Private equity investment has become an increasingly important source of growth funding in the healthcare industry. As reported by Modern Healthcare, private equity-backed healthcare provider deals in the U.S. totaled 84 transactions worth $23.2 billion in 2018.
Thanks to the influx of private equity capital, many providers have the growth capital they need to implement serious expansion strategies. But there’s a catch: private equity firms want to scale quickly, and the development capital is typically accompanied by an aggressive growth target.
For many healthcare providers, identifying growth opportunities and implementing rapid expansion strategies is uncharted territory. They need help determining where to open new facilities that will best contribute to the return on the private equity firm’s investment.
Fortunately, consumer analytics can be a useful tool for quickly finding the best growth opportunities, shortening the timeframe for implementing a strategy, and proving the validity of the plan to private equity investors. Here’s how it works.
1. Start by Defining Your Consumer Profile
Today’s healthcare industry is increasingly driven by the demands of consumers. Understanding who your organization’s core consumers are and where people just like them are located is a crucial first step in discovering growth opportunities. Start by developing a consumer profile of your patient base then matching it to other “lookalike” households in markets of interest. If one of your strategic goals is to capture a new consumer segment, then your analytics provider can work with you to develop a goal profile for this target segment and find households that share those characteristics.
2. Develop a Model to Assess Potential Performance
Once your profile is developed, you need to assess other factors that influence facility performance. This may include factors such as demand for the medical services you offer, the existing supply and proximity of medical providers for that service line in the market, and area draw factors. These factors can be combined and weighted in a site scoring model that is used to assess the potential performance of new sites.
3. Conduct a Potential Analysis to Identify Expansion Opportunities
Using the model, your analytics provider can conduct a potential analysis in your markets of interest. This assessment determines not only how many locations the market can realistically support, but also the trade areas where those facilities should be placed. This gives you a data-backed roadmap for growth that you can show your private equity investors.
The Bottom Line
Private equity funding gives healthcare providers the opportunity to take their organization to the next level and expand coverage into new markets. By using analytics to develop a market plan, healthcare executives can move quickly to meet growth targets.
Buxton offers a full suite of analytics services that can help healthcare providers plan their growth strategies. To learn more about our solutions, visit our healthcare industry overview.
