Four healthcare sectors turning the heads of PE investors

By Kapila Ratnam, NewSpring Capital

The healthcare industry creates thousands of new investment opportunities every year. At NewSpring, we continue to see promising opportunities in telemedicine, behavioral health, home health, and pharma outsourcing.


The use of telemedicine is growing quickly across this country: The American Telemedicine Association says that more than half of all U.S. hospitals now use some form of telemedicine. This has been driven predominantly by the increasing shortage of providers in certain clinical specialties, as well as a general shortage of primary-care physicians in the U.S., which is expected to worsen in the next several years.  The adoption of telemedicine has also benefited from increased access to fast internet connections and the widespread use of smartphones, tablets and other mobile devices. With these technological advances, telemedicine enables much-needed care in places where it otherwise might not be accessible, especially in remote and rural areas. Physicians can now connect virtually with patients anywhere to deliver informed recommendations about their care. Additionally, now that payers have started to create mechanisms to reimburse care provided through telemedicine, adoption should increase at a greater pace than before.

Behavioral Health

According to the National Institute of Mental Health, each year some 10 million people experience a serious mental illness that substantially interferes with one or more major life activity — evidence that behavioral-health services address a growing need. While financing options for these services continue to improve, the lack of available choices creates demand. Of those not receiving proper treatment, women and children often suffer the most. The World Health Organization says women are twice as likely as men to develop certain mental-health conditions like depression, eating disorders and panic disorders. Additionally, children who experience mental illness at a young age may lack the proper resources to identify the underlying issue and receive helpful treatment early on, which results in complications down the road. Furthermore, improperly managed care for a mental illness and/or an untreated drug addiction can contribute to nonviolent offenders winding up in the U.S. prison system. These situations create an opportunity for companies that can effectively manage and properly treat mental-health issues.

Home Health

To combat the steep cost of healthcare, we’ve seen a shift from fee-for-service to fee-for-value models, which focus on the quality of care rather than the quantity of services billed. This change is now rewarding providers for keeping patients out of the hospital, which is the most expensive point of medical intervention (The home is the cheapest.) As providers incur more risk while this shift takes effect, they are keen to develop networks and protocols to manage these patients both in hospitals and at home. It’s critical to establish home health networks that are not only safe and convenient for patients, but also efficient to manage from the perspective of providers. To provide effective care for patients at home, there is a need for both skilled and unskilled service providers as well as timely and appropriate means of communication among all parties in the care continuum. This leads to a demand for connected health technologies, which help patients, physicians and other caregivers proactively manage patients’ health, resulting in compelling investment opportunities.

Pharma Outsourcing

The pharmaceutical industry continues to combat a growing number of issues, including heavy competition, increased regulatory pressure, shrinking profit margins, a cost-heavy structure and more. Due to these challenges, pharma companies have begun to shift their business models, embracing outsourcing as a strategy to drive economies of scale without thwarting their operations. At NewSpring, we find the most value in companies that focus on cost-saving initiatives for pharma companies and/or provide niche services, like software platforms that allow effective sharing of data and timely communication among multiple stakeholders.

At NewSpring, we are always looking for opportunities to partner with compelling companies that are filling a void within their respective industries. As healthcare continues to respond to the growing needs and expectations of patients, as well as ever-changing requirements and regulations, there will be many opportunities available for investors to consider.

Kapila Ratnam is partner at NewSpring Capital and NewSpring Healthcare, which partners with management teams to accelerate the growth of differentiated healthcare companies across technologyenabled healthcare services, niche clinical providers and specialty pharmaceuticals, delivering capital for growth, recapitalizations and mergers and acquisitions. Kapila can be reached at kratnam@newspringcapital.comPhoto courtesy of the firm.