American Medical Response Acquired for $2.4 Billion

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It’s official: private equity firm KKR is purchasing American Medical Response. The $2.4 billion acquisition is the latest addition to KKR’s growing list of healthcare portfolio companies.

Turns out the recent buyout, combined with similar purchases, is a new direction for George Roberts and Henry Kravis, co-CEOs and co-chairmen of KKR. Just last month, the firm also acquired online health publisher WebMD. And in a separate deal, the private equity giant also obtained a majority stake in Nature’s Bounty.

So what does it mean? It means that investors see the value of the healthcare industry and expect it to grow in the near future.

KKR's actually been at it for a while when it comes to investing in healthcare. Two years ago they also bought Air Medical. According to Reuters, “the merger with American Medical Response (AMR), the largest U.S. provider of ambulance services, would allow KKR's Air Medical Group to easily substitute costly helicopter flights with ambulances for shorter trips.”

Together, Air Medical and American Medical Response will transport an estimated five million patients every year. As of now, Air Medical and American Medical Response services are available in 46 states. But who’s to say they won’t expand that to all 50 states soon?

It’s easy to see why KKR and other private equity firms are investing in healthcare. After all, it's a safe bet. As management consultant firm Bain & Company puts it, the healthcare industry has a “proven resilience to economic turbulence.” Maybe that’s why last year the deal value for healthcare private equity reached $36.4 billion, the highest level since 2007.

In a recent article published in Forbes, contributor Todd Millay gave his thoughts on why healthcare stocks are hot right now:

“The long-term fundamentals of the healthcare sector compare favorably to the broader market. The sector has superior earnings-per-share growth—the key driver for long-term equity returns. The healthcare sector also has a higher and more stable return on equity than the broader market. Healthcare stocks have traditionally declined less than the overall market in downturns.”

It makes sense, given that everyone needs healthcare and it will always be in demand.

Dan Loeb Increases Support of Healthcare Sector

Dan Loeb's Third Point has increased its investment in Baxter.

Dan Loeb’s Third Point has announced an increase in its investment in Baxter International Inc., a medical equipment and supplies company. Though Baxter’s stock has dropped 15.48% over the past year, Loeb’s Third Point now ones an additional 11.97 million shares at an average price of $32.69—so obviously Loeb sees the company is going somewhere. In fact, just the announcement of Loeb’s increased involvement with Baxter sent the stock price on a rise to the tune of 1.3%. That’s likely a good sign for the consumer.

Dan Loeb is somebody who knows a good deal when he sees one. Known for aggressively restructuring the companies that come under his influence, Third Point’s investment in Baxter is a good sign that it’s about to rise farther in stock price and in the marketplace.

Baxter’s homepage touts the company as one that is “saving and sustaining lives” around the world. Inspiring stories like that of Yin Le, who was forced to leave school after she was diagnosed with end stage renal disease (ESRD) as a fifth grader. But through peritoneal dialysis (PD) therapy, she was able to treat the disease – and get back to life as a kid. Baxter provided the equipment that allowed Yin to treat her disease from home and continue living her life.

“I was so excited that I was finally able to have lunch at school,” she said. “I surprised my friends when I showed up in the cafeteria for the first time, and in that moment, I was filled with happiness.”

It’s a good sign that big companies such as Third Point are working hard to promote health care services—naturally, the more funding the sector gets, the more likely people are to receive the services and goods they need to stay happy and healthy.

And now that Third Point owns a total of 53.85 million of Baxter’s shares, the board of the company has plans to expand to 12 directors. Additionally, Third Point partner Munib Islam has been appointed to Baxter’s board of directors. He believes that Baxter now has the chance to focus on improving profit margins as well as increasing its market share.

Loeb, expert investor that he is, operates under a fairly simple business philosophy: he believes in having “talented management teams, strong and growing free cash flows, and a proven track record of smart capital allocation that drives significant increases of intrinsic value per share,” a philosophy he will no doubt bring to Baxter.

Third Point has had an active hand in the health care sector lately. The health sector now comprises 12% of the company’s equity portfolio. Now, if more companies who could afford to do so actually invested in healthcare, the stronger the sector—and all of us—would be.

Innovations in Healthcare Technology

Companies like CitiusTech are revolutionizing the healthcare industry.
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Technology is becoming a fact of life, especially in healthcare.  You may have been to a doctor’s office where your intake information is put directly into a database shared with all the medical staff.  Maybe you’ve even sat and watched your doctor email the pharmacy so that your prescription is ready within minutes of leaving the office. 

The whole process of going to the doctor looks completely different than it did even five or ten years ago. I love how simple and efficient so many things are becoming, especially as my life has become more hectic.

There’s a whole business brewing around providing the best, most efficient healthcare technology.  Whether it’s streamlining the data filing process or helping doctors evaluate treatment plans, technology is changing how medicine is practiced.

One key technological element is the idea of computers that “evolve,” or learn.  Scientists use the term “machine learning” to describe a computer that can collect data, determine trends and ideal outcomes, and rework its programming to optimize for the best results. 

Think about how amazing it would be if a doctor could use this sort of technology to make sure the right patient is getting the right treatment every time!  It would also help pharmaceutical companies do their testing  much more efficiently and with fewer errors.

One company that’s leading the way with technological advances like this is CitiusTech.  CitiusTech builds new applications, software, and methods for keeping healthcare analytics tidy.  Its board of directors includes Gary Reiner and Cory Eaves of General Atlantic, which recently began investing in the company. Together with its investors, CitiusTech is focused on bringing the best new technology to the market. 

Like many industries, healthcare isn’t always well organized, so companies like CitiusTech have been working to not only bring out new technology, but also to help organize the massive amounts of information already there.  The company is currently partnered with 50 healthcare organizations, including hospitals and life science companies.

With computers that can learn and companies stepping up to improve healthcare organization and technology, who knows what the future of healthcare will look like?

Have you had an interesting experience with technology at the doctor’s office?  Share your story in the comments below!