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serving as a senior executive for Park Ridge, NJ-based Merit Behavioral Care, a mental health care services firm. Al Waxman, Psilos’s senior managing member and CEO, is the former chairman and CEO of Merit. Magellan Health Services, based in Avon, CT, scooped up Merit for $460 million in cash and the assumption of debt in 1998.
In health IT, Psilos has benefited from M&A activity involving their own portfolio companies. Psilos was a founding investor in New York-based ActiveHealth Management, a provider of health analytics tools, which health care giant Aetna bought in 2005 for $400 million. In 2007, the Bosch Group bought another Psilos-backed firm in the health IT arena, Health Hero Network, a provider of tele-monitoring devices for home health care. But Germany’s Bosch didn’t say how much it paid for Palo Alto, CA-based Health Hero. (This latter deal sounds like a risky bet that paid off for Psilos, since Health Hero/Bosch still hasn’t been able to find widespread insurance reimbursements for its “Health Buddy” monitors.)
If there’s a truism in health IT, it’s that the customers (hospitals, doctors, and even patients) are notoriously resistant to adopting new technologies. Suennen talks about this problem as “an industry that is allergic to technology.” Thus, she’s looking for health IT deals involving companies that serve large markets and provide clear incentives for healthcare customers to adopt their technology.
Hospitals, for example, have big financial incentives to adopt the PatientSafe’s handheld devices for improving patient safety, Suennen says. The U.S. government has put the kibosh on many reimbursements previously paid to health providers to fix their own medical errors on patients who have become seriously injured as result of those mistakes. “The costs of medical errors committed at the bedside, and it depends on who you ask, but it’s somewhere between $40 billion and $60 billion per year,” she says. This has helped PatientSafe’s products find their way into more than 90 hospitals.
Suennen’s group is also now evaluating potential investments, for example, in companies with technologies that support what the government calls accountable care organizations (ACOs). There’s a big push in the health insurance reform bill passed earlier this year to create ACOs, which get financial incentives to take more responsibility for the costs and quality of for patients than, says, a traditional medical group that aims to maximize profits by billing insurers for any many patient visits as possible.
Yet ever since Suennen started Venture Valkyrie in June, it’s never difficult to learn which healthcare topics she’s reading about or thinking about. The healthcare industry is a complex matrix of stakeholders (patients, doctors, hospitals, insurers/payers, and on and on). It can be tricky to find where technology works in this mix, so I’ll be following Suennen’s fledging blog to hear how she’s figuring it all out.