(Mag) The next wave? Disruption via workforce, compliance management

I’m back from a quick beach vacay in Tulum and, naturally, caught a bug on my travels back to the Northeast. It’s very possible I’m just in denial. I can still taste that octopus ceviche.

Either way. Let’s get right to today’s healthcare rundown.

Clearlake Capital’s Symplr said Wednesday it had agreed to buy API Healthcare, which helps hospitals and medical clinics manage their workforces and track patients.

The announcement comes a week after I reported that Veritas Capital was seeking a buyer for API, which it carved out from General Electric alongside two other healthcare IT businesses.

The most likely suitor aside from Symplr was said to be the U.K.’s Allocate Software, a portfolio company of Vista Equity Partners and minority investor Hg.

While Veritas initially planned to keep and build API, the firm after buying athenahealth decided it would concentrate on that company and the remaining GE businesses, which had since been rebranded as Virence Health, two sources told me.

API, which GE purchased from Francisco Partners in January 2014, was perceived as the crown jewel amid the group of assets up for sale in 2018. The division’s performance languished under the conglomerate, I learned.

Governance, risk and compliance

Since I learned last summer that Pamlico was shopping Symplr, I’ve observed increasing conversation around the sub-area of healthcare IT often categorized as governance, risk and compliance.

And the PE community has had an appetite for specific-point solutions like Symplr, through which providers track and manage the credentials of physicians, visitors, staff and contractors.

The valuations speak to that. Clearlake’s purchase of Symplr was valued at some $550 million, I previously wrote. Clearlake, by the way, wasn’t necessarily the expected buyer of Symplr, which besides PE was viewed as a logical fit for a broad range of strategic buyers, sources have said.

If you consider Symplr’s tie-up with API, Symplr’s massive amount of credentialing data could be married with API’s employment-type data, offering growth into new avenues, one source said.

For example, you might be able to look at compensation on physician employment contracts and tie that to the number of actual hours worked and patient reimbursement levels. You could also potentially utilize the data to address physician and nursing burnout, the source suggested.

This type of data is increasingly crucial as the healthcare ecosystem shifts toward value-based payments, from a fee-for-service model of reimbursement.

Beyond credentialing and workforce management, there are software players that focus on patient risk and safety. There’s the U.K.’s Datix, which TA Associates backed in May 2018, as well as Francisco Partners’ Quantros and Triple Tree Capital-backed Verge Health.

These companies are using data to help prevent human medical errors and ultimately improve the quality of care.

There’s also patient-scheduling software, the largest of which is Francisco’s QGenda. Other smaller players include VC-backed OpenTempo and Lightning Bolt, the latter of which K1 Investment Management bought alongside CareWire earlier this month through existing portfolio company, PerfectServe.

So while we’ve seen the PE community pick spots within specific parts of the market, we have yet to see a sponsor try to create an enterprise company that does something broader, two sources recently pointed out.

Will we? TBD.

Besides all these functions on the provider side, there are sizable companies that focus on the supply-chain side or the business-process and administrative-type functions geared toward the back end of health systems. While this is not a particularly huge market within the broader healthcare industry – and has been tough for players to get scale – these functions impact some 60 percent of costs in health systems, one of the people estimated.

Two notable players are Arsenal’s Tractmanager and Temasek’s Global Healthcare Exchange. Arsenal’s investment in TractManager, by the way, dates back six-plus years. GHX scored its investment from Temasek in May 2017, with Thoma Bravo staying on as a minority investor.

Questions arise

So the questions become: Does anyone have the vision to disrupt the market by creating a combined enterprise that touches both the compliance and supply-chain sides? As healthcare systems become more integrated, does it make sense to keep these things separate or tie them together?

If you look more broadly at healthcare IT, we’ve already seen this occur in the electronic-health-record and revenue-cycle-management arenas, which includes companies like AllScripts, Cerner, Epic and athenahealth.

While some may have such a vision, the two sides may not have the appetite to collaborate, one source suggested.

“I have doubts because both sides of the provider organization are chasing completely different value components,” this person said. “It’s hard enough to get departments of a side of hospital to pull off the same value propositions.”

Still, more add-on activity is likely to follow from players on both sides ready to consolidate.

That said, the market isn’t seeing the level of integration it once saw, this person said. Companies are focused on the business development side, and saying, “let’s let these specialities run themselves,” the person said.