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How to Use Financial Data to Mitigate Risk in Private Equity Investments

by | Dec 14, 2021

Once a largely fragmented sector, healthcare has seen a shift toward consolidation in recent years – coinciding with an increased private equity presence in the space. With any private equity investment, however, risk management is a key aspect of any successful operation.

With certain payers now tying reimbursement to value produced, especially those in the primary care space, it has become increasingly necessary for organizations to track performance in clinical and financial areas. In this push for enhanced data reporting, standardization of systems has become essential. 

Performance data for healthcare practices are also of interest to private equity firms, which have an interest in mitigating private equity risk in healthcare. These firms want to ensure that any risk to their investment is minimized – a boon for the healthcare practice, as well, as this means all parties involved have an interest in seeing the practice succeed, and seeing that patients receive quality care. 

Understanding how this is best performed – and accounting for the metrics and tools necessary to do so – is an excellent starting point. 

How is Private Equity Risk Measured in Healthcare?  

Private equity firms approach healthcare – in this case, healthcare practices, as they would any other industry – as a high-growth investment with the aim of maximizing their value. In the complex world of healthcare, however, this is often easier said than done.   

Fragmented business units, complex policies or legislation, multiple locations, data silos, faulty reporting processes, and more create barriers for private equity firms to assess the value of healthcare practices which they are scouting for investment. This is a problem because private equity firms need correct data to identify a practice’s potential future growth and profitability.  

One of the best ways to get around these pitfalls and determine private equity investment risks in healthcare is to make use of healthcare analytics dashboards. Also referred to as healthcare dashboards, these software tools are powerful, all-in-one views into practice performance.  

Healthcare dashboards aggregate a variety of data to give healthcare professionals a window into the “health” of their organizations. Read on to learn more about the wide variety of healthcare KPIs (or key performance indicators) dashboards provide to private equity firms to gain accurate assessments to properly value healthcare investments. 

Financial Dashboards Save time, benchmark KPI's, and improve performance CTA

Healthcare Metrics for Private Equity Firms to Assess 

When it comes to healthcare KPIs, private equity firms can access a wide variety of healthcare metrics to improve practice performance. Just as healthcare practice types vary widely (from primary care providers to specialists, to behavioral health clinics, and many more) so too are the many kinds of metrics monitored by these firms. Luckily, because of dashboard customization capabilities, leadership is often able to prioritize the KPIs that are most important to track. 

Though there is a wealth of data available through healthcare dashboards, there are certain healthcare KPIs that are of the highest importance to private equity investment risk management efforts. The most important areas firms should include when assessing a healthcare investment and the associated risks are:  

  • patient visit metrics,  
  • schedule utilization metrics,  
  • population health metrics, and  
  • billing and coding metrics.  

Why is this? Because for virtually all practice types, these healthcare KPIs can serve as a barometer of the vitality and health of the practice from a business perspective. 

For example, private equity firms assessing a practice as a potential acquisition can look to patient visit metrics to get an idea of how consistently and how often patients are coming in – a key source of practice revenue. Or private equity leadership can view schedule utilization data to determine if a location is getting the most out of its scheduling capabilities – and maximizing provider time. 

Viewing the most essential healthcare KPIs – made possible with the aid of healthcare analytics dashboards – not only gives prospective investors an idea of a practice’s current health and risks, but it also offers a roadmap of potential performance improvement areas down the road (should an investment be made). 

The end result of keeping an eye on healthcare metrics to improve performance should be the support of the overall mission of private equity risk mitigation. With a clear picture of what they are acquiring (and awareness of what to do to improve their holdings post-acquisition), private equity groups can foresee and minimize any potential risks to increase the chances of a positive return on investment for healthcare investments. 

Financial Dashboards Save time, benchmark KPI's, and improve performance CTA

Automation with Financial Dashboards 

In the past, the data assessment process at a medical practice was manual, paper-based, and time-consuming. Overburdened staff would have to spend hours compiling management reporting data into one centralized report – only to have said report be effectively obsolete the moment it was printed. 

Healthcare dashboards or financial healthcare dashboards have done away with these inefficient and burdensome processes. With a “data pipeline” in place that automatically pulls practice data from all requisite areas (think RCM, HR, EHR, financial, and other databases) in real-time, not only will the redundant work and cost of report assembly be eliminated – a much more intuitive overview of practice performance will be gained as well. 

By automating the data reporting process, financial dashboards allow private equity firms to explore all of the variables affecting the healthcare practices they are looking to acquire (or already have in their portfolio). This can reveal valuable insights that aid the decision-making process. 

Medical Advantage Can Help 

With an enhanced understanding of how portfolio or prospective practices are performing, private equity risk management becomes much easier. Healthcare dashboards can provide greater understanding through streamlined and accurate assessment. For more information or a free demo, contact one of our consultants today


  • James Worsham

    James Worsham is an industry leader in sales, bringing a wealth of knowledge and well over a decade of experience to the table. As Director of Sales, Worsham is instrumental in facilitating strategic partnerships with top-tier technology firms across the country, planning and exe...

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