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BFD Expert Voices - Health Tech Deals

BFD Expert Voices

Dental technology is emerging as a growing area of health care investor interest, according to a recent Harris Williams report.

Why it matters: As private equity continues to consolidate dental services organizations, demand for technology to streamline workflows is increasing, particularly as dentistry faces a tight labor market, Aaron writes.

Zoom in: Investors are targeting dental tech companies that aid operational scalability, drive patient acquisition and satisfaction, improve the quality of revenue, and minimize overhead costs.

Pandemic-induced squeezes on patient volumes have passed, but most providers still have packed schedules (and not enough dentists).

"Staffing shortages and an increase in retirements rates of dentists have exacerbated the need for technology solutions that maximize value for both the patient and the provider," the report says.

DSOs are also investing more in specialization to differentiate themselves in a crowded market, the report notes.

State of play: With 100+ PE-backed DSO platforms today, there is accelerating momentum in the space, among both existing sponsor-backed dental tech platforms and startups.

Aquiline Capital-backed Planet DDS, a PE-backed provider of dental tech software, in January acquired dental practice management system provider Cloud 9 Software from Accel-KKR.

Toothio, a Scottsdale, Ariz.-based dental staffing tech company, raised a $4 million seed round back in August.

Torch Dental, a New York City-based dental supply provider secured a $28 million Series B, back in July.

Wellplaece, a dental supply marketplace provider, gathered $5.5 million in seed funding.

The intrigue: Artificial intelligence is the term-du-jour in health tech, and there are plenty of opportunities to leverage AI in dental tech, the report says.

In dental education, for example, virtual patient simulators are replacing clinical work on live patients.

Other potential uses include imaging, oral surgery via robotics, practice management via virtual dental assistance, and other use cases.

1 big thing: Investors smile on dental technology 

Illustration of toothpaste forming a dollar symbol.

Employers may be grappling with some of the biggest rises in health care costs in a decade, but most are not making meaningful changes to benefit design, according to preliminary findings from Mercer's 2023 National Survey of Employer-Sponsored Health Plans.

Why it's the BFD: Employers continue to be squeezed by medical inflation but are for the most part maintaining existing health benefit plans — and their digital health components — in the fight to retain workers, Erin writes.

Details: Per-employee health coverage has for the last decade risen 3% to 4% annually, but this year ticked up more than 5%, according to the survey of 1,700 employers.

Mercer experts tell Axios' Tina Reed they expect costs to rise 5.4% next year, a change that could have topped 6.6% if employers made no attempts to cut costs.

The relatively small change "indicates that most employers are not making cost-cutting changes to their plan," Mercer says in a press release.

What's happening: Many large employers have added Centers of Excellence (COEs) to health plan networks designed to steer members to higher-quality providers while saving costs.

Flashback: A Mercer analysis from earlier this year found that more than a quarter of employers were offering navigation or advocacy services to members.

About half said they planned to offer at least one point solution — often with a virtual care component — for chronic conditions.

42% said they had improved access to mental health care within the past three years by adding supplemental behavioral health care provider networks for virtual or in-person care.

Between the lines: New and pricey drugs, big claims and economic conditions are injecting much more volatility into the picture, Mercer chief actuary for health and benefits Sunit Patel tells Tina.

"Even if the average increases, say 5.5%, you've got more clients, more employers, who are outliers, that are in excess of 10%, than we've ever seen," he says.

Specifically, companies are coping with more gene therapies and other expensive treatments for small patient populations that carry high costs. The use of pricey GLP-1s for weight loss is also a major concern.

High inflation, labor shortages in health care and consolidation are also driving up prices.

"We're hearing from a lot of finance officers and others just wishing that they had the ability to better predict claims," he says.

What we're watching: How much of the expected increases will get passed along to the workforce.

Employers have been trying to avoid passing increases on to workers for about five years, fearing employees could hit a tipping point when it comes to out-of-pocket spending.

Mercer found the majority of large employers that responded to the survey do not plan to increase cost-sharing in 2024 and will require employees to pick up an average of 22% of premium costs.

2. The BFD: Employers grapple with health costs

• Lissun, a Gurugram, India-based telemental health startup, raised $1.3m in seed funding led by Inflection Point Ventures and Rainmatter Capital. https://axios.link/45ICHjM 

• NMS Capital-backed Cordental Group, a Cincinnati-based dental support organization, acquired Signature Dental Experience, a Bloomington, IL-based dental practice. https://cordentalgroup.com/

•  Havencrest Capital Management, a Dallas-based health care firm, made a majority investment in Tekton Research, an Austin-based clinical research company. https://tektonresearch.com/

• ERPHealth, a Philadelphia-based provider of outcome-tracking technology, acquired Manifesto, a Philadelphia-based peer support and health coaching platform. https://erphealth.com/

Simon Dentistry, a Bowling Green, Ky.-based dental provider, merged with MB2Dental, a Dallas-based dental partnership organization. https://mb2dental.com/about/

3. Deals o' the day

•  At CVS Health, CFO Shawn Guertin will also serve as president of health services; Prem Shah will continue as chief pharmacy officer and is now president of pharmacy; and Brian Kane became president of Aetna.

• At Array Behavioral Care, Shannon Werb, the former COO of DispatchHealth, became CEO; Sara Gotheridge, a former senior medical director at LifeStance Health, became CMO and Ben Schlang, a former principal at Harbour Point Capital, became CFO.

4. It's Personnel

📈 The next driver of inflation: health care — Axios

🏥 Health insurance costs are taking biggest jumps in years — WSJ

5. Your daily dose

Illustration of a repeating pill bottle pattern with one rolled up newspaper.

Sept. 5 — As the credit markets rebound, health care dealmakers are betting on life sciences and pharmaceutical services investments.

Why it matters: As drug pricing negotiations continue at the federal level, pharmaceutical executives and investors are shifting strategy — buoying demand for outsourced service providers, Axios' Claire Rychlewski and Aaron wrote.

Sept. 6 — Pumpspotting, a Kittery, Maine-based community-driven breastfeeding support platform, raised a $2.2 million seed, CEO Amy VanHaren told Aaron.

Why it matters: The U.S. care economy is approaching $6 trillion while employers continue to increase family benefits spending.

Sept. 7 — AI-powered drug development startup Inceptive popped $100 million in funding from backers including Nvidia venture arm NVentures and Andreessen Horowitz.

Why it matters: Founded by former Google Brain researcher Jakob Uszkoreit, Inceptive aims to bring the power of generative AI to bear on the $1.4 trillion pharmaceutical industry, Erin wrote.

6. 🗞️ Catch up quick

💖 Thanks for reading, and extra thanks to newsletter editor Claire Rychlewski and to copy editor Mickey Meece. Please ask your colleagues, friends, and family to sign up.

September 08, 2023

1 big thing: Investors smile on dental technology