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BFD Expert Voices - Health Tech Deals

BFD Expert Voices

It's not just a labor shortage rankling home health, as high workforce turnover and churn make the businesses increasingly difficult to run, the Wall Street Journal reports.

Why it matters: A push to provide care in the home has for the past five years driven significant private equity investment into home health, but current labor dynamics could chill PE dealmaking in the near-term.  

Driving the news: The median caregiver turnover rate was about 65% in 2021, the WSJ reported, citing data from Home Care Pulse, a company that provides training to home care agencies.

The industry is dealing with staffing woes, scheduling gaps and waiting lists for services, Axios' Tina Reed writes today.

Stakeholders are trying to persuade Congress to delay future rate cuts. A planned $180 million in reductions will be phased in over two years, distributing the pain for the sector. 

By the numbers: About 40% of home health agencies now offer signing bonuses, and 94% have increased pay, some by as much as $10 an hour based on experience, WSJ says.

Still, median pay in 2021 was $14.15 an hour — just $29,430 a year — for home health and personal care aides, according to the Labor Department.

Zoom in: The labor squeeze may mean less investment into home health providers while more capital pours into technology that helps the industry navigate care with a limited workforce. 

Remote care company Biofourmis last year collected $320 million in Series D capital from players including General Atlantic, Intel Capital and CVS Health.

Tomorrow Health, a startup that matches patients with home care vendors, in June raised $60 million in Series B funding from VC backers including Bond Capital, Andreessen Horowitz and Obvious Ventures.

Hybrid home care startup Homeward Health in August pulled in $50 million in Series B funds led by Arch Venture Partners and Human Capital.

DispatchHealth, a high-acuity home care provider, in November raised $330 million in combined equity and debt financing from backers including Optum Ventures and Echo Health Ventures.

Tech-enabled senior care company Lifespark last year was working with Lincoln International to raise $50 million in growth equity.

Meanwhile, although overall investments in home care ticked downward from 2021 to 2022, they remained relatively robust last year — with a frenzy of M&A activity, per a 2022 Mertz Taggart report.

In-home care companies in Q1 2022 commanded two of the top four spots for the highest digital health valuation step-ups, per SVB, including Homeward Health (10x) and MedArrive (5.4x).

CVS last fall made a notable bid with its $8 billion purchase of Signify Health, which leverages at-home health risk assessments to provide value-based care.

Retail giant Best Buy in 2021 acquired hospital-at-home company Current Health for $400 million.

Plus, home health providers will avoid significant Medicare pay cuts next year, after the Biden administration announced a net 0.7% increase in fees last year, Axios' Maya Goldman wrote.       

1 big thing: Home health's labor churn

Illustration of a shadow cast over a home with a red cross for a door

MyOrthos, an SV Health-backed orthodontics platform, is exploring strategic options, sources tell Claire.

Why it's the BFD: MyOrthos is the third dental deal to come to market, signaling an investor sweet tooth (sorry, not sorry) for the space, this year. 

What's happening: Moelis was hired to advise Boston-based MyOrthos on options that include a growth equity raise or sale, sources say. 

MyOrthos is being marketed on around $20 million to $25 million in EBITDA, they add.

A process is underway, with talks having started late last year. 

By the numbers: MyOrthos, which offers orthodontia and dentistry services, has 67 practices and 72 orthodontists in 12 states in the East Coast, Mid-Atlantic and Midwest.

Catch up fast: MyOrthos was founded in 2019 by CEO Elizabeth Campbell and chief dental officer Tyler Russell.

The company took in capital from Campbell's former firm SV Health that year.

MyOrthos completed a $127 million debt refinancing round in 2021 from  Antares Capital and BMO Financial Group, and last year received $100 million of debt financing from the two lenders, per PitchBook.

Between the lines: As leverage for sponsor-backed deals continues to decrease, private equity firms reticent to inject more equity into new dental deals will likely have to ask doctors to roll more of their own profits in, one source says.

"Instead of rolling 20%, they have to roll 40 to get the transaction done," he notes. "It's going to be interesting to see how many doctors are willing to roll 40%."

Moelis declined to comment. SV and MyOrthos did not respond to requests for comment.

2. The BFD: MyOrthos in market 

Illustration of a one dollar bill zoomed in to show George Washington smiling with a mouth full of white teeth.

Alongside steady PE-led M&A activity in general dentistry, orthodontics has garnered significant sponsor interest.

Thomas H. Lee Partners joined Linden as an equal investor in its orthodontics chain Smile Doctors at a $2.4 billion valuation in late 2021. 

FFL invested an undisclosed amount in Orthodontic Partners in 2019.

Pamlico Capital acquired Canadian Orthodontic Partners from Sheridan Capital in 2021 for an undisclosed price. 

3. State of play: Orthodontics 

Illustration of a file foldler with a note that says "State of Play" paper clipped to it.

TPG Growth has agreed to invest in MedQuest Associates, an Alpharetta, Ga.-based chain of outpatient diagnostic imaging facilities that's owned by nonprofit health system Novant Health. The joint venture is aimed at expanding MedQuest.  www.mqimaging.com 

4. Deals o' the day

JPMorgan Chase has named Alto Pharmacy CEO Alicia Boler Davis to its board of directors.

Scan has named Roxie Health cofounder Varun Kumar VP medical director.

Acuity Health has named Proem Behavioral Health advisor Jim Szyperski managing director.

Biofourmis has promoted former medical director Sandeep Pulim to VP of clinical strategy.

MRO has named former Cerner exec Matt Wildman chief commercial officer and former Cotiviti exec Moliehi Weitnauer chief product officer. 

EHealth has named former M1 Finance exec Ketan Babaria SVP and chief digital officer.

IntegriChain has promoted former COO Joshua Halpern to CEO.

SnapMedTech has named former Thumbtack COO Jeff Grant CEO.

5. It's Personnel

✈️ Situational awareness: Former Theranos CEO Elizabeth Holmes tried to flee the country with a one-way ticket to Mexico last January following her fraud conviction, prosecutors alleged Friday.

🎈 Erin spent the weekend celebrating a triumvirate of friends' birthdays, minus one who got COVID — again.

🙏🏻 Thanks for reading, and extra thanks to newsletter editor George Moriarty and copy editor Brad Bonhall. Please ask your friends and colleagues to sign up.

January 23, 2023

1 big thing: Home health's labor churn