Nashville Health Care Council, Nashville Capital Network Present Panel Discussion on the Post-Election Dynamics of Capital and Health Care Ventures



Last week, the Nashville Health Care Council and Nashville Capital Network hosted "The Post-Election Dynamics of Capital and Health Care Ventures," panel in which health care entrepreneurs, investors and advisors explored how the results of the 2020 election and the ongoing coronavirus pandemic could impact the landscape of health care capital and investments in the coming months.

The conversation took place on Nov. 5, when the outcome of the presidential election was still uncertain. Gail Peace, Founder and CEO, Ludi, Inc., moderated the discussion. Panelists included Devin Carty, CEO, Martin Ventures, and Co-Founder and Board Chairman, Wellvana Health; L.A. Galyon, Managing Director and Partner, Brentwood Capital Advisors; and Anna Haghgooie, Managing Director, Blue Venture Fund and Sandbox Industries.

Addressing the election, which appeared to indicate continued Republican control of the Senate and Democratic control of the House of Representatives, panelists speculated about whether a Biden or Trump administration would be more advantageous for the health care industry. The panelists said they plan to pay close attention to the stimulus package, policies on drug pricing and expansion of the Affordable Care Act.

"A divided nation is an understatement right now," Carty said "We will most likely be a divided political world with the Senate staying Republican control, but will be watching Georgia closely, and House staying Democratic control, although losing a few seats will be the thinnest majority in about two decades and could negatively impact Pelosi's negotiating position. Additionally, it will be important to see what happens with the stimulus package. Given the uncertainty, it will most likely just sit there and be reevaluated sometime in January. With Biden, the stimulus package will most likely be larger, have tax credits for lower income families, and more state funding." He believes a Republican Senate means Medicare for All is unlikely.

Galyon added that a Republican Senate will assuage his clients' concern about large tax increases, but overall he does not expect "many material changes." With a Democratic majority in the House and a Republican Senate, the parties will have to work together. "This is what everyone wants - the two sides to meet in the middle, which is where our country is," he said.

"Nothing changes on the acceleration and importance of Medicare Advantage," Haghgooie said. "I think that continues to grow within the Medicare book of business and is a place with a lot of innovation and collaboration between the public and private sector. I don't think that changes with either presidential outcome." She also indicated that budget pressures on the states are important to watch because of implications on Medicaid.

Peace also asked the panelists to describe how the COVID-19 pandemic has impacted business strategy and deal flow in the last year. According to Carty, many investors "went heads down" from March to June to support existing companies in their portfolios and are now cramming a years' worth of deals into the final quarter of the year. Galyon added that while M&A volume was down 30% in the second quarter of 2020 versus 2019, deals are on an upswing.

"This has impacted everybody. Providers saw volumes drop and surgeries were pushed. Software and outsource companies saw their pipelines annihilated or pushed to 2021. Hospitals and physician groups weren't buying anything but masks," Galyon said. "This has been a challenging time, but the good news is health care is pretty defensive."

The panelists agreed that while new ideas and changes have emerged during the pandemic, the coronavirus simply "added kerosene" to trends that were already growing, including telehealth, mental health care, substance use disorder treatment, home and community-based care, value-based care and the direct-to-consumer movement. Looking ahead at the rest of 2020 and into 2021, Carty predicted continued growth and success for health tech, tech-enabled services, and services companies centered on lowering costs, moving care virtually or into the home, and proven tangible success at improving patient outcomes. Haghgooie emphasized the need to integrate mental health and substance abuse treatment into primary care and further measure what quality really looks like for these services.

Galyon referenced the "Amazon effect" on retail and what that might look like for the health care industry. "Can the outpatient experience eventually mirror retail? Investors like businesses that deliver value and appeal to the consumer," he said. "We're also looking at the care setting transformation. Can you provide quality care in a low-cost setting? This is something investors have chased for a really long time."

The conversation also covered diversity, racism and the inherent bias within the investment and M&A sectors. Peace referenced the statistic that women receive less than 2% of the total dollar amount of investments each year, a number that continues to decline in 2020. The panelists agreed that diversity is an important element for success and key differentiator among organizations. Cartyreferenced McKinsey & Company studies that find "companies in the top quartile for gender, racial or ethnic diversity are more likely to have performance financial above their national industry medians. Diversity is part of the winning formula."

"How do you make great decisions? By having a lot of different perspectives around the table," Haghgooie said. "As investors, we're making judgments and decisions. Are you getting those if you're only looking through one lens? This is particularly important in health care because consumers are diverse. There is not one segment of our country that is not a consumer of health care. If you are making investment decisions to serve Americans, you should be thinking about all of those perspectives."