Private Equity

Driving Profitable Organic Growth in Healthcare

Achieving Growth in Healthcare’s Hottest Sectors

Healthcare providers are under increasing margin pressure driven by escalating labor costs, supplier costs and the out-migration of services to lower-cost care sites. Despite these economic headwinds, savvy investors continue to pour “dry powder” into select, attractive subsectors of healthcare, including:

  • Specialty PPMs/Rollups (e.g., Cardiology, Aesthetics, Urology)
  • Pharma Services (e.g., CDMOs, Staffing)
  • HCIT/Digital Health (e.g., specialty RCM, Remote Monitoring, “Clin-Tech”)
  • Non-acute Sites of Care (e.g., Home Health, Behavioral Health, ASCs)

These healthcare subsectors continue to show signs of growth, but it has never been more critical to understand if they will produce ongoing organic growth. Taking advantage of these sectors’ economic potential requires understanding which organic growth levers to use to produce desired results.

Analytical Insights Reveal Growth Opportunities

Against persisting economic headwinds, it’s simply not enough to grow with the market, nor can M&A be deployed as “scale for scale’s sake.” Instead, companies must craft a strategy that creates ongoing cash flow to ensure growth and profitability.

Deal and operating teams need more than thoughtful investment themes to unleash each of these subsectors’ potential. Investment decisions require a sound analytical approach communicated via data-backed organic growth stories. These analytical insights identify opportunities (and pitfalls) specific to each subsector. A nuanced approach that includes data analysis, case studies and appropriate subsector application correlates highly with profitable investments and the ability to fund growth through free cash flow. For example, recent Alexander Group research saw leading healthcare organizations, defined as “Profitable Growers,” exhibit a 67% higher enterprise value to revenue (EV/R) with revenue growth rates nine points higher and expense to revenue (E/R) four points lower than their similar cohort.

Value Creation Plans Include an Executable GTM Approach

Add-on and roll-up strategies remain strong plays, but value creation plans must include executable go-to-market (GTM) strategies designed to outperform the market. Each subsector has distinct characteristics and priorities, making a one-size-fits-all model unsuitable. That is why it is critical to use essential and effective GTM levers for each subsector, including:

  • Specialty PPMs/Rollups
    • Drive Multi-channel Patient Demand
    • Create Culture and Value Prop to Attract Regional Talent
    • Align Practice Compensation with Objectives
  • Pharma Services
    • Adapt Customer Coverage to Changing Buyer Priorities
    • Modernize Marketing Motions
    • Lead with Science and Invest in Talent
  • HCIT/Digital Health
    • Define and Deliver Differentiated Value Proposition
    • ID, Resource and Prioritize Expansion/Conversion Targets
    • Deploy Customer Success to Drive NRR and Retention
  • Non-acute Sites of Care
    • Understand and Influence Patient Referral Patterns
    • Optimize Marketing Investment and Mix
    • Drive Efficiencies to “Bend the Cost Curve”

Identifying the appropriate GTM strategy requires understanding the subsector and how disruptors, competitors, and customer/patient preferences impact market conditions. GTM strategies must continually adapt to market conditions and evolve accordingly.

Designing an Organic Growth Value Creation Plan

Regardless of the subsector, a proven, efficient and comprehensive approach to creating and executing an organic growth value creation plan identifies the appropriate levers and actions using data insights, GTM strategies and market awareness. Working with management, employing a series of diagnostics, utilizing proprietary research and conducting targeted customer research to design all elements of the revenue engine are key, including:

  • Marketing and Demand Stimulation
  • Detailed Segmentation and Targeting
  • Serviceable Addressable Market and Product “White Space”
  • Value Propositions and Pricing
  • Job Roles, Headcount and Talent Profiles
  • Sales Compensation Plans and Enablement Programs
  • Business Case and Execution Plan for Change

This approach helps companies develop a bespoke value creation plan aligned with the investment thesis and organic growth plans. Given our current economic environment, profitable organic growth is attainable and a market imperative by leveraging industry expertise and a proven approach.

Experts in Healthcare Value Creation

Alexander Group specializes in the creation, detailed design and execution of value-creation plans to drive profitable organic growth. Contact us today to learn more about our proprietary benchmarks, industry-leading insights and service offerings.

Back to Top