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5 deals that show how tech drives healthcare M&A

Healthcare companies are spending more on information technology than ever before. Private equity firms are investing in the innovations most in demand, including big data, SaaS and artificial intelligence, as we explore in depth in Mergers & Acquisitions' feature, Healthcare's must-have technologies, which includes interviews with Harris Williams' Sam Hendler, GTCR's Sean Cunningham and other dealmakers. Here's a slice of that longer story, featuring 5 deals that showcase the trends driving healthcare IT deals.

GTCR-backed Cedar Gate focuses on predictive analytics
GTCR, the Chicago-based private equity firm, partnered with David Snow, who had served as CEO of Medco Health Solutions to launch Cedar Gate Technologies, a healthcare predictive analytics company, in 2014.

“We had started by looking for healthcare tech assets and were focused on analytics businesses, but we didn’t initially find much that fit our criteria, so we started building software tools that we figured we would eventually marry up with a platform company,” says Sean Cunningham, a managing director with GTCR. “It was a unique approach in a sense.”

In 2018, Cedar Gate found its match in Global Healthcare Alliance (GHA). GHA has built a proprietary Software-as-a-Service claims adjudication technology that bundles fee-for-service claims and manages payments to healthcare providers. It enables healthcare entities to manage bundled payment programs for multiple clinical specialties. It has processed more than 2.3 million bundles.
New Heritage invests in brain activity data
The term “medical technology” has evolved from introducing doctors to new equipment to for private practices and hospitals to connecting patients and doctors through telecommunications.

New Heritage Capital, a Boston-based PE firm, made an investment in Rhythmlink in March. Rhythmlink collects neurological data from patients by measuring their brain activity through disposable electrode pads.

“This isn’t the type of thing that hospitals bid out because it’s relatively low dollars, but so important," says Melissa Barry, a partner at New Heritage. “We are seeing a dramatic increase in brain health monitoring. Valuable clinical insights will be faster and easier to obtain.”
Bain Capital bets on high revenue cycle management demand
The healthcare revenue cycle management market is expected to grow to $100 billion by 2024, according to a report from Global Market Insights Inc. This is not lost on private equity firms.

Bain Capital saw an opportunity in the sub sector and pounced on it, buying Navicure and Zirmed and then merging them to form Waystar. Waystar has become giant in the revenue cycle management industry.

"One of the most interesting aspects of healthcare IT is being able to access the clinical data in health records,” says Chris Gordon, managing director, Bain Capital Private Equity. “But a lot of the information in health records are in the form of scans or PDFs so the data is not easily usable. However, Waystar’s technology has the ability to synthesize data so claims can be submitted and paid more efficiently and also package it for use in driving clinical improvement.”
Great Hill likes SaaS deals
Insurance companies are not immune to the change going on in the healthcare industry. Frequently, insurance companies are asked to reduce cost while improving efficiencies and managing risk.

Boston-based PE firm Great Hill Partners got a small taste of the benefits markets and knew within months that it wanted to be entrenched in the sector. In 2014, Great Hill made a $51 million minority investment in Bswift, a SaaS provider for health insurance exchanges and employers nationwide. Within seven months Great Hill sold its stake in Bswift to Aetna for $400 million. “We owned the company for a short period of time, but it was long enough to know we liked the space and wanted to own more companies like Bswift,” says Christopher Busby, a partner with Great Hill. “Our investment in Bswift validated our thesis.”
Riverside buys into automating payments
Payment processing solutions have become a necessity. Most service providers and consumers agree that payments should be mostly invisible. As a result, more payors and providers are turning to payment processing technologies to speed processes up while maintaining accuracy.

Greenphire aims to do exactly that. The firm is an automated payment company for the clinical trial industry. The company’s customers are big pharmaceutical companies running large-scale clinical trials, as well as hospitals and universities around the world. The Riverside Co., a Cleveland and New York -based PE firm, bought Greenphire in 2014.

“How does a big pharmaceutical company reimburse hundreds of people for travel or pay them for taking part in a trial?” asks Joe Manning, a partner with Riverside. “It used to be a manual process of writing checks, handing out cash gift cards, or people sending in receipts and waiting for wires. It was so inefficient.”