MARLIN & ASSOCIATES Healthcare IT Review Dear Clients and Friends, August 2013 We all agree that the healthcare industry can learn valuable lessons from financial institutions, be it in For further information contact: risk management, security, developing standards or Afsaneh Naimollah building collaborative business models. After all, [email protected] these institutions are among the most technologically +1 (212) 257-6055 advanced companies in our economy. Granted the challenges in our industry may be different and Stephen Shankman standards are still emerging, but many HIT [email protected] companies are successfully applying business +1 (212) 257-6044 models and technologies conceived and Hits implemented within the financial vertical. This brings us to the subject of common standards and the phenomenon we call the “network effect”. As more people adopt a standard, the more useful it becomes, which spurs more people to use the standard; examples range from the telephone to credit cards. If our healthcare system can eventually bring providers, payors and patients together in a similar fashion to a credit card network, we will be well on our way to cutting billions of dollars of administrative costs from the system. A few visionary companies are, in fact, doing just that through successfully building payment networks, where providers receive reimbursements within 24 hours and patient payments are significantly expedited. He was injured at a debate on healthcare reform The more providers join the network, the more payors see the value of signing on. This is precisely the network effect that contributed to the massive Marlin & Associates is one of the most active success of credit cards. Perhaps, like the credit card investment banking and strategic advisory firms providing strategic and financial advice to business, providers (merchants) will someday worldwide buyers and sellers of middle-market subscribe to multiple payment networks. What is technology firms. Our firm is headquartered in clear is that pioneering companies in this field stand New York, NY and has additional offices in San an excellent chance of setting the standard and Francisco, CA; Washington, DC; Toronto, becoming the backbones of all healthcare delivery Canada; and Hong Kong, China serving companies that provide information and payments. Standardization is a key subject on our technology to a wide range of communities healthcare national agenda. Healthcare payment including those that serve the healthcare, networks are a good place to start. banking, capital markets, insurance, and marketing industries. Sincerely, H.I.T. Greatest Greatest H.I.T. www.MarlinLLC.com Afsaneh Naimollah © Marlin & Associates Holding LLC. M&A is a registered trademark of Marlin & Associates. Other names, trademarks, and logos are properties of their respective holders. Marlin & Associates Securities LLC, a wholly-owned subsidiary of Marlin & Associates Holding LLC, is a broker-dealer registered with the Securities and Exchange Commission and is a FINRA/SIPC member firm (www.finra.org). Investment banking and/or securities are offered through Marlin & Associates Securities LLC. The information and any opinions contained in this report are for information purposes only. While they have been obtained from sources that we consider reliable, we do not represent such information and opinions are accurate or complete, and thus should not be relied upon as such. The information contained in this report does not constitute an offer to sell or a solicitation of an offer to buy any security. The price and value of the companies referred to in this communication may fluctuate. Past performance is not indicative or a guarantee of future performance. IMPORTANT INDUSTRY NEWS M&A TRANSACTIONS / INVESTMENTS Nine Pioneer ACOs to exit CMS program Healthsense acquires WellAware Nine of the original 32 “Pioneer ACOs” (or 28%) Healthsense, a provider of aging services technologies announced that they were leaving the experimental backed by Merck Global, acquired WellAware Systems CMS accountable care organization (ACO) program (backed by .406 Ventures). WellAware utilizes sensors that began in September 2012. The goal of the and analytical software to track important wellness program is to provide more coordinated care for indicators such as sleep. Medicare beneficiaries, while reducing costs. Two ACOs are leaving the program completely and may Remote monitoring technologies, such as WellAware’s, apply their investments to private insurer contracts, are being incorporated in a number of newer healthcare while seven are planning to apply to the less risky models, such as ACOs. WellAware expands alternative Medicare Shared Savings Program Healthsense’s solution set for the senior population, a (MSSP) ACO model. One of the main issues for all fertile ground for the remote monitoring sector. nine exiting ACOs is that they did not achieve the savings targeted by the Pioneer program. Kareo acquires the billing company ECCO Health Kareo, a cloud-based medical office software and Although all of the 32 Pioneer ACO participants services company to small physician practices, acquired improved patient care and outperformed Medicare ECCO Health, a Las Vegas-based medical billing fee-for-service organizations for all 15 comparable company. This acquisition follows the January 2013 quality measure, CMS reported that only 13 of the 32 launch of Kareo Billing Services. Pioneer ACOs produced savings ($88 million in 2012). According to published sources, two ACO On the heels of a $20M raise earlier this year, Kareo is participants had shared losses of approximately $4 embarking on a plan to offer end-to-end services to its million. Program savings were generated in part by clients from EMR to billing. Kareo seems to be following reducing hospital admissions and re-admissions. the ‘athenahealth’ model of combining could-based CMS data said Pioneer ACOs were rated higher by software with medical practice services. We are beneficiaries on all patient experience metrics when watching this space closely as several new companies compared to 2011 fee-for-service results. following similar models have been funded in the past year. Accountable care is a marathon not a sprint. The fact that many Pioneer ACO’s achieved savings in the Temis acquires i3 Analytics first year, is a testament to the potential cost savings Paris-based Temis, a leading provider of text analytics ahead. We see this recent development as a bump in software for enterprises, acquired Maryland-based i3 the road. We believe ACOs are an innovative model Analytics, a SaaS mapping platform for the biopharma that can bring strong benefits. The Medicare ACO sector. has even given a boost to the private ACO market which is estimated to be 300 nationwide. This deal emphasizes Temis’ commitment to the Life Sciences market, in particular the clinical trial sector. We believe as CMS fine tunes its measurement We have seen a number of U.S. based PE/VC firms standards for ACOs and as the model becomes more investing in local healthcare markets internationally. The systematized, the ACOs will be in a position to Temis/i3 analytics deal is a strategic cross-Atlantic generate meaningful savings. acquisition, a rarity in the HIT industry. We don’t believe this will be a trend, but rather anticipate more healthcare US venture capital firms invested $850M in 90 different HIT cross-border M&A activity within Europe itself. companies in the first half of 2013. © 2013 Marlin & Associates Holding LLC. All rights reserved. May not be reproduced without attribution. Page 2 Marlin Equity acquires eHealth Solutions .Mediware purchases CPR+ Marlin Equity Partners acquired California-based Mediware acquired Definitive Homecare Solutions (aka eHealth Solutions (aka SigmaCare), a provider of CPR+), a leader in homecare software. Mediware plans clinical software to the long-term and post acute care to integrate this business into its Alternative Care market. Solutions business. We view the long-term and post-acute care market as Mediware has been a very active consolidator in the possessing favorable characteristics due to an aging homecare solutions space, including its recent population living longer as well as healthcare initiatives Fasttrack deal in June, as it seeks to take advantage of attempting to keep patients out of hospitals. a secular shift toward more home-based care Zotec to acquire MMP for $200M BACTES acquired by Sharecare Zotec Partners, a provider of revenue cycle Sharecare, an online health and wellness engagement management for physicians, signed an agreement to platform backed by Galen Partners, acquired BACTES, acquire Medical Management Professionals (MMP), a a provider of Release of Information and audit management services. healthcare billing company (and subsidiary of publically traded CBIZ) to create one of the largest billing This is the third acquisition in the last year for companies in the U.S. specializing in radiology, Sharecare, which was founded by Dr. Mehmet Oz. anesthesiology, pathology and emergency medicine. Sharecare appears to be buying a variety of businesses to build a critical mass of revenue, a strategy not too Consolidation in the billing RCM sector is on the rise. dissimilar to the early days of WebMD. This combination is certainly one of the larger transactions in the industry . Practice Fusion raising $60M Practice Fusion, a free EMR provider, has closed a Stinger Medical and Enovate merge $60M fourth round of funding that values the company Stinger Medical, backed by Riverside Partners, and at approximately $500 - $600M. The company has Enovate merged to become the largest provider of raised nearly $100M to date. mobile clinical work stations in the United States. Practice Fusion started as a free EMR company, a The new company, Enovate Medical, will offer a brilliant strategy to penetrate the market quickly. Now complete line of mobile work stations, wall stations, wall with a large installed base of 150k physicians, the arms and medication transfer and exchanges services, company has started to offer paid services such as e- all of which are increasingly in demand as hospitals prescribing, lab connectivity, etc.