Need to Meet: Adam Willis, Managing Director, Madison Capital

  • Firm’s healthcare team closed 27 transactions in 2016
  • $643 mln of new loan commitments
  • Forecasts a busy 2017 amid political shifts

Madison Capital Funding’s healthcare team is coming off a strong 2016, including 27 transactions closed and $643 million of new loan commitments. And team leader Adam Willis said the sector outlook continues bright.

“A lot of people expected this overhang from the election and these negative sentiments,” said Willis, reflecting on the mood at last month’s JPMorgan Healthcare Conference in San Francisco. “And really, what came out of it was people still remain excited and enthusiastic about healthcare.”

The fundamental trends that have made the industry so attractive to investors —aging populations, growth of chronic conditions, globalization of treatment — aren’t changing with the political regime.

And though the fate of the Affordable Care Act adds “an element of uncertainty … people seem to be quite optimistic about 2017 in terms of overall healthcare growth,” Willis said. The experts he talks to “agree that what’s deemed ‘repeal and replace’ is likely to look a lot more like ‘repeal and amend.’”

Apart from Obamacare, opportunities abound. Sponsors are moving down-market, Willis said, working to scale smaller businesses to achieve efficiencies from a payer perspective. “There are a lot of inefficiencies within the system right now that, if you’re a private equity investor, you can take advantage of,” he said.

Consider the demography of dentistry: “A lot of dentists are getting toward retirement age and looking to exit,” making their practices attractive targets for acquisitions, he points out. Or senior care, in which Madison Capital has done several deals: The trend toward delivering treatment at home is “taking costs out of the system and providing a better patient experience.”

On the consumer side, the rise of high-deductible plans has left hospitals struggling to collect “a bigger chunk of their revenue from individuals,” Willis said. He says this increased level of consumer responsibility is here to stay, whether the ACA survives or not. Accordingly, “revenue-cycle management has been a focus of sponsors,” as alternative models for pursuing medical debts are sought.

Willis said he and his team are healthcare generalists: “Our thesis starts with: Does the business provide greater efficiency, taking costs out of the system? And is it providing quality of care? Those are the two fundamental themes you see in any healthcare investment. After that, you get more detailed in terms of sub-sector.”

For Madison Capital, these include pharmaceuticals, medtech, healthcare IT, and physician-practice management, a business undergoing consolidation across several specialties.

To sponsors, Madison Capital promotes a stable capital base — its parent is triple-A-rated insurer New York Life — as well as experience dealing with what can go wrong in this heavily regulated industry. “DOJ investigations, OIG investigations: We’ve dealt with those things,” Willis said.

Action Item: Read more about Madison Capital’s healthcare team here:

Photo of Adam Willis courtesy of Madison Capital