HIStalk Connect Interviews Dmitry Krasnik, Managing Director, Houlihan Lokey’s Healthcare Group

Dmitry Krasnik is Managing Director of Houlihan Lokey’s Healthcare Group in Chicago, IL.


Tell me about yourself and the company.

I lead the healthcare IT investment banking efforts at Houlihan Lokey. We’re an investment bank, started in 1972 out of LA. The company began as a fairness opinion provider and has really grown up through the years. We now offer corporate finance, restructuring, consulting and other services as well, and in corporate finance, we have been the largest healthcare M&A group for a while now. We’ve got over thirty-six people  in New York, Chicago, Dallas, and San Francisco. We’ve averaged number one in the market for M&A for the last few years by the number of deals that we’ve transacted. I joined about three and a half years ago to lead healthcare IT. We just recently advised GI on the acquisition of Net Smart in their joint venture with Allscripts. We’ve  helped divest the care management assets for McKesson. We’ve worked with companies like Ability and Xifin that we helped recapitalize.

I read that you’ve completed over fifty transactions in the healthcare sector yourself. How has it grown in the past couple of years, and what do you expect the future to hold?

My area of focus, healthcare IT, is very dynamic. We see a lot of innovation in terms of being able to enable new care delivery models, as well as new reimbursement models.

I started in healthcare IT in 2004, and the  innovation cycle has been fairly impressive. A lot of it has been mandated by regulatory … But a lot of it is enabling the transition of healthcare into a new mode of operations in terms of being able to deliver better outcomes, keeping track of patients … And so the first few phases that we have seen has been converting all records into electronic formats … Then we’ve seen a number of people trying to figure out what to do with all that information we gather now that they have it. We’re seeing some successful from people being able to take that data and transition it into actual information that impacts healthcare outcomes.

Now I think we’re kind of in that third phase where we’re trying to use some of that information to actually engage with the patient to create wellness.

What do you predict the biggest areas of growth will be in healthcare IT?

There’s going to be some haves and have not’s. Things that enable the new models will definitely have the advantage. And where we see opportunity is around patient analytics … We also see a lot of opportunity in terms of transitioning the relationship with the patient and making that patient be a part of their own healthcare. So, whether it’s around the payment cycle, in helping the patient understand what their self-pay portion is, to getting a patient engaged in their particular healthcare decisions to drive compliance, are all very important factors that we see on the provider’s side.

On the payer’s side, we see a lot of payer consolidation driving M&A decisions…additionally there is a focus on outcomes and patient engagement … Keeping patient loyalty and keeping those patients within a particular system or a particular payer.

We see a lot of technologies that enable the broader enablement of wellness, care management, care coordination, analytics, having patients become more involved -  focusing on  consumerism. All the factors and all these technologies that enable these factors are going to continue to win.

There’s a number of outmoded technologies and some of them are based in very legacy systems that are designed, or were designed, to be modular and not interact with other systems, and we see those companies declining substantially. We see a lot of innovation and change happening in the healthcare IT spectrum over the next few years.

How would a young company get on your radar?

Part of it is just kind of getting to know people. The way we try to do it is look for companies that are transformative or innovative in what they do. There are companies that we’ve worked with … For instance, Ingenius Med, that was a relatively young company when we started talking to them. What they focused on was taking the patient billing or the patient charge capture interaction, and transitioning that into care coordination and really impacting what I would call "value-based care" – from a bundle standpoint – and being able to determine where the value of that patient care was created. Things like that … We came to know them, and we kept in touch with them.. But it’s really sort of understanding – getting a good grip of what that company does – and having a conversation as to what are the needs of the market.

We’re in touch with a lot of large strategics that are looking for buy-side ideas, as well as the investor community. We have a pretty good feel from the market as to what the market is looking for, and where the market trends are heading and where the demand is. It’s easy to be able to identify companies once you get a chance to talk to them. The main challenge is getting in front of those folks or having those folks get in front of us. That’s not necessarily easy.

Now that companies like Teledoc are publicly traded, how does that impact investor interest in telemedicine?

I think that’s great. I’ve always thought very highly of Teledoc and have known them for a while. They’ve done a really nice job of engaging the consumer of healthcare via tele-medicine. Hopefully this continues to build momentum… As to the overall delivery of healthcare via tele-medicine… We know that the VA has had a lot of success in working with tele-medicine and remote monitoring. I’d like to see these technologies really get a good foothold. I think the fact that Teledoc came out public and they’re doing well is really a positive.

Accelerators are everywhere. Some of them have health systems involved. What does that mean to you from an investment perspective?

I think that that’s a very big positive. I think especially when they involve health systems, and those health systems are able to share some health data so that they can use and create analytics, that expedites the efficacy of that smaller startup. Generally speaking, I think that gives the startups an opportunity to experiment with real live data and deliver real outcomes in terms of their analytics.

I have to ask, is the Theranos meltdown affecting investor interest in healthcare investments?

In healthcare, yes. In healthcare IT, not so much. We’ve not seen any kind of blow-back from all that news.

What are your thoughts about how the upcoming presidential election will affect healthcare IT?

Generally speaking, I don’t see a long term impact in healthcare IT. I think the one thing that both republicans and democrats agree on is that we need to take cost out of our system and we need to improve outcomes. Both parties see technology as a way of getting there. I think on the margin in the last election … We saw a slowdown in spending, especially amongst the hospitals. That impacts peoples’ growth trajectory. But it only shifted out about a quarter in the last election so I don’t foresee a huge impact here, especially the way the landscape is shaping out on healthcare IT.

Do you have any final thoughts?

Yeah. I think that healthcare IT is generally seeing a lot of positive changes. The models that are going to be successful are the ones that are going to be viewed in terms of enabling the better outcomes of healthcare and the transitions of our current models. As we go towards more outcomes focused, reimbursement models, I think healthcare IT becomes an essential part of the equation. As we are seeing more regulatory pressures that drive the reimbursement model and the outcomes model, we’re also seeing the consumer relationship with the provider change. It used to be focused around the doctor. A lot of the systems are really starting to try and figure out how to build a relationship with that particular consumer of healthcare. We’re starting to see more technologies and more focus on being able to engage with a particular individual around his or her healthcare needs, and driving those specific tailored outcomes. We’re seeing a number of technologies evolve in terms of basically interacting with the consumer, driving consumer behavior, and impacting some of the analytics that came out of digitizing the whole healthcare record.

We’re also seeing a number of new entrants wanting to get into the space. A lot of the traditional folks on the new media side, where they know how to interact with the consumer in driving that kind of behavior.

On the payer’s side, I think we’re going to continue to see very solid performance. A lot of the same needs in terms of population management and wellness that the providers have, as those models converge. We’re also going to see pressure on these folks that serve any of the big payers to consolidate because data security needs will continue to become big issues… and payers will try to rationalize their vendor base.

We’ll also see the post-acute become a bigger part of the equation of healthcare delivery as people really try to think about "how do I manage a population outside of the four walls of a hospital" – If I’m a major system. Especially in community care, where a lot of government populations are based, where you really need to be able to circle around and drive that entire community value chain as that person migrates out of the hospital.

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