What's your (new) financial persona?

What's your (new) financial persona?

June 26, 2020

Jami Youmans, MHA Kyle Hathaway

Managing Partner Managing PartnerHealthEco HealthEco

What’s Your (New) Financial Persona | June 26, 2020 2

Agenda

1. Welcome & Introductions

2. Definitions

3. Financial Personas

4. Equivalent Net Patient Revenue (eNPR)


Kyle Hathaway is a co-founder and managing partner of HealthEco, a firm that specializes in partnering with health systems to monetize core competencies and invest, develop, and launch businesses that create alternative revenue and margin capture opportunities. Kyle leads the collaboration efforts amongst health systems advising them on growth, innovation, capital, and entrepreneurial strategy. His specialty is leading venture and private equity-backed companies on business launch, capital formation, and go-to-market strategy. Additionally, Kyle is an advisor to several venture funds and an active participant in the entrepreneurial capital markets.

Key areas of focus:

• Health System Innovation Programming, Entrepreneurial Thinking, Venture Creation• Deal Structure and Investment Advisory, Market Derisking, Scalability Analysis• Private Equity and Venture expertise in startup launch, mergers and exit structures• Expert in market insight and go-to-market strategy

Introductions

Kyle HathawayManaging Partner

HealthEco


Introductions

Jami Youmans is an investor and entrepreneur focused on the health system and provider markets. Her 15-year career in healthcare has spanned health system leadership roles, founding and building two healthcare consultancies, and forming a strategic venture fund. As a co-founder and managing partner of HealthEco, Jami ensures portfolio companies achieve scalable market adoption and realize the targeted impacts for HealthEco partners. Additionally, Jami leads the HealthEco partnership with HFMA and is a venture partner with Grayhawk Capital, a seasoned investment organization with more than $500M in assets under management.

Key areas of focus:

• Health System Innovation Programming, Technology Sourcing, and Implementation

• Investment Advisory, Market Derisking, Due Diligence, and Scalability Analysis

• Industry Partnerships & Sponsorships, Corporate Venture Capital (CVC) Thought Leader

• Chicago Chapter of Society of Physician Entrepreneurs founder, National Market PartnerJami Youmans

Managing PartnerHealthEco

5What’s Your (New) Financial Persona | June 26, 2020

HealthEco is a Chicago-based healthcare firm led by former hospital executives and venture capital partners. They combine their decades of experience along with unique skill sets to bring health systems and health providers together with profitable innovation that builds growth, improves margins, and creates sustainable financial health.

HealthEco & HFMA

Strategic Partners

Link to Press ReleaseLink to Website

http://www.thehealtheco.com/hfma-healtheco-announce-partnership-to-diversify-healthcare-revenue-streams/

http://www.thehealtheco.com/


Entrepreneurial Thinking - the ability to see things differently than the rest of the world but, it is not necessarily an inherent trait and can be easily developed or improved. It is more like a state of mind that opens your eyes to new learning opportunities and helps you grow in your role.

Equity Mindset - Self defined as the application of equity principle to determine and compare the equivalent values both parties bring to a negotiation.

Private Equity Mindset - The art of finding buying out-of-favor assets and securities and holding them long enough to recover and sell for many multiples of the original purchase price.

Opportunity Cost - is the benefit that is missed or given up when an investor, individual or business chooses one alternative over another.

Arbitrage Opportunity - Arbitrage is the simultaneous purchase and sale of an asset to profit from an imbalance in the price.

Glossary of Key Terms


Opportunity Costs: Increased opportunity costs keep smaller health systems on the sidelines and expand the divide between the Core State and the promise of Transformation.

The Business Model Divide Grows

Greatest Market Potential:

Adjacent Markets – represent a market opportunity where health systems that embrace their personas partner with non-competitive systems in opportunities to create eNPR.


Start-up “Company X” is an early-Stage company focused on the healthcare provider markets or selling into health systems.

In this scenario, the start-up has launched with one health system-sponsored pilot site customer giving Company X a starting valuation of $5MM.

The health system may have invested anywhere form $500k to $1.5MM to create the company and must commercialize or sell this to in the, sometimes very competitive, markets.

Start-up “Company Y” is an early-stage company focused on the same markets as Company X.

In this scenario, Company Y has been launched by 5 health systems in partnership each investing $100k-$250k resulting in Company Y having a starting valuation of $25MM due to the diversification of customer-base.

The syndication of capital, external market expertise, partnerships, and national lens has the opportunity tocreate a more scalable company with substantial derisking.

The Arbitrage Opportunity

Example 1: Too Bespoke to Scale

= $5MM

Example 2: Built to Scale

= $25MMArbitrage Opportunity = $20MM


The Arbitrage Opportunity

Innovating your partners underlying business models.

+ +


Accelerated the financial pressures that health systems were already facingRecovery has yielded – two mindsets: Offense & Defense.

In Offensive-Minded Health Systems:• Created an environment where creativity and innovation became viewed as a means to

survive highlighting organization’s core competencies capabilities• Entrepreneurial leaders seized the opportunity as an ability to create meaningful change

In Defensive- Minded Health Systems:• Leaders acknowledge their financial personas and choose growth through collaboration• Align organization to preserve core-oriented task and partner to pursue growth initiatives

What did COVID-19 Surface?


The Financial Persona


Health System PersonasRi

sk &

Cap

ital

Organizational Commitment & Resources


Buyer

Seeks to buy innovations that solve strategic needs for the health system.

Key Needs:• Access to broad market intelligence• “First Mover” agreement outlines• Expert Derisking and Due Diligence programs• Peer collaboration networks

Example Organizations:


Buyer

Taking margin back through ownership.


Investor

Seeks to invest and generate returns through equity in early-stage companies accretive to the health systems’ mission regardless of utilization.

Key Needs:• Balance Sheet strength• Access to market intelligence• Venture market expertise• Entrepreneurial leadership thinking• Due Diligence expertise• Peer networks for collaboration, derisking, and best

practices



Investor

Taking margin back through ownership.


Creator

Seeks to create innovations from within to generate returns, engage staff and physicians, and monetize core competencies.

Key Needs:• Ideation channels and resources• Broad market understanding• Expert commercialization/tech transfer capabilities• Peer collaboration networks for knowledge share of

best practices



Creator

Revenue from internal innovations.


Change Agent

Seeks to lead alternative revenue creation systemwide and in the community through buying, investing, and creating businesses.

Key Needs:• Access to committed capital• Ideation channels and resources• Active venture capital portfolio management expertise• Expertise in commercialization and tech transfer• Access to national and international market insights• Peer collaboration networks for knowledge sharing of

best practices and syndication partnerships• National collaboration networks for commercialization

and shared services



Change Agent

Large health systems have paved the way.


Setting Metrics for Measuring Success:Equivalent Net Patient Revenue (eNPR)


Equivalent Net Patient Revenue (eNPR)

Defined as the equivalent acute care billing that would be required to reproduce a margin gain from alternative revenue strategies

Example: “XYZ” Health has an operating margin of 2.2% and generates $5.5MM in EBITDA though an alternative revenue strategy.

eNPR = $5.5MM/2.2% = $250,000,000 of NPR that would be required to produce the same margin gain through core services.

Total Margin Operating MargineNPR =


$450MM in Margin Gain = $3.6BN eNPR

Direct Margin Impact vs. NPR Replacement Value

$1BN in 4 Yr Margin Gain = $20.4BN eNPR


Paths to Equivalent Net Patient Revenue

Multiple Pathways to Success

Venture/PE Investing• Dividends• Liquidity Events

Business Creation & Ownership• Margin from Vertical Integration• ROI from EBITDA Contribution• Liquidity Events

Joint Venture/Shared Services• Margin from Vertical

Integration• EBITDA Contribution• Dividends

1 2 3


Keys to Success

Knowing your financial persona allows for selecting partners with complimentary personas that maximize core competencies.

• Collaborations on business ventures in non-competitive markets

• Partner with expertise, resources, and new technologies at scale

• Benefit from improvements by partners without incremental cost

• Mitigate risk though syndication

Healthcare organizations from across the country can partner to create synthetic scale


Prioritize the Capture of eNPR

5 steps to take back to your health system

1. Know your health system’s persona(s)2. Empower Key Entrepreneurial Leaders

within your organization3. Define your future state goals and priorities

& create the path to execute4. Collaborate with like-minded partners with

synergistic personas to maximize collective strengths and opportunities

5. Measure impact through eNPR


Kyle Hathaway

Questions

Jami Youmans

[email protected]

C: 757-288-4525

350 N Orleans St., Suite #9000n

Chicago, IL 60654

[email protected]

C: 816-805-3310

350 N Orleans St., Suite #9000n

Chicago, IL 60654

http://thehealtheco.com

http://thehealtheco.com

Documents

What's your (new) financial persona?