While home-based care is where health care is going, it’s also very behind from a technology standpoint.
Even leaders at top-performing home health and home care agencies admit that their respective spaces are not where they should be in that area.
It makes sense, then, that private equity and venture capital firms are intrigued by the idea of investing in technology that can move forward health care in the U.S. at large, and especially in the home care and home health sectors.
“Widespread adoption of EHRs came about as a result of the HITECH Act, part of the 2009 American Recovery and Reinvestment Act,” a Pitchbook report on health care IT trends, released Friday, read. “However, some provider groups were excluded from the so-called “meaningful use” incentives, including home health agencies. … As a result, vertical EHRs catering to small, independent providers in these categories have an opportunity to grow market share by digitizing groups still reliant on paper and/or legacy record systems. Practices may wish to digitize in order to increase efficiency, accept referrals from other healthcare providers, or prepare for growth or a sale to a larger, often PE-backed group.”
The above is considered one of the opportunities for investors in the near-term future.
It’s also an opportunity for small and large providers as they try to update their technology to increase efficiency and better cater to evolving payer landscapes.
“We’ve got a variety of lean initiatives around how we optimize. It’s one of the biggest pain points in our business. It only got worse with PDGM,” Elara Caring CEO Scott Powers told Home Health Care News last month. “We’re really looking hard and taking an outside-in view of how to take technology to that particular problem.”
The Dallas-based Elara Caring is a provider of home health, hospice, palliative, behavioral health and personal care services. It serves more than 60,000 patients across 200 locations.
In other words, Elara Caring is not a small- to mid-sized provider, and even it is doing everything it can to catch up from a technology perspective. Its currently backed by Blue Wolf Capital Partners and Kelso & Company.
Overall, an estimated $4 trillion is spent on health care per year in the U.S. and $265 billion of that is “potentially attributable to administrative waste,” according to McKinsey & Company.
PE and VC investors are already heavily embedded in the home health, home care and hospice spaces. A recent Pitchbook report highlighted that interest.
“I think we’re going to see a lot of platform creations, a lot of add-ons and a lot of what we call growth in our data,” Rebecca Springer, senior health care analyst at Pitchbook, told HHCN last month.
Updating workflows within a home health or home care provider is the kind of investment that can make a mid-sized organization into a dominant one.
PE and VC firms recognize that. And, given many of the health care-focused ones have home-based care capabilities within their portfolio, having tech platforms that mitigate these issues bodes well for them.
This was a heavy topic of discussion at the the McGuire Woods Healthcare Private Equity and Finance Conference this past week in Chicago.
“The thing that’s important to understand from a technology standpoint is the EHR, patient intake, billings processes and claims processes systems in the back-office infrastructure,” Andreas Apostolatos, managing director of healthcare services investment banking at Bank of America, said during the event. “We do see a lot of these single-market locations that are founder-led, have built formidable businesses that have been bootstrapped, and just don’t have a tremendous amount of sophistication behind the operation.”