United States

The ever-increasing importance of health care IT as an investment

A cost center or salvation: What every investor needs to know


The health care and life sciences industries are in a period of dramatic change. Despite this change, successful private equity funds and strategic buyers can still execute deals. McGuireWoods and RSM host an annual conference to explore ways to successfully close transactions and achieve capital growth by implementing the right strategies in the right markets. The following article summarizes one of the panel discussions at the 2018 event


  • Amber McGraw Walsh, Partner, McGuireWoods LLP
  • Venkat Mocherla, Director, Business Development and Marketing, Qventus, Inc.
  • Debbie Yantis, Vice President and General Manager, Cerner
  • Gulshan Mehta, Director, RSM US LLP

“Health care IT has failed,” according to Venkat Mocherla, director of business development at Qventus, Inc. This announcement raised eyebrows at a recent panel discussion moderated by McGuireWoods. Today, thanks to Uber, Amazon and other digital presences, consumers are used to managing their day-to-day lives through technology. Technological change is happening at a rapid clip, and the health care industry offers opportunity not only for IT investors but also for patients, who will inevitably benefit from the efficiencies and ease that technology can offer.

Debbie Yantis, vice president and general manager of Cerner, a supplier of health information and technology services, noted, “I’m seeing more of Cerner’s clients, health systems or physician practices concerned about and interested in the changing needs of the consumer.” During the panel, on-demand car services like Uber and Lyft were cited as examples of reliable technology that consumers now expect in other aspects of their lives, but this fast and efficient service is often still lacking in the health services space. For example, while an Uber ride to the hospital might take just minutes, once a patient gets there he may wait an hour to get through the registration process.

Today’s hospital system and the IT supporting it is often antiquated, but this creates opportunity for IT investments to streamline the industry with useful technologies. “Consumers want to manage their health,” said Yantis. “They want the health systems to know who they are. They would like to have their wearables and their devices connect automatically. They want to self-schedule appointments and pay their bills online. It’s this demand from consumerism that is pushing the industry forward.”

“The market is the market,” observed Mocherla. “A lot of health system CEOs we talk to say, ‘This is the new world, and if we’re not a transparent organization ourselves, the world’s going to bring it on us, and we’re going to get disrupted.’ So I don’t think it’s a binary. I think this is the new world we live in.”

Tax reform and other new laws

The Tax Cuts and Jobs Act tax became the law of the land on Dec. 22, 2017, and so too did the repeal of the individual mandate, leaving millions of people uninsured and a potential 10 percent rise in insurance premiums. The panel was asked in light of this fact, how have you reacted with your clients? Gulshan Mehta, director at RSM US LLP, was the first to respond: “I think there’s a role for all of us,” he said, “as we try to help an organization understand what it stands to lose as a result of the uncompensated care that may be significantly higher as a result of the repeal of the individual mandate.”

Mehta added that he sees this as an opportunity to help health care providers through an alternative solution to manage the uninsured. “It’s all about the data and understanding the composition of your patient population,” he said. “There is opportunity to come up with a solution that actually allows you to either use technology or just processes in a way more effective manner. By partnering with other organizations in your locality, health care providers can come up with a better answer than just taking the expense on for uncompensated care.” 

A potential source of funds has come with the 21st Century Cures Act, a broad health care bill that authorizes $6.3 billion in funding, mostly for the National Institutes of Health and other groups. The act is meant to support medical research and medical-device innovation, combat the opioid epidemic, and create new patient data systems. Mehta noted that, from an investment perspective, organizations should think about the 21st Century Cures Act in terms of opportunities. 

One of those opportunities is in the field of cybersecurity. “Health care systems need this type of IT expertise in-house,” said Mocherla. “Having a CISO—chief information security officer—or position similar is one of the most in-demand jobs for health systems to acquire.”

The panel agreed that it is often a challenge to stay on top of the ever-changing health care tech space, especially for health care systems that are dependent on legacy technologies. “In large part, they’re sitting ducks,” said Yantis.

Evolve or die: The opportunity

According to Yantis, health care providers also need to think of themselves as electronic health care record (EHR) companies. “If a physician’s practice or a health system doesn’t have a good electronic reporting system, they need to have one. It’s imperative,” she said. No one who walks into a hospital would want to live without the technology and advances in safety, efficiencies and productivity that improve care.  But these advances are not always appreciated by the provider or physician, especially if he or she is still paid on a fee-for-services basis. They are now asked to document a multitude of items for billing or compliance purposes, a task that may take up more time on their end, so that embracing technology is not always popular.

“EHR companies often get a bad reputation,” said Mehta, “as if we are forcing processes on clinicians to do something that is not natural to them.” They don’t see using technology as essential to delivering care, the panel agreed, but technology adoption and innovation is here to stay. Added Mehta: “I have to remind myself constantly that health care is evolutionary, not revolutionary. It can be frustrating.”

The growth of the smart consumer is key to why the health care industry believes it needs to evolve. “Data is king,” said Mehta. “From being able to understand what the consumer or patient wants, to understanding who your patient population is in terms of demographics, the data should always guide the ship.”

Asked about the opportunities in innovation, Qventus’s Mocherla noted, “I think, for those of us in health care IT, there’s never been a better time. The question is, how can you take something that’s very expensive and complex, available to a few people, and democratize it to meet the needs of many?”

Necessity is the mother of innovation, and today the health care IT space is unleashing a new level of creativity. But Debbie Yantis pointed to a need for innovation beyond IT infrastructure. “I don't think it’s just innovation with health IT,” she said, “but it’s medical innovation, whether it be the diagnostic testing, or the genetic information that we have available to us, or new surgeries and procedures. All these areas are advancing at a rapid pace.” There’s just no way, she said, for a health care provider to keep up on all the new drugs and treatments and on what types of patients might have good or bad reactions to them. “The goal,” she said, “is to take this moment, with a holistic approach, to work together to give care providers the best tools and technologies to drive the right decisions for care.”

To learn more about the McGuireWoods and RSM US Annual Health Care and Life Sciences Private Equity and Finance Conference, please visit the conference website.

For more health care and life sciences industry insights, read RSM’s quarterly industry spotlights developed in partnership with Pitchbook.

How can we help you?

Contact us by phone 800.274.3978 or
submit your questions, comments, or proposal requests.

Transaction Digest newsletter

Stay up to date on the latest transaction trends with this quarterly communication