Illinois and Wisconsin-based healthcare system Advocate Aurora has a new line of investment and recently placed some of its first healthcare bets.
Advocate Aurora Enterprises (AAE), a wholly owned subsidiary of Advocate Aurora Health Inc., announced last week that it has acquired $ 180 million worth of Maryland-based senior home care company Senior Helpers.
The deal came just days after the group led a $ 25 million funding round in a telenutrition platform called Foodsmart.
AAE was founded to focus on consumer health and wellness, Scott Powder, president of Advocate Aurora Enterprises, told Fierce Healthcare.
“We know that in addition to great medical care, there are so many other things that affect a person’s health – everything from genetics to lifestyle and behavior to what are known as social determinants,” Powder said. “Often these things affect a person’s overall health more than their medical care. We said that if we are to serve our general purpose of helping people live well, this idea is about the health and wellbeing of people Consumers participate and have a much bigger footprint. ” Space is very much aligned with this strategy. “
Here are three key details from our conversation about how Powder described Advocate Aurora’s investment ambitions.
1. You focus your investments in three sectors. While the broader goal is to invest in consumer wellness companies, Powder says AAE is initially looking to invest in three sectors: companies that focus on independent aging, parenting, and improving personal performance through the integration of the mind, body, and diet aligned, he said.
RELATED: Providence St. Joseph Health Announces New $ 150M Health Fund
“These are sectors where we believe there is a great unmet need and we believe there are many opportunities for growth,” said Powder. “We also believe that the core business – Advocate Aurora – has some features that can help us be successful in these particular categories.”
While not a requirement, strong investment goals include companies that Advocate Aurora may become a client of.
“If all other things are the same, we would try to invest in a company, acquire it, and do a transaction with a company that has synergies or cross-pollination opportunities with our core business,” said Powder.
How do entrepreneurs and corporations get AAE’s attention?
Powder said they have so far managed to get early leads and connections through Advocate Aurora’s corporate venture arm. With travel reopening after the pandemic, he anticipates his team will travel to more venues across the country to meet with businesses. He also suggested they could find AAE online.
2. You focus on more established companies. While Powder said AAE tries to keep the parameters of potential investments flexible, its strategy favors more established players over seed-stage or pre-revenue companies.
“They’ve been around 10 years with Foodsmart, they’ve already had four rounds of investments and we like where they are, they’re still a fast, high-growth company, but they have a very solid and growing customer base ahead of us . ”
Similarly, AAE sees great upside growth potential in the Senior Helpers business, but the company is more mature.
AAE isn’t set up to spend a set amount of money, Powder said. He declined to give details of how much funding he would have to work with, saying this could change from year to year.
And while there are aspects that are similar to venture capital in the sense that the company may want to invest and hold equity in different companies, there is one major difference to AAE’s strategy, Powder said.
“Venture capital, or private equity, is mostly financial investors who seek a return on invested capital for their investors over a period of time,” said Powder. “While we are trying to be part of the financial health of Advocate Aurora Health, we have a strategic goal of investing in these companies over the long term, and we don’t necessarily want to get out, as we do.” I am trying to serve this purpose of helping people live well through these investments. “
3. You want to get into the digital health space. The core business of care services is a very challenging business, said Powder. For example, an enormous amount of a healthcare system’s revenue is determined and essentially limited by Medicare and Medicaid.
Utilization is falling in many areas of the healthcare system.
“The technology is increasingly moving outside of the traditional stationary equipment we’ve put together over the years,” said Powder. “It is a very challenging business to be in this space and we want to invest in things and work with companies that are less asset intensive. We are focused on digital technology as the mechanism for providing care, information and Services as well as lighter assets like what we do with Senior Helpers, a people-based business. We’re pulling more and more care into the home. “
It will take time to build the portfolio, but Powder said the ultimate goal for the investment is to contribute to the bottom line as it aligns with the broader goal, he said.
“Ultimately, it’s about serving our ultimate purpose, helping people live well. That’s why we want to be much more meaningful in consumer health and wellness, and that’s our mission. We’re not just trying to get a financial return achieve. “