For this edition, Golub Capital's Peter Fair interviewed Paul Cook, Chief Executive Officer of Valant.
In the behavioral health market, adoption has lagged. An executive at the American Psychiatric Association estimates adoption among psychiatrists at 75%, a level confirmed by our private practice and community mental health pipelines. The EHR technology of 2009 has not evolved and scaled to meet the needs of clinician users and provider organizations—older software architecture is inherently slow, isolated and expensive to customize. Meanwhile, U.S. healthcare reimbursement models are transitioning from fee-for-service to value-based models, leaving legacy EHR technologies struggling to accommodate new reporting needs. There is great appetite for change, particularly in the community mental health market.
While there are many new players in healthcare IT, we have not encountered a significant new competitor in the behavioral health enterprise EHR space. We’re instead seeing new vendors pop up in specialty service technologies such as consumer digital, wellness, population health management—healthcare IT that may interface with EHRs but doesn’t replace them.
Competitors in the enterprise behavioral health market have products that, on average, are over ten years old. Our biggest competitive advantage comes from having decided to build new technology from the ground up, rather than extend our legacy technology. This sets us apart in terms of user experience, system performance, accessibility of data, responsiveness to change and interoperability.
Before the failure of ACA repeal legislation in Congress, some prospective customers stalled EHR procurement processes to see what would transpire. At this point, it appears that Medicaid expansion is relatively safe. In fact, more states will expand it.
The requirement of coverage of essential benefits has helped solidify a trend toward parity between coverage for mental health and physical health benefits in the commercial insurance markets. While there may be some weakening of essential benefits in the coming months and years, we do not foresee major changes with respect to commercial insurance coverage for mental health benefits. Nor have we observed any impact on the private practice market as a result of regulatory uncertainty.
Valant receives inbound inquiries nearly every day to talk about our company and industry and interest in raising capital. We can’t engage with everyone, but we want to keep our opportunities open as we look to raise a final round in the next 12 months.
What’s challenging for private equity investors is that the underlying technology infrastructure in EHR may be entirely different within five years.
This creates some uncertainty across the entire healthcare IT market. There are also tremendous opportunities—particularly within relatively narrow verticals like ours—to invest in companies that are further along the technology curve. There are opportunities to integrate strong technology platforms, both horizontally and vertically, in ways that result in ownership of a market or create a network effect within a vertical.
We just launched a product for the enterprise sector of behavioral healthcare, so we have invested heavily in product and engineering. We will always be a company that invests heavily in our product. In fact, there are several markets adjacent to behavioral healthcare that we will pursue beginning in 2019. We will also focus on sales and customer success in the coming years—investments that are also likely to be technology-driven.
As incentives shift from volume to value, healthcare providers will gradually assume more risk. They will need to integrate across different dimensions of care, including the social determinants of healthcare such as housing and education. To do this, they’ll need to capture, manage and share data in new ways—at great scale.
Software companies need to adopt technologies and processes aggressively that support these trends: cloud, big data, microservices, APIs, etc. Ultimately, software companies, like medical device companies, will be judged by their ability to help organizations achieve better outcomes.
Valant will be the dominant EHR software vendor in behavioral healthcare. It will be a model for how to build scalable and extensible service delivery technology infrastructures and how to use technology and data to continuously improve clinical outcomes at scale. Valant will also be the fastest growing EHR in physical healthcare.