Health Tech: $40 million for mental health

The most important thing: THL deepens the push of health technology

Illustration of a heart rate monitor with a line forming a red cross.
Illustration: Brendan Lynch / Axios

Thomas H. Lee Partners Appoints Former CEO of Allscripts Paul Black as a consultant to help obtain new healthcare IT investment opportunities and perform due diligence He tells Sarah exclusively.

why does it matter: The move highlights THL’s intent to delve deeper into health technology – a segment where deal volume has been relatively muted in the past few months in private equity.

what are they saying: Black says, who step down from Allscripts in May after nearly a decade. “When other people hit the pause button, I think it’s the time to hit the speed up button.”

Quick catch up: THL hired Shahab Vajvi to amplify the health tech effort about a year ago, from Martis Capital, where he worked as a founding partner on deals including HHAeXchange and Epic Systems.

Zoom: Historically, THL has veered significantly toward provider-centric technology, with Vagefi seeing “a great opportunity for that.” [continue to] Do things better, faster and cheaper. “

  • Black and Vajvi say wage inflation in concert with the labor crunch, and the potential resulting pressure on scale, is lending disguised investment opportunities.
  • These include revenue cycle outsourcing (and other outsourcing services); Technology that increases the operational productivity of the workforce; Clinical Operations Recruitment Solutions. automation of third-party operations; and enabling value-based care.
  • Likewise, Black sees interest from insurance companies to take on some of the manual work required within their organizations to process claims.

Yes and: THL is actively exploring opportunities in drug technology, including investments focused on data collection or companies that help make drug marketing more efficient.

Between the lines: Healthcare companies are more willing to go abroad in this environment — and that’s where technology comes in.

  • “There is a fair amount of anxiety and pressure in the market,” Black says. “People in this situation are usually looking for other solutions in exchange for doing the same thing they’ve been doing for the past 100 years.”

Reality check: Vagefi is beginning to see health tech ratings drop, with recent trades in “mid-teen EBITDA type multiples,” versus the 20x-plus that companies have imposed in recent years.

  • As credit markets continue to rattle and interest rates continue to rise, “I think you’re going to see more rationalization going forward,” although “A-plus” assets may be an exception, says Vagefi.

recovery: Black reflects on the many years he spent building Allscripts, and shares two major studies:

  1. You have a strong vision for the future – and be sure to implement it over a multi-year time frame from a capital allocation standpoint.
  2. Maintain market relevance. Black says Allscripts has been more than “just a good EMR company,” with significant R&D spending on data, consumer, interoperability, payers, and life sciences. “The different platforms that were neutral in electronic medical records ended up becoming a big part of what the Allscripts story is,” Black says.

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