Strategy & Landscape

Our mission is to improve patient outcomes and investor value by integrating the leading practices, assets and human capital of strategic acquisitions.

Strategy

PHM is focused on a highly fragmented and developing market of small privately-held companies servicing chronically ill patients with multiple disease states caused mainly by age and obesity. In addition to our primary focus on organic growth, we may evaluate acquisitions that complement our existing portfolio companies and/or offer significant growth potential in their own right. We may consider opportunities to invest in annuity-based companies to acquire their patient databases and technical expertise at favorable prices.

PHM’s organic growth strategy is to increase annual revenue per patient by offering additional and/or complimentary services to current patients, enabled by the diverse product offerings of our portfolio companies. In addition, bottom line growth is enhanced by consolidating certain functions like purchasing, IT, billing and marketing which leverages buying power as well as the cross-utilization of sales staff. The expected result is growing EPS with each acquisition along with acquiring best practices leading to higher quality services for the patient.

Chess Pieces

Market Landscape

As the US population ages, the overall market of healthcare spending in the United States is projected to increase dramatically. Medicare, the government owned insurance for people over 65 in the US, is under tremendous pressure to cut spending in the face of this demographic. Right now, about 8,000 people turn 65 each day in the US, within 5 years that number will increase to 11,000 people. Medicare’s response to this problem has been to redefine the approach to paying for healthcare.

  • To reduce costs, Medicare is creating programs which encourage healthcare treatments and diagnosis in the home, where it is less expensive than in hospital. This aligns perfectly with the Post Acute Respiratory Care Collaborative (PARCC) that was rolled out by PHM portfolio company, VieMed and already extended to 5 other PHM portfolio companies. Together, these PHM companies represent the largest in home non-invasive ventilation provider in the U.S., significantly reducing hospital readmission for COPD patients.
  • Medicare is focused on paying the companies that provide these in-home services for “outcomes”. This means that the in-home health company must ensure whatever in-home medical device they provide the patient is being used effectively. The outcomes-based requirement for healthcare services provision has completely changed the landscape for in-home healthcare companies. By reducing COPD readmissions over 70% from the national average, PHM is well positioned to excel in this evolving environment.
  • PHM is on the leading edge of this new shift in the in-home market. Unlike the competitors who have made billions of dollars in investments in a disappearing model, PHM is providing services solely under the new Medicare model. Understanding how to deliver in-home healthcare profitably under this new model positions PHM in the market with a significant competitive advantage.
Medicare and the U.S. Healthcare System

Health care costs continue to rise in the U.S. and throughout the developed world. Total U.S. health care expenditures were estimated to be $3.09 trillion in 2014, and are projected to soar to $3.57 trillion in 2017. Health spending in the U.S., at about 18% of Gross Domestic Product (GDP) in 2014, is projected to grow steadily. Health care spending in America accounts for a larger share of GDP than in any other country by a wide margin and is simply not sustainable at this rate.

The health care market in the U.S. in 2014 included the major categories of hospital care ($959.9 billion), physician and clinical services ($618.5 billion), dental services ($122.4 billion) and prescription drugs ($290.7 billion), along with nursing home and home health care ($248.5 billion). Registered U.S. hospitals totaled 5,723 properties in 2012, according to an American Hospital Association survey, containing 920,829 beds serving 36.1 million admitted patients during the year (the latest data available).

Medicare, the U.S. federal government’s health care program for Americans 65 years or older, provided coverage to an estimated 54.0 million seniors in 2014. National expenditures on Medicare for fiscal 2014 were projected to be $615.9 billion, including premiums paid by beneficiaries. By 2030, the number of people covered by Medicare will balloon to about 81.4 million due to the massive number of Baby Boomers entering retirement age. Medicare’s response to this problem has been to redefine the approach to paying for healthcare and PHM is prepared to capitalize on this trend.

Home Health Care Market

Home health care is a diversified industry including in home device, home nursing care, companion care, infusion services and others and represents about 3% of the overall US Healthcare expenditures. The home healthcare market is highly fragmented, and counts more than 100,000 players with no major company having greater than 5% market share. Top commercial providers include Amedisys, LHC Group,Gentiva, Apria, Lincare and American HomePatient. Nearly 8 million Americans receive some form of home and community care each year, a growing number as an aging population drives demand and policy makers shift expensive hospital care to the home.

Source: Fiscal 2013 US Government Healthcare Expenditures per Category, cms office of the actuary

Previously, Medicare paid for the in home device and assumed that the patient was using the device properly, ultimately reducing the patients’ healthcare costs over time. After two decades of this payment method and in the face of a growing population of aged Americans, Medicare came to the conclusion that is needed to be changed.

The result of a new method of paying for healthcare services has completely changed the landscape for in home healthcare companies.

PHM is on the leading edge of this new shift in the in-home market. Unlike the competitors who have made billions of dollars in investments in a disappearing model, PHM is providing services solely under the new Medicare model. Understanding how to deliver in-home healthcare profitably under this new model positions PHM in the market with a significant competitive advantage.

Outlook

Rising geriatric population coupled with increasing prevalence of chronic diseases will boost the demand of home healthcare market globally, as well as the everlasting search for lower costs of health.

The number of American seniors, 40 million in 2010, is projected to more than double to 87 million by 2050. The average U.S. life expectancy, 73 years in 1975 and 75 a generation ago, reached 78.7 in 2011.

The global home healthcare market was valued at USD 176.1 billion in 2013 and is estimated to reach a market worth of USD 303.6 billion in 2020 growing at a CAGR of 8.1% from 2014 to 2020.

Source: KOL and Company Reports

The North America home healthcare market was valued at $90.9 billion in 2012; it is poised to grow at a CAGR of 7.5% to reach $130.4 billion by 2017, at a higher rate of consolidation.

By 2020, the ranks of US home health and personal care aides will have swelled by more than 1.3 million—a 70 percent increase from 2010, according to the Bureau of Labor Statistics. That compares with a growth rate of 14 percent for the U.S. job market at large. Rapid job growth is expected because of the projected rise in the number of elderly people, who are increasingly relying on home care, as well as the continuous search to less expensive care for Medicare and Medicaid.

Demographics and Service Consolidation Opportunities

Age and healthcare expenditures

The first baby boomers began to turn 65 in 2001. And for the next 18 years, boomers will be turning 65 at a rate of about 8,000-11,000 per day. This population is starting to have a significantly negative impact on the health care budgets of the industrialized world.

Source: US bureau of Census 2008

A 60-year old is more susceptible to suffer from diseases than a 20-year old. With increased age comes increased health expenditures. On average, the 60-year-old and above group spends over 200% more than the 30-year old category. Health care costs increase substantially on a per person basis as one ages.

Sources: Mary Meeker’s landmark report, 2012

Chronic diseases among the 65+

Chronic diseases and conditions—such as heart disease, stroke, cancer, diabetes, obesity, and arthritis—are among the most common, costly, and preventable of all health problems. As of 2012, about half of all adults—117 million people—have one or more chronic health conditions. One of four adults has two or more chronic health conditions.

Source: University of Colorado

Service Consilidation Opportunities

In 2012, a study showed that approximately half (117 million) of US adults have at least one of the 10 chronic conditions examined (ie, hypertension, coronary heart disease, stroke, diabetes, cancer, arthritis, hepatitis, weak or failing kidneys, current asthma, or chronic obstructive pulmonary disease [COPD]). Furthermore, 1 in 4 adults has multiple chronic conditions.

Medical Studies, Sources and References

Medical Studies Show Home-Based Care Is Cost-Effective

Homecare can play a tremendous role in reducing care spending by treating more people in a cost-effective manner at a fraction of the cost of other institutional settings – all in the patient-preferred setting of the home. Among the most popular segments of Home Care Services, we can find Medical Equipment, Oxygen Therapy, and Glucose self-testing for Diabetics.

Home medical equipment allows seniors, persons with disabilities or chronic health issues, and individuals recovering from an accident, surgery or illness to stay in their homes, often at a much more affordable cost than a brief stay in a hospital or a longer stay in a nursing home or assisted living facility. For example, the daily cost of home oxygen for Medicare patients is 1/30th of the cost of a day in a nursing home, and – or 1/268th of the cost of a single day’s hospital stay.

The Imperative of Home-based Care – New England Journal of Medicine

A 2010 article in the New England Journal of Medicine states, “ultimately, health care organizations that do not adapt to the home care imperative risk becoming irrelevant. It seems inevitable that health care is going home.” Steven H. Landers, M.D. of the Cleveland Clinic describes demographic, clinical, economic, and technological forces that make home-based care “imperative.” He cites oxygen as an example of advances in portable medical technology and cites parenteral nutrition and infusion as examples of care that are less expensive than and as equally effective as institutional care. He notes that there may be more than 70 million Americans age 65-plus by 2030. “Many of these older adults will have limitations on their activities, including difficulty walking and transferring from bed to chair, that make leaving their homes difficult. Bringing care to the home improves access for such people…. Older adults are particularly prone to complications of confinement in hospitals, such as delirium, skin conditions, and falls. Treating people at home may be one way to avoid such complications.” (Landers, S. “Why Health Care Is Going Home,” New England Journal of Medicine, October 20, 2010.)

Oxygen Therapy Is Cost Effective, but Improvements Needed in Medicare Policy

An article published in the February 2009 American Journal of Managed Care on long-term oxygen therapy concluded that “continuous oxygen therapy for chronic obstructive pulmonary disease is highly cost-effective.” The article states, “The Deficit Reduction Act [of 2005] provision that limits rental of all home oxygen equipment to 36 months … may significantly reduce services for fragile elderly patients and could raise numerous patient safety issues…. There is substantial room for improvement in the current Medicare policies regarding long-term oxygen therapy. Medicare coverage can be improved by prescribing long-term oxygen therapy to patients who will receive substantial benefit and by providing adequate support for services and maintenance.” (Oba, Y. “Cost-Effectiveness of Long-Term Oxygen Therapy for Chronic Obstructive Pulmonary Disease,” American Journal of Managed Care, February 2009.)

Self-Monitoring of Blood Glucose in Diabetes: Cost-effectiveness in the U.S.

Analysis in the American Journal of Managed Care, March 2008, documents an extremely large and growing economic burden of the chronic disease diabetes mellitus. According to the Centers for Disease Control, about 14.7 million people in the U.S. had been diagnosed with diabetes through 2004, with type 2 diabetes mellitus accounting for about 90 percent of those cases. A total of $92 billion in direct medical expenditures were attributable to diabetes for 2002, and the projected increase in the diabetes population suggests that annual direct costs could reach $138 billion by 2020. Identifying cost-effective technologies for diabetes management is an important goal. One tool repeatedly shown to improve glycemic control for insulin-using patients is the self-monitoring of blood glucose (SMBG). Clinical guidelines recommend SMBG at least three times daily for patients with diabetes who use insulin. The report demonstrates cost-effectiveness for SBMG patients who test both 1 and 3 times daily. (Tunis, S., Minshall, M., “Self-Monitoring of Blood Glucose in Type 2 Diabetes,” American Journal of Managed Care, March 2008.)

Oxygen Therapy Reduces Hospitalization and Mortality

A 2004 assessment of clinical literature on long-term oxygen therapy by the U.S. Agency for Healthcare Research and Quality found oxygen therapy reduces mortality and hospital frequency and length of stay for patients with severe COPD. The average number of hospital admissions per patient year decreased from 2.1 to 1.6 and the average number of days hospitalized decreased from 23.7 to 13.4 after long-term oxygen therapy. (Lau, J., et al., Long-Term Oxygen Therapy for Severe COPD, Tufts-New England Medical Center Evidence Based Practice Center, June 11, 2004.)

Equipment Represents Less than One-Third of Medicare Home Oxygen Cost

An assessment of the costs required for providing home oxygen therapy to Medicare beneficiaries was conducted by Morrison Informatics in 2006. To identify costs and resources used, Morrison gathered data from 74 oxygen providers that serve more than 1.7 million Medicare beneficiaries. Analysis of the results found that the oxygen equipment represents less than one-third (28 percent) of the cost of providing prescribed oxygen to patients at home. Oxygen therapy in the home requires services such as preparation and delivery of equipment, patient assessment, patient training and education, medical documentation, maintenance, replacement supplies, and 24-7 availability for emergency service. The non-equipment expenses represent 72 percent of the cost of home oxygen therapy for Medicare beneficiaries. (Morrison Informatics, Inc., “A Comprehensive Cost Analysis of Medicare Home Oxygen Therapy,” June 2006.)

Homecare Reduces Costs by 37 Percent for Heart Failure Patients

The May 2004 Journal of the American Geriatrics Society reports that homecare, directed by Advanced Practice Nurses (APNs), reduced total costs of care for patients suffering from heart failure and co-morbid conditions, attributable to fewer and later hospitalizations and fewer deaths. (Naylor, Mary D., et al., “Transitional Care of Older Adults Hospitalized with Heart Failure: A Randomized Controlled Trial,” Journal of the American Geriatrics Society, May 2004.)

Review of Medicaid Homecare in Seven States Shows Reduced Costs

A 2002 study published in Health Care Financing Review describes the characteristics of Medicaid home and community-based programs in seven states. In Washington, for example, the state imposed strict fiscal caps, keeping spending to 40 percent of the cost of nursing home care on a per capita basis. (Wiener, J., et al., “Home and Community-Based Services in Seven States,” Health Care Financing Review, Spring 2002.)

Johns Hopkins’ Hospital At Home Program Improves Patient Outcomes While Lowering Health Care Costs

Release in June 2012, the study shows improved quality of care, reduced length of stay and higher patient satisfaction scores. Using a Johns Hopkins-developed program that allows medical professionals to provide acute hospital-level care within a patient’s home, a New Mexico health system was able to reduce costs by roughly 20 percent and provide equal or better outcomes than for hospital inpatients, according to new research.

Lower Cost of Home Intravenous Antibiotic Treatment v. Hospital, SNF Settings

A study described in Clinical Infectious Diseases quantified cost savings of a home intravenous antibiotic program in a Medicare managed care plan. The average cost per day of home therapy was $122, compared to $798 in the hospital and $541 in a skilled nursing facility. (Dalovisio, J., et al., “Financial Impact of a Home Intravenous Antibiotic Program on a Medicare Managed Care Program,” Clinical Infectious Diseases, 2000.)

Alere Home Testing Study Shows Reduction of Health Risks with Warfarin Home Monitoring

Alere Home Monitoring studied 4,501 patients to see if increasing a warfarin patients’ testing frequency could help reduced the risk of dangerous test results. The results were promising and supportive of weekly patient self testing.

The study showed weekly testing reduced patient risk by 30% over patients who tested their blood twice a month. Weekly testing was close to 50% better at keeping their INR blood test close to their target range than patients who tested their INR monthly.

Weekly testing may not be easy or affordable if you have your blood drawn at a lab or your doctor’s office. Patients who test their INR at home often test weekly, eliminating travel to and from their lab. Monitoring your INR at home requires a prescription and the support of your doctor. Patient self-testing is covered by Medicare and most private insurance companies up to and including weekly testing.

Sources
http://www.forbes.com/sites/danmunro/2012/12/30/2012-the-year-in-healthcare-charts/
https://www.aahomecare.org/issues/cost-effectiveness-of-homecare
http://www.plunkettresearch.com/health-care-medical-market-research/industry-trends
http://www.cdc.gov/pcd/issues/2014/13_0389.htm
http://www.cdc.gov/chronicdisease/overview/
http://www.cdc.gov/nchs/data/hus/hus13.pdf#114
http://www.cdc.gov/nchs/data/databriefs/db100.htm
http://www.bumc.bu.edu/gms/files/2012/02/Top-30-fastest.pdf
http://www.homecare100.com/homecare100/files/2014/2014-home-health-care-market-outlook.pdf
http://www.marketresearch.com/corporate/aboutus/press.asp?view=3&article=2113&g=1
http://www.transparencymarketresearch.com/pressrelease/home-healthcare-market.htm
http://www.marketsandmarkets.com/PressReleases/north-american-home-healthcare.asp
https://www.lifescienceintelligence.com/market-reports-page.php?id=A376
https://www.lifescienceintelligence.com/media/sample/example-execsum2.pdf
http://ptinr.com/warfarin-you/news-stories/how-often-should-i-test-my-inr
https://www.genworth.com/corporate/about-genworth/industry-expertise/cost-of-care.html
http://kff.org/medicare/fact-sheet/medicare-spending-and-financing-fact-sheet/
http://www.bccresearch.com/pressroom/hlc/global-market-sleep-aids-reach-$76.7-billion-2019
http://www.hindawi.com/journals/bmri/2014/528789/
http://www.patientnavigatortraining.org/course2/8_demographics.htm
Bristol-Myers Squibb Company. Medication Guide for Coumadin Tablets and Coumadin for Injection (Package Insert). Princeton, NJ: Bristol-Myers Squibb Company. 2009.
Center for Medicare and Medicaid Services. Decision Memo for Prothrombin Time (INR) Monitor for Home Anticoagulation Management (CAG-00087R) [Memorandum]. Baltimore, MD. 2008.
Liska G, Hogan-Schlientz J, Sallee R. Does patient self testfrequency affect oral anticoagulation therapy time intherapeutic range? Presented at the 11th national conference on anticoagulant therapy, Boston: 2011.
Hylek, E. An Analysis of the lowest effective intensity of prophylactic anticoagulation for patients with non-rheumatic atrial fibrillation. N Engl J Med 1996; 335:540-546.
Hylek, E. An Analysis of the lowest effective intensity of prophylactic anticoagulation for patients with non-rheumatic atrial fibrillation. N Engl J Med 1996; 335:540-54