deeply feel the impact if subsidies are stripped from states in the wake of the King v. Burwell decision.
Although the need for capital is often immediate, the panelists noted building a strong investor-management relationship doesn’t happen overnight. Edmans said, “Trust between an investor and manger is risky and it takes time to build.” He added, “It’s important for both parties to have a commonality of vision on where the business is going and the flexibility to understand the vision may change as the environment shifts.”
Luckily for local industry innovators, Crutchfield said, “If you are an entrepreneur in Nashville, you are living the dream. This is a robust community of resources, capital and expertise to develop solutions to move the industry forward.” He added there is great opportunity for entrepreneurs who are able to develop strategies in a changing landscape. “We are rapidly expanding to an area where people live, work and play,” he predicted.
LeMaster said, “The hard decision is how to allocate capital, and how we take advantage of the need to be creative.”
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