Today’s choices for private equity investors are growing at a healthy pace. Opportunities exist for investors in almost every imaginable industry. And it’s never been more true than in the healthcare and health services sector.
While there is a myriad of “industries within the industry,” some niche markets are ripe for investment. The key to selecting a company, though, remains the same for any industry: proper due diligence.
Here are just three of the many “healthy” areas to watch in this sector, as well as a few tips to ensure you pick a winner.
Urgent care – it’s right down the block
This year there’s a continued upsurge in investment in urgent care facilities. These facilities range from local “emergency rooms” – physically detached from any hospital – to your corner pharmacy offering general diagnostics, minor injury care and immunizations.
The latter is exemplified by companies like CVS Health, whose Minute Clinic is one of the largest and broadest rollouts of urgent care in the US. These clinics offer services with no appointment and at relatively low cost, which encourages patients to seek treatment, who would otherwise go without.
Whether it’s a large chain or one of hundreds of individual ones, the concept is working. IBIS World reported annual revenue of $16 billion and expects more than 12,000 open clinics by 2017.
Ambulatory surgery centers – growth or profit?
Did you know that of the 5,464 ambulatory surgery centers (ASCs) in the US, 96 percent are for-profit? And that doctors and surgeons perform over 23 million procedures in these facilities every year? And with only 14 percent of them owned by large, multi-unit chains, they represent a huge profit potential for private equity investors.
The number of ASC procedures continues to grow, in part due to advances in technology and out-patient surgeries. Both of these reduce the frequency of overnight or extended hospital stays, especially for orthopedic and eye surgeries.
While the overall growth of ASC facilities was relatively small in 2014, the increased case load made for soaring profits. So it’s not surprising that Becker’s is predicting in an increase in private equity backing and new facilities acquisition, to capitalize on increased profits.
EHR and Healthcare IT continues to surge
Aside from actual patient care, health IT is a booming business. Besides the top 10 EHR providers reported by Becker’s, there are a number of smaller players that individual physicians and groups tend to use.
Healthcare IT encompasses more than providing electronic health records (EHR) solutions for large clinics and hospital chains. In 2015, the up-and-coming health IT companies are focusing on two things:
- Data aggregation to ease the efficient data exchange between providers, billers and insurers, and
- Big Data analytics to help providers identify opportunities for cost cutting while still improving care.
Due diligence is required, regardless of the niche
Private equity investors interested in the healthcare sector will find these three niches to be attractive prospects. Plus, urgent care, ambulatory surgery centers and budding health IT providers are only three of many healthcare-related opportunities.
As with any investment prospect, IT due diligence is crucial to making an informed decision. Whether a company treats strep throat or replaces a knee joint, or they simply ensure the data flows properly to and from the back office, there’s always infrastructure to be assessed. You need to make sure the technology, the software, the network and the staff you’re buying are all sound and ready for growth.
If expert IT due diligence is not your forte, hire someone with an experienced assessment team. It just might make the difference between a successful operation and a botched procedure.