Only 20% to 25% of patients that need behavioral health support actually receive care. That means the behavioral health sector offers opportunity and high ROI for investors focused on delivering better outcomes at lower costs.

Terry Wang, Partner at Regal Healthcare Capital Partners, joins host Geoff Cockrell on this episode of The Capital Corner for a discussion on how investors should view opportunities in the behavioral health sector, growth strategies, and what 2023 may look like.

“The most important element here is who is delivering care, really making sure that you're delivering care in a compliant way, in a quality way,” advises Terry. “Even if it may cost more in the short term, it's going to pay off in the long term. There are countless examples of behavioral health companies that have gotten in trouble because they've cut corners.”

Even with the potential for difficult valuations in the current economic climate, Terry predicts lots of opportunity within the behavioral health sector. Once considered “the ugly stepchild” of the healthcare industry, it is now a primary focus for government agencies, healthcare providers, and patients, who are beginning to understand how mental health concerns can impact physical health.

The sector is only just starting to mature, says Terry. Investors that can prove they can deliver better results at a lower cost stand to benefit from the enormous opportunity.

Name: Terry Wang

What he does: Terry is a Partner at Regal Healthcare Capital Partners. Before that, he was the VP of Operations at CHE Senior Psychological Services, a leading, private-equity backed provider of mental health services to skilled nursing, assisted living, adult day care, and rehab centers. He received a B.S. in Finance and Management from the Wharton School of the University of Pennsylvania, and an MBA from Harvard Business School.

Organization: Regal Healthcare Capital Partners

Connect: LinkedIn

Top takeaways from this episode

★ Focus on delivering better outcomes at lower cost. According to Terry, there are opportunities to invest across the entire acuity spectrum of the behavioral health sector.

★ An underserved market leaves room for organic growth. With behavioral health needs being largely underserved, there’s an opportunity to hire and retain providers, contract with insurance companies, and find ways to market to new patients.

★ Behavioral health assets can have different lifecycle opportunities. Platforms in the sector can progress through different stages as their size and scale changes. Early stage investors can get involved even when platforms are pre-revenue.

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Jason Porter of Baird is a leading healthcare provider investment banker with many specialties. But one area that he says is growing and occupying more attention from investors lately is fertility care and OB-GYN services.

Why? Both OB-GYNs and fertility providers present a range of opportunities for investors: they’re often seen more frequently by patients than general providers or other specialized providers, and advancing research and technology in the space continues to generate successful outcomes. The sector continues to push for more contracts and opportunities for value-based care.

So what is it like to invest in this thriving yet complicated market right now, and how does Jason approach investment opportunities?

Tune in to this episode of The Capital Corner to find out. Host and Chair McGuireWoods' private equity group Geoff Cockrell sits down with Jason to discuss where the OB-GYN and fertility sectors differ, where opportunities in the sector are growing, and what providers and groups can do to be more successful as they shift to value-based care.

Name: Jason Porter

What he does: Jason is a Managing Director at Baird’s healthcare investment banking practice and a leading investment banker in the healthcare provider services space. At Baird, he focuses on physician and alternate site healthcare services.

Organization: Baird

Connect: LinkedIn

Top takeaways from this episode

★ Investor interest in OB-GYN and fertility services is growing. This is because patients see OB-GYN providers more frequently than other doctors, creating more opportunities to provide value-based care. The quality of both OB-GYN and fertility care is also growing as new technology and advancements in medicine become available.

★ Approach the market with a construct in place. When it comes to settling compensation between providers and sponsors, it’s imperative to educate your provider on different compensation models and options beforehand. Then when the bids start coming in, you can walk them through “what it can look like in the future and what that proverbial second bite of the apple can be from an economic perspective,” Jason says.

★ Data is key to success in a system turning to value-based care. In order to be successful in benefitting both the payer and provider, groups need to provide data showing outcomes across practices. “There's no other way around it as the entire healthcare ecosystem moves to value-based care,” Jason says.

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On this episode of The Capital Corner, McGuireWoods' Geoff Cockrell sits down with Dr. Bijan Salehizadeh, Managing Director at NaviMed Capital, to discuss what is happening in the pharma services space within healthcare private equity.

The pharmaceutical services industry has piqued the interest of private equity investors over the last five to ten years as more drugs move into development and high quality science continues to grow. An impressive 500 IPOs were filed from biotech companies last year alone.

So what attracts private equity firms to invest in pharma services? And what can we expect in 2022?

“The benefit of pharmacy services is you're not subject to government reimbursement. And Pharma is a good payer and a fast payer. You also have pretty good pricing power,” explains Bijan in relation to what attracts investors to pharmaceutical services.

Despite a turbulent start to 2022, Bijan doesn’t see the interest in pharma services slowing down. In fact, he describes the industry as being “recession resistant” compared to many other areas of healthcare.

Name: Bijan Salehizadeh

What he does: Bijan has over 20 years of healthcare operating and investment experience. At NaviMed, he sits on the firm’s Investment Committee and is responsible for leading investments and overseeing portfolio companies with a particular focus on healthcare providers and pharmaceutical services. Prior to co-founding NaviMed Capital, he was a General Partner at Highland Capital Partners, where he focused on growth stage healthcare investments.

Organization: NaviMed Capital

Connect: LinkedIn

Top takeaways from this episode

★ Structural change is driving growth in pharma services. Over the past 5-10 years there has been a lot of growth in pharma services within the healthcare private equity space. Structural changes have driven a lot of this growth, including having more drugs in development and a growing need to outsource the commercialization of drugs to third-party companies.

★ Private equity firms see the appeal in backing pharmacy services. Despite the risks of the FDA stopping a trial or discovering that the science didn’t work, pharma services remains an attractive investment for private equity groups. Investors appreciate not being subject to government reimbursement and the strong gross margins present in the industry.

★ Niche companies are especially attractive. Strategies for attractive deals within the pharma services space can include working with very specialized companies who have found success in their specific niche — including finding sales synergies and cross selling opportunities to help these smaller companies grow. These once niche companies then grow to a size that other companies and investors begin to pay more attention to.

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