The BBS Connect Newsletter is an extension of our BBS Connect Operating Partner Database, which connects middle-market healthcare-focused private equity funds with experienced executives. Each installment will introduce you to the impressive and insightful professionals that are part of our network.

In this quarter’s edition, we are pleased to feature insights from Henry Sullivant who has served in executive roles at Baptist Memorial Healthcare Corporation and Select Health Alliance, among others, for more than 30 years. Henry brings a wealth of operational and clinical experience to multistate healthcare systems and organizations.

Featured Q&A

Henry Sullivant – Multidisciplinary Healthcare Leader

What areas of healthcare do you anticipate having the most interest from strategic acquirers?

Although healthcare operating margins have decreased, especially impacted by the exodus of workers during the pandemic, any product that helps healthcare systems, provider groups, and other front-line companies do more with less is an opportunity. There are a few sectors that I think are generating a lot of interest: genetic based decision making for actuarial pricing of services; “hospital-at-home” alternatives to acute care facilities; and, if the market supports “risk-based” contracts for providers, then any solution that permits expansion of “patient panels” without the need for office visits…”wearables,” as an example.

Private equity’s role in healthcare continues to grow – and so is scrutiny of private equity’s impact on healthcare. How do you envision the political landscape impacting private equity in healthcare?

PE’s practice acquisition has increased per visit charges, based on reports noted in Health Affairs and other industry publications. The increase is in fee-for-service (FFS) payment models, not in “bundles” or front-loaded payment models. As Medicare and other insurance products shift risk to providers, these acquisition models based on FFS revenues will no longer be profitable. The shift in the payment model will be driven by the private sector or employer-sponsored plans who will shift risk to providers. PE’s successful increase in revenue will be driven by cost of care reductions and not an increase in charges per visit (E/M up charging).

Federal fraud and abuse scrutiny may follow the significant increase “traditional” Medicare FFS charges in services such as gastroenterology, ophthalmology, and dermatology – all heavily utilized by Medicare beneficiaries.

As a strategic investor, what criteria do you think about when evaluating potential targets?

There are several questions I ask when evaluating targets:

• What’s the problem the Newco is trying to solve, and will it improve the health of the individual/community?
• Is there a buyer? If so, is the product scalable? National scope or international?
• How will it improve operating efficiency for the buyer?
• Will it reduce current operating costs of the buyer? (more predictable from a budget standpoint than revenue increase). Secondarily, what are revenue increase predictions?
• Will the product/Newco disrupt the market favorably? Are there similar products already in existence…if yes, why is this product better?
• Will the product make a patient healthier?
• What is the leadership team of the company?
• What is the market durability of the investment?

What advice do you have for companies seeking an investment partner?  Aside from revenue and growth, what is the most important intangible for a successful business?

Companies looking for an investment partner need to have a clear understanding of the investor’s expectations.

A successful business needs to have a strong management system in place that focuses on project scope, measurable goals, reporting cadence, triggers, etc.