Lead Left Interview – Rod Rivera and David Baker

This week we chat with Rod Rivera and David Baker, Managing Directors at Capstone Headwaters. Capstone Partners LLC and Headwaters MB, LLC recently announced a strategic transaction combining the two firms. This single platform has 150 professionals, covering 16 dedicated industry groups, spanning 20 offices across the US, UK and Brazil. This combination has resulted in one of the largest independent investment banks in the US. Mr. Rivera and Mr. Baker cover healthcare for the firm.

The Lead Left: Gentlemen, we appreciate a few moments with you today. Given our recent series on healthcare, we thought our readers might appreciate hearing your thoughts on the state of the sector. Perhaps starting with things you believe healthcare investors should be focused on.

Rod Rivera: Thanks, Randy. It’s great speaking with you. First, I would say that increased risk is one of the primary concerns we consider. The world of healthcare, as you’ve been detailing, is changing. All the subsectors that have great CEOs and built the best platforms are asking, how does the world of capitation change the equation? And in turn, are lenders looking in the rear-view mirror rather than the front windshield? Are smart equity guys anticipating the change or are they bidding properties up because they can leverage it?

David Baker: Those are the right questions. Where are things going? What are the risk elements? And how does private equity address it? Value-based care is definitely the theme of the day. Self-insured companies have been pushing value-based for years. For example, Leapfrog Group, Health Transformation Alliance and, recently, The JP Morgan/Amazon/Berkshire venture. These self-insured payors combine resources and use scale as leverage to lower costs and seek innovation in care delivery.