Canadian business owners in Health Care in demand by Private Equity

Healthcare in Canada is admired by many Americans. Jeff Immelt spoke in Toronto last month and said, "Canadian health care should be a #1 expertise exported to the world." GE is benefiting from Buy Ontario where the government is trying to reduce costs by buying from big suppliers, like GE, but shutting out small Canadian companies.

Our Canadian Government needs to support Canada more.

A full story on this appears in this week’s LBO Wire.

Health-care reform and stimulus spending were pilloried in the recent American election, but the government’s drive to digitize the sector has found support from private equity.

One of the main objectives of reforming health care is to improve the quality of the care while reducing costs. Health-care information technology companies that focus on capturing revenue and implementing electronic medical records provide important tools necessary to achieving that outcome.

Making sure that hospitals and doctors get paid is an increasingly difficult task as providers grapple with bad debts and face tighter reimbursements from insurance companies, Medicare and Medicaid. Revenue cycle management software that boosts reimbursements, clears insurance eligibility, and helps the uninsured find coverage is in big demand.

There have been several PE deals in this area recently. In October, for example, health-care payment systems provider Emdeon Inc., backed in part by General Atlantic LLC and Hellman & Friedman LLC, bought PE-backed reimbursement specialist Chamberlin Edmonds & Associates Inc. for $260 million.

“Wiring the system,” as the industry puts it, is another driver behind health-care IT investments. The plan to adopt electronic health records — championed by the oddly allied Newt Gingrich and Hillary Clinton in 2005 — is getting a big push from the 2009 federal stimulus package, which will spend about $40 billion by 2016 to help hospitals and doctors go digital.

Although there is a lot of money floating around, picking the winners in the fragmented health-care IT market is a challenge for investors, especially as a wave of consolidation unfolds in the sector.

Large hospitals, which evaluate vendors based on their track record and ability to invest in upgrades and services, will likely award contracts to the dominant players, said Dr. Bruce Darrow, a cardiologist and assistant professor at Mount Sinai Medical Center, who is leading the implementation of the hospital’s new electronic medical records system.

“We look for companies that are actually going to be around when you’re done implementing the system,” he said.

Tony Clement blames business for not hiring employees

Tony Clement is blaming business owners for not hiring more employees, says a CBC report today.

I find that hard to believe as Clement is one politician who does get out there with business owners and he must have heard their issues with minimum wage, hiring and firing legislation and the amount of taxes taken from employee payroll.

One comment that I hear all the time from business owners is that they want to hire Canadians and they want to keep their current staff, but they simply cannot compete with the price of goods coming in from overseas competitors.

So do we blame Walmart?

If there is someone to blame, don’t pick on business owners, let’s pick on the Canadian consumer making the cheaper choice.

I wish I had $100 for every owner who has told me they are sending jobs to China and they do not want to make that decision but the buyers of their light bulbs, plastic bags, T-shirts, etc. have made the cheaper choice. Canadian business owners are heartbroken about laying off their long time staff. Do you think that is easy? Canada Goose is still manufacturing here but it is a challenge and their coats are expensive.

Our Canadian government is a boy scout in the world. We are playing checkers while the USA and China are playing chess.

Number one leadership trait for a family business owner is Humilty

When I first heard a CEO say that the most important leadership trait was humilty, I was confused. At the time, I was working with Deloitte and starry eyed about CEOs but have since realized the truth of that definition.
The top family owned business in Ireland is a supermarket, Superquinn. Here is a family business owner who has stayed at the top where so many companies want to be, and surprise, he says his leadership trick is humilty. No Harvard MBA required for that.
Feargal Quinn says, "customer-service innovation and public service demand the same defining trait: humility."
Quinn likes to remind business leaders that they should make only five assumptions, which he calls his five lessons in humility: 

1. My customers know more than I do. 
2. My employees know more than I do. 
3. Neither my employees nor I can be creative all of the time. 
4. What I knew yesterday is not enough for today. 
5. I'm not responding fast enough for my customer.

Read more

Medical companies shut out of Health Ontario purchasing

Our government is damaging the future innovation in the health and medical industry with “Ontario Buys”, which encourages institutions to buy in bulk as a means to save money. At first sweep, it seems sensible to purchase from fewer suppliers--the Walmart model of “buy in bulk and save” proven to save money by simplifying processes and consolidating costs of doing business.

Unfortunately, this well-meaning government program shuts out large numbers of smaller Canadian companies because they do not having the size or product breadth for this bulk game.

As an example of how the Ontario Buys program works, a medical device manufacturer under $40M in revenues is refused even an appointment with the several buying groups tasked with following this new initiative for the health care industry because of their small size.

This same medical device supplier is peppered with calls from the government offering all manner of programs to help the business, from R&D tax breaks to government experts to build better online catalogues, and so on.

But if there is no buyer, these government initiatives are pointless. The bulk of orders go to large corporations. 

You may think: Wonderful, these large corporations produce Canadian jobs through their Canadian offices, but they are actually American multi-national corporations with subsidiaries that have been set up in Canada. They do create jobs, but profits are more than likely invoiced back to the American Parent as management fees to avoid our higher Canadian Tax Rates. The goods are imported into Canada from American manufacturing parent corporations, avoiding any manufacturing in Canada, keeping the benefit of manufacturing or higher paying jobs in America. 

Ironically, the US has implemented a minority owned mandate under the Federal Initiative “Minority Owned Contract Opportunities” which forces buying groups to ensure that a percentage of the products purchased are from Minority Corporations, inclusive of SME companies. 

Our politicians are keenly aware of the importance of small and medium sized companies.  Research by Glaeser and Kerr, in a recent Harvard Business Review article, show that a gnat like cloud of small companies buzzing around larger companies will be a far better boost to job growth than incentives for large companies. Even adjusting for variables such as tax or industry, Glaeser and Kerrobserve say "the relationship between small firms and job growth rate stands."

In order to protect our future, Ontario Buys needs to be modified to require a small percentage of purchases be from SME Canadian businesses. I do not support gender or skin colour as a reason to buy, but companies with revenues under $500M should be factored into the purchasing decision as this would ensure a fair and open process at the table for Canadian manufacturers.

I will end here but am happy to discuss with you in more detail as I get frustrated hearing about innovation and R&D grants or financing programs. That is not the problem - it is the buying end. Why give all our support to US owned companies who have a branch office or corporation in Canada, but shut out our SME’s? , in a recent Harvard Business Review article, If you ask health care industry people about the Buy Ontario program, they approve because, generally, they are working for these large companies.

As Glaeser and Kerr’s research show, small companies lead to big companies.  It’s alarming that the Government buys from big suppliers as it is already crushing small companies. Then, where will be future innovation or competition. Maybe a question to get more of a response from government would be to ask, “What companies will still be around for all those government experts to help”

Canada needs to give more support to its biotech companies

As I listened to the biotech, health and medical experts at a meeting I put together at the Granite Club, I realized there are structural issues our government needs to get fixed. It is becoming evident that Canada is playing checkers, while the US and others are playing chess. As I keep saying, pure business competing against pure business is over as China and the US already know. 
Our government action is key to future success and innovation.
Thank you to Kathryn Simpson, formerly GalxoSmithKlein, who sent me an article supporting the issue that Biotech is needing support from the government. Mark Lievonen, Sanofi Pasteur, says that Canada is just not giving business the support enjoyed in other countries. Come on, Tony Clement http://twitter.com/#!/TonyClement_MP, spend some time on this industry. Let's look at what The Sun says:

Canada needs to cut red tape and give more support to its biotech companies or risk losing billions of dollars in investment — and related expertise — to other markets, said Mark Lievonen president of Sanofi Pasteur.

Weak patent protection, lack of access to financing and more attractive tax and investment regimes elsewhere are all posing a risk to the sector here, said Lievonen, whose company helped develop vaccines for diptheria and polio and commercialize insulin.

Investment capital in technology based industries has dropped to the lowest level in 13 years, according to the Canadian Venture Capital Association, while Ernst & Young estimates the number of operational biotech companies here has fallen by a fifth because of lack of access to capital.

Companies are also failing to capitalize on their research by successfully bringing their products to market, Lievonen said.

“We need to create some success stories,” he said in an interview after an Economic Club of Canada lunch in Toronto. “We need to create and support our own winners and ensure investors get a decent return.” Read more:

Jacoline Loewen, private equity, sales and family succession.