Niche in Outsourced Healthcare Services Shows Promise

The healthcare space today boasts both fully matured subsectors and highly fragmented pockets. Successful investment in the space requires recognizing and leveraging trends early on, before they become flooded with competitors. For Garrick Rice, a managing director at Sterling Partners, one of those unique areas lies within outsourced services.

Sterling, founded in 1983, focuses on education, business services, and healthcare. The firm has experience investing in a number of areas within the latter, including laboratories, behavioral health, and multisite-based facilities, as well as physical therapy and care services for people who have endured catastrophic injuries at work.

The firm’s strategy includes investing further into its portfolio companies, setting the stage for strong organic growth in approximately five years. Sterling’s leadership points to its growth strategy as a differentiating factor from other firms in the healthcare space that are typically more focused on leveraged buyouts.

Asked which area in the healthcare space could be poised for significant growth, Rice points to the specialist segment within the outsourced-services subsector. Outsourced services as a whole is showing signs of maturity, but it is the underlying group of people with particular specialties and training that shows promise.

For instance, one of Sterling’s portfolio companies includes Q-Centrix, a provider of data abstraction for acute-care hospitals. Q-Centrix’s proprietary technology and team of outsourced employees empowers clients to make better decisions with advanced data and information gathering while ensuring cost efficiencies, according to Sterling’s website. Surgical Solutions is another Sterling investment that provides operating room support to hospitals throughout the United States. That includes technicians to assist with setup, support, and postoperative cleanup, as well as equipment procurement, equipment cleaning and sterilization, and scope repair.

Rice also points out quality-of-care management for various disease states—as well as Medicaid and payer services—as interesting opportunities. 

This is not to say the smart money should ignore popular areas within healthcare. To the contrary, many firms, including Sterling, continue to keep their eyes on “population management,” for example. Going to the emergency room typically has expensive outcomes for a number of parties involved in the process. Therefore, healthcare investors are studying a variety of clinical models that focus on hands-on management of patients to prevent trips to the emergency room.

The one constant throughout Sterling’s investment thesis for healthcare is to put capital to work in portfolio companies that help to increase efficiencies within the system and lower costs for patient care.

“Our goal is to drive better outcomes for the patient,” Rice explains. “That is better all around for all parties.”