How healthcare investing efforts can drive innovation
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What is the main topic discussed in this episode?
This is McKinsey on Healthcare, a podcast series about visionaries, leaders, and problem solvers shaping the future of healthcare.
Today, I am joined by Matt Holt, who is a managing director at New Mountain Capital. He's the head of healthcare investing and is the president of private equity for the firm. Matt, I'm delighted to be speaking with you. Given your wealth of knowledge, passion and investments in this space, we will be talking today about private equity investments in healthcare and where it goes from here. What attracted you to healthcare investing over the last 18 years?
What motivated Matt Holt to focus on healthcare investing at New Mountain Capital?
And what has kept you excited?
I joined New Mountain Capital 18 years ago in 2001, about a year into the founding of the firm. I joined Steve Klinsky, and we really began our effort to evaluate sectors for proactive analysis. Healthcare really jumped out at us in the very early days for a number of reasons. We were interested in the scale of the industry, the regulated nature of the industry, and as a result of that, the corresponding complexity of And further, the dynamic nature of the industry, including the ultimate penetration of technology, we felt that it would open up a lot of investment opportunities. And that if we studied the large complexities of the market, that we could develop competitive advantages over time, which we've now been working on for 18 years.
And by healthcare, you define it broadly as? services and life sciences with the whole ecosystem in terms of your investment portfolio?
From a scope standpoint, we look across provider markets, payer markets, life sciences markets. There's a lot of convergence across themes, and we've invested across all of those categories over our history.
If you look at trends, private equity continues to play an increasing role in the healthcare industry. If you think about investor interest and from an investor point of view, what makes it an interesting market to play in?
First off, it's very large. Healthcare has a lot of different pockets. It represents over 18% of US GDP. Two of the major trends in the investment world and in the business world at large are impact investing, being responsible from a social, environmental, and governance standpoint. In addition to that, technology investing. Healthcare really represents a market where both of those major trends are converging and having a very big impact on the industry and its evolution. It's creating a lot of opportunity to invest with those two tailwinds really behind our investors.
Those are important tailwinds on a macro basis. Let's just convert this from trends to impact. What do you think has been the tangible impact of just private market investing and PE investments in the space? Are there a few examples you could share to illustrate?
Two key themes that we're very focused on relate to really investing in businesses that can deploy technology to reduce inefficiencies and thereby cost, but at the same time improve quality. The second big trend that we're very focused on is really a tectonic shift in the overall ecosystem, which we call the shift to value. Alternative payment models, the way that hospitals get paid are obvious examples of the shift to value, but there's a lot of other ways of playing this shift, including, for example, in the pharmaceutical industry, we're seeing pharmaceutical companies trying to, over time, evolve their own business models to be on the right side of outcomes. And we have a couple examples of investments that are really playing at the forefront of this, and one would be a business called Citel, which is the leader in data analytics and, in particular, data management.
around optimization of research and development. That's a business that takes data from its customers, does a lot of number crunching, really helping to drive productivity of R&D spend for pharmaceutical customers. And there's a lot of underlying regulatory trends that are opening up that market opportunity for Sitel. Another example would be our investment in Signify Health, which is leveraging technology in and around scheduling and logistics to drive efficiencies as they deploy doctors and clinicians into the homes
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Chapters
5 chapters
1
What is the main topic discussed in this episode?
0:06–0:50
2
What motivated Matt Holt to focus on healthcare investing at New Mountain Capital?
0:50–10:42
3
How does New Mountain define the scope of ‘healthcare’ for investing decisions?
10:42–12:56
4
Why is private equity increasingly interested in healthcare as an investment market?
12:56–17:45
5
What tangible impacts have private-market investments produced in healthcare operations?
17:45–22:47
Speakers
2 identifiedMore from McKinsey on Healthcare
Nishaminy Kasbekar on centralizing pharmacy in patient care
Kevin Mahoney on the responsibility of academic medical centers
Brian Evanko’s on affordable, personalized healthcare
Eric Larsen on the emergence and potential of AI in healthcare
Warehouse to wellness: Bob Mauch on modern pharmaceutical distribution
Leading a best-in-class health system integration