Cressey & Company has decades of experience investing in inpatient healthcare facilities. There are over 5,750 inpatient hospitals in America (1). This segment includes acute-care (medical/surgical), rehabilitation, long-term acute care (LTACH) or sub-acute, psychiatric and specialty hospitals. In aggregate, these facilities represent over $750 billion of expenditures and nearly 37 million admissions each year (1). Facilities can be free-standing or contained inside another healthcare facility (the hospital-in-a-hospital model). We look to invest in high quality inpatient facilities that provide important services to their communities, providers and patients.
Home care includes a broad array of healthcare services performed in the homes of patients. The Cressey & Company team has extensive experience investing in home care, including Hospice, Home Nursing, and Home Infusion. In the United States there are more than 33,000 home care providers treating approximately 12 million patients (2). Annual home care expenditures exceeded $72 billion in 2009 (2) and the Congressional Budget Office projects an annual growth rate of about 9% for Medicare home health services alone over the next decade (3). Cressey & Company sees home care as an increasingly important part of the healthcare landscape and looks to invest in clinical thought leaders with a commitment to long-term quality and productivity.
Cressey & Company has actively invested in multiple providers of outpatient services including Wound Care, Physical Therapy and Dialysis. Outpatient services are specialized services offered in a more cost-effective setting of care than hospital based inpatient services. Healthcare reform is expected to accelerate the growth in outpatient services and highlight the need for more integrated care. Cressey & Company expects outpatient services to play a critical role in reducing the cost and improving the quality of care for increasingly prevalent chronic conditions. Cressey & Company targets outpatient services businesses that have a strong local presence, a commitment to quality and an excellent reputation with referring physicians.
The outsourced services segment includes a number of businesses and niches that provide services and products primarily to other healthcare providers and facilities. These include: (i) specialty services like diagnostics and value-added distribution, (ii) physician practice management including quality and compliance support, and (iii) healthcare education. Cressey & Company has made multiple investments in specialty outsourced services businesses, including a number in value-added distribution (e.g., institutional pharmacy and specialty DME). Value-added healthcare distributors, for example, play a critical role in the healthcare supply chain delivering care-related products to 200,000 providers on a daily basis (4). Cressey believes that outsourced services providers increase the efficiency of the U.S. healthcare system and help lower costs for both providers and patients. We anticipate a continuing and significant consolidation opportunity in this vital segment of healthcare services.
The Cressey & Company portfolio companies have historically been significant purchasers of HCIT and we have used that historical experience to establish our HCIT effort. The team has extensive experience with HCIT through the evaluation and purchasing of HCIT done by portfolio companies in the current fund and our predecessor funds. HCIT has become a key driver in improving the cost-effectiveness and quality of healthcare services in our provider portfolio companies and in the United States generally. The HCIT market in the United States is estimated to represent more than $65 billion in annual spending (5). Cressey & Company is focused on finding new opportunities in this increasingly important high growth sector of the healthcare services landscape.
The Cressey & Company team has deep experience in specialty healthcare facilities having invested in dental practice management, behavioral residential treatment centers and veterinary services. Specialty facilities serve niche healthcare needs (particular geographies, patients, disease states, or treatment protocols) in an outpatient (non-hospital setting) making them more economical and patient friendly. These specialty verticals are often highly fragmented making them attractive candidates for Cressey & Company’s partnering and growth strategy.
(1) “Fast Facts on US Hospitals.” Fast Facts on US Hospitals. N.p., n.d. Web. 01 Oct. 2012. <http://www.aha.org/research/rc/stat-studies/fast-facts.shtml>.
(2) “Basics Statistics About Home Care.” National Association for Home Care & Hospice, n.d. Web. 1 Oct. 2012. <http://www.nahc.org/facts/10HC_Stats.pdf>.
(3) Ellich, Kevin K. LHC Group, Inc. Overweight, Country Road, Take Me Home; Initiating Coverage At Overweight. Rep. Piper Jaffray, 19 Dec. 2011. Web. 1 Oct. 2012.
(4) “PHARMACEUTICAL DISTRIBUTORS CONTINUE TO DELIVER OPERATIONAL EFFICIENCIES AND VALUE TO U.S. HEALTHCARE SYSTEM AMIDST ECONOMIC AND REGULATORY CHALLENGES.” Center for Healthcare Supply Chain Research – Press Release – 11/10/11. N.p., 10 Nov. 2011. Web. 02 Oct. 2012. <http://www.hcsupplychainresearch.org/press/20111110-rod.asp>.
(5) Stockton, Jamie. CERN: Initiating Coverage with a Market Perform Rating. Rep. Wells Fargo Securities, 29 May 2012. Web. 2 Oct. 2012.