It was a remarkable year for growth-stage healthcare IT and tech-enabled service companies and as a result, it was quite a year here at Oxeon Partners. At the end of 2012 in an effort to avoid a potential “sophomore slump,” our firm extensively dissected numbers around process, people and technology; in looking back, much of what we put into place before the holidays in 2012 paid dividends. In the past 12 months, we worked on 55 searches and, incredibly, had to turn down 107 more due to capacity or fit concerns. Of the 55, we did 30 searches for CEOs, Presidents and CFOs—as I know all of you are hoping, I will detail compensation trends on these searches later in this article… yes, I know you are all now speed scanning to get to the paragraph with dollar signs.
For those confident in their compensation packages, I will move on. In 2013, Oxeon Investments made 17 different investments, including Evolent, Landmark, Avalon, WiserCare, CareInSync, Liazon, RxAnte, Village Practice Management, and others. Out of these 17 investments, the most important number is 7.3x: the multiple on our first investment to exit. We thank our friends at Liazon for being that one!
2013 left us practically exhausted just contemplating the many different numbers that defined our growth. Oxeon is now at 18 employees, 10 of whom were new this year. We’ve moved into one new office and logged over 4,000 calls, interviews and meetings on my calendar alone. I’ve flown over 300,000 miles—I don’t even want to think about what that translates to in airport martinis!
Shortly after writing this article, I’m going to take 10 with the 4: 10 days of vacation with the 4 incredible members of my family!
The Oxeon-related numbers are probably only interesting to me, but they are reflective of some incredible statistics we saw across the companies we’re involved with. Just a few to note include investing in and building the leadership team of a still confidential company taking on sub-capitated risk on the sickest of the sick: the 5% of people that consume 60% of our healthcare spend. Capitation rates for these populations in New York City, served by another client AlphaCare, are reaching $10,000 per member per month. Yes, you read that correctly.
We saw RxAnte using quantitative algorithms to predict, with a high degree of certainty, who would be adherent with their medication programs. One of our clients and investments working in the population health management space employed similar sets of numbers to take health benefit plan cost curves from greater than 14% to a -4%.
Omada reduces body mass index by an average of 5% over 16 weeks and their users maintained those results for 52 weeks. This correspondingly reduces Type II Diabetes, which is projected to afflict more than 50% of the U.S. population. People who have been diagnosed with diabetes spend $13,700 more on healthcare and have, on average, 2.3 times the healthcare spend as someone who does not have this condition. These numbers all add up to a serious impact on one of the biggest challenges facing our society today.
Behind all of these innovative disease management platforms sit the providers who deliver them. Village Practice Management, Privia and Unified Physician Management are all aggregating large numbers of physicians, each focused on different specialties and in different regions, intending to take risk through payer contracts or around bundled payment platforms. The value proposition of many of these groups is largely driven by technology on the backend that alleviates doctors of the countless hours they have historically spent on paperwork, and allows them to return to the practice of medicine.
To that end, we have also worked with ABILITY Network which processes billions of Medicare and Medicaid transactions. Our revenue cycle clients like Recondo process numbers all day long with incredible success. The most important number to both these businesses is likely their double-digit growth rates!
We have spent a substantial amount of time this year investing in and building the leadership team for confidential companies created to carve out critical functions within payer or provider operations, all on an at-risk basis. We’ve watched incredible care management and care coordination platforms scale from less than 50 to over 400 employees. Multiple companies we work with have raised $100,000,000 or more to fund growth and some of those same companies are signing contracts with 9 and 10 figure TCV deals. Across the board, we are proud to be working with companies putting up big numbers that are a testament to their potential impact on the healthcare system, their business models and their incredible leadership teams.
The fact that we can assist in making this impact leaves me looking at numbers differently: I can’t remember a single day where I was sitting at my desk, wondering when 5:00 p.m. would arrive. Similarly, I can’t remember a single day when 5:00 p.m. actually arrived and I didn’t marvel at where the time went. I love my job.
While there are many numbers that get me excited about where healthcare (and Oxeon) is going, a number that I have struggled with in 2013 is the number 15. This seems to be the approximate number of months of sales cycle required for early stage HCIT companies to sell their technology to large payers and providers. Consider $5,000,000; the approximate run-rate required for many of these angel-funded companies to raise substantial Series A venture capital funding. I’m concerned about the long-term prospects for the many exciting HCIT-based entrepreneurial initiatives facing the combination of those numbers.
So, that brings us to compensation. In surveying friends of the firm on what they would like to see in our newsletter, the most common response was compensation insight! Over 2012 and 2013, the firm has executed over 100 searches in healthcare IT and services, ranging across the venture and private equity investment spectrum. Across all searches in 2012 and 2013, average base compensation grew by 4%, from $250,277 to $261,037 and variable compensation by 5%, from $105,838 to $111,572. It is important to note that the firm conducted many more CEO, President and CFO searches and did more work for Growth PE vs. venture capital firms in 2013 as compared to 2012.
For CEOs, average base compensation was $275,416 and total compensation was $355,833 with average equity at 4.91%. Interestingly, for CEOs, Presidents and CFOs in aggregate, average base compensation was higher at $283,043 and average total compensation was $390,760. This increase is likely due to several high-profile CFO and President searches we’ve completed, which may have skewed the data. An alternative explanation is that these numbers are due to the fact that CEOs were getting much larger equity packages: average equity across the top three roles was 3.07% and therefore substantially lower than CEO equity. If people are interested in diving into the specifics, please reach out to me.
The final number I’d like to mention for 2013 is 18. That is the number of members of the Oxeon family extending “thank you’s” to each of you. People reading this article supported us as family, friends, clients, candidates, networking sources, co-investors and people who are just interested in playing a role in transforming healthcare. We had more fun having a greater impact than we could have ever imagined in 2013 and we can’t wait to get started doing more of the same in 2014.