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At HealthQuest, we take “Best Ideas” from our investment professionals and form pods to investigate and develop investment theses. Below we dive into some of the more serious cybersecurity challenges we see facing health systems and explore some innovative solutions and technologies that may be used to combat them. 

Health systems are continuously digitizing their operations, leading to rapid growth in sensitive data and increased risks of cyberattacks. This data has tremendous value to criminals, allowing them access to personal identity details, compromising patient security, disrupting medical care, and damaging finances and reputation. Given the devastating consequences, health systems are directing significant attention towards cybersecurity initiatives to protect against these increasingly sophisticated attacks.

Innovative solutions and technologies are essential in safeguarding sensitive patient data and IT systems. From artificial intelligence (AI) powered tools to medical Internet of Things (IOT) management to Identity Access Management (IAM) to blockchain-based systems, here are some of the innovative solutions and technologies we are excited about:

AI is a particularly attractive technology when it comes to powering healthcare cybersecurity solutions. Capabilities include the ability to:

 Solutions that identify, monitor and trigger alerts for connected medical devices. Healthcare organizations are rapidly adopting connected medical devices; however, unlike conventional IT assets (e.g., laptops, tablets, and mobile phones), many of these devices may not be managed by IT teams and traditional security solutions often can't see or secure them. While these devices improve patient care, many seem to lack robust security, often making them easier entry points into an organization’s network. The leading approaches typically monitor behavior with known profile baselines instead of static parameters.

 Through its distributed ledger technology, blockchain may be a more secure way for hospitals to store and manage patient health information. Unlike traditional database architectures, a decentralized system allows organizations to share data across multiple stakeholders while seeking to prevent malicious actors' unauthorized access or manipulation of records – providing secure storage of protected health information (PHI). Overall, blockchain technology is still nascent but has the potential to be an impactful enabling technology.

 IAM is typically designed to be an essential Zero Trust security strategy component. Zero Trust is a security model that assumes every request, user, and device is untrusted, and seeks authentication and authorization before granting access to resources. Unlike a traditional security framework, it is typically designed to not grant unfettered access upon entering a single password.

IAM’s goal is to ensure that only authorized users are granted access and this is often achieved by implementing a combination of technologies and policies that work seamlessly together with minimal disruption to user workflow. In addition to common security technologies like Multi-Factor Authentication (MFA) or Single Sign-On (SSO), a proper IAM solution also incorporates technologies such as Role-based Access Control (RBAC), which assigns permissions to users based on their role within the organization (rather than on an individual basis), and Attribute-based Access Control (ABAC) which grants access to resources based on a set of attributes, such as the user's job title or location.

If you are working on solutions that address the cybersecurity challenges health systems are facing or are interested in this space, please get in touch with our team at 

This material is intended for information purposes only, and does not constitute investment advice, a recommendation or an offer or solicitation to purchase or sell any securities to any person in any jurisdiction. This material may contain estimates and forward-looking statements, which may include forecasts and do not represent a guarantee of future performance. This information is not intended to be complete or exhaustive and no representations or warranties, either express or implied, are made regarding the accuracy or completeness of the information contained herein. The opinions expressed are as of June 2023 and are subject to change without notice. Reliance upon information in this material is at the sole discretion of the reader. Investing involves risks. Past performance is not a guarantee of future results. There is no guarantee any investment strategy will be successful. HealthQuest Capital Management, L.P. is an investment advisor registered with the Securities and Exchange Commission

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At HealthQuest we develop theses through best ideas brought by our investment team members and voted on by the full team. The selected “best ideas” form research pods to go deeper on a particular trend or hypothesis. In early 2022, we focused a pod on the challenges facing the nursing workforce. Healthcare stakeholders have been aware of these challenges for decades; however, the stress levied on the healthcare system and on nurses during the Covid-19 pandemic brought these challenges to a national and global stage. It also fueled our interest in understanding the needs of one of our most critical healthcare resources: nurses. Our findings are detailed below. 

The nursing workforce has experienced a multitude of challenges ranging from recruitment, education, training and licensure to job culture, safety, retention, scope of practice, job satisfaction, growth, and career progression. While we expect many of the solutions to the nursing workforce challenge to arise from within provider entities (e.g., a change in hospital culture or creation of nurse leadership opportunities) or from policymakers (e.g., national licensure), we also anticipate that the private sector will generate solutions targeted at the nursing workforce.

Our research highlighted several themes – some of which have existed for years, and have been exacerbated in the wake of the Covid-19 pandemic:

Hospital and health system leadership are looking for solutions to address the needs of their nursing workforce across the following categories. 

These represent areas where technology solutions can have an impact on the nursing workforce, either on their own or in conjunction with policy, culture, leadership and educational initiatives. 

Streamline Nurses’ Workload & Focus Their Efforts on Advanced Care

Ensure nurses are adequately trained to care for their patients

If you’re working on solutions for these problems or interested in this space, reach out to our team at 

Research

Nursing Workforce Challenges

Portfolio company hiring was like riding a rollercoaster during the pandemic – from supporting commercial growth to assessing the workforce ahead of market headwinds – and the evolution we are seeing in leadership teams, particularly among Chief Financial Officers (CFOs), is worth its own spotlight. HealthQuest Venture Partner, 

, also Partner and Head of JSS Executive, shares his insights on how the CFO responsibilities have expanded and the importance of recruiting a dynamic leader into this role. 

What is the current state of the CFO role? 

Today’s CFO is busy in ways that previous generations of finance leaders could not have anticipated, with more responsibility for corporate strategy, board engagement, digital initiatives, financial performance, controls and management. The COVID-19 pandemic and subsequent recessionary environment changed the CFO’s responsibilities; they had to sharpen their focus when it came to managing inflation, supply chain disruptions, hybrid work, financing the business during an evolving macro environment, workforce fluctuations (The Great Resignation, Quiet Quitting and RIFs) and interest rate hikes. CFOs also have a meaningful role to play in their companies’ Environmental, Social, & Governance (ESG) programs, an increasingly important topic for investors and companies. A 

 reported dramatic changes in the gamut of functions that reported to the CFO, compared with data from two years prior. Amid all this disruption, it has become apparent that CFOs are expected to play a strong, central role, alongside executive peers, in stabilizing a business and positioning it to thrive in challenging conditions. 

How did macro events shape the needs within this role?

I mentioned some of the macro factors above that ultimately shifted focus, and added responsibilities, of the role of the CFO, but overall, the increase in capital markets activity seen in late 2020 and the record setting 2021 had many companies in 

 of the formal CFO role. The increase in traditional IPO volumes (+93% YoY for the U.S.

) along with the strong emergence of the SPAC (Special Purpose Acquisition Company) vehicle required many companies to hire a CFO with public-company readiness and experience. In 2021, there were 613 SPAC IPO’s, an increase of 147% from 248 in 2020 and over 900% compared to 59 in 2019

. The increase in volumes for IPOs, both traditional and through SPAC IPOs, increased the demand for CFOs who were ready and experienced to lead private companies through these transitions. These day-to-day tasks of executing one of these transactions rely heavily on the CFO to stretch in functionality from investor relations, to legal to accounting, and more. 

While public market exits have dried up in the last 18 months, we continue to see an abundance of hiring for the CFO role. However, these searches are no longer focused on CFOs who can transition a company from private to public or tackling the responsibilities of an IPO or SPAC process; instead, searches are focusing on CFOs with experience weathering prior downturns, turning companies around and bringing credibility during these challenging times. As a result, we have seen a decline in COO searches as more experienced CFOs take on both the financial and operational roles. This reduces cost to the company and streamlines turnarounds under one leader. 

What are companies looking for in Chief Financial Officer hires?

The role of the CFO has evolved to become more strategic over time; not to diminish the historical functions of the CFO, these are incredibly important, but the strength in bench under a CFO across Controller, FP&A, Investor Relations, etc. focuses on most of these duties, thus elevating the CFO to be more strategic. 

In a recent engagement for a private-equity backed business, some of the compulsory requirements included: significant prior M&A experience (buy side & sell side), past experience as a CFO of a private equity-backed company, proven track record to direct debt strategy and work with lenders and bankers, MBA in Accounting, large Audit firm experience (Deloitte, PwC, EY and KPMG) and of course, specific life science experience, and not to mention they had to be based in a specific city. Couple this with the considerations for a distributed workforce, repurposing hard assets, like office space, and budgeting for T&E in a hybrid world, it becomes increasingly evident what investors mean when they talk about the “war for talent”. Ultimately, the CFO search for an executive search professional such as myself, has become the most challenging search of them all. 

How do you evaluate CFOs to ensure they are prepared to lead through this environment?

When hiring a CFO, a rigorous and multi-faceted assessment process must be applied. Each investor group and company has their own priority experiences that a search agency must consider and be thoughtful of – it is imperative that a diligent approach is taken during the brief taking.  In the most part, my time is spent understanding the prospective CFO’s core competencies and leadership qualities, as well as their background in driving company growth (top-line & bottom line) as well as operational efficiency (supply chain, inventory management and distribution, etc.). The follow-on questions shift from quantitative to qualitative examples around how this was managed, how did the organization respond, what was the outcome and what challenges they encountered through this growth. When addressing core financial capabilities, the CFO will be asked to explain their experience managing significant budgets and P&Ls. How did they prioritize investments and what is their experience managing budget cuts, restructuring, or reallocating resources? We would also look to understand how the CFO implemented best practice across the finance organization: FP&A, GAAP reporting, IT systems and compliance.

For the ‘Strategic CFO’, understanding their M&A background (including strategic partnerships and joint ventures) and the transactions they have led takes up a large part of the discussion. Key questions around the number of buy-side/sell-side transactions completed, size of checks, capital structures, and whether they have directed and executed on documents are key for hiring decision makers to understand. 

It is important to note that I have highlighted just a few topics and core areas an executive search professional may look to address. A lengthy article could be written on this topic alone. Finally, a thorough executive assessment (i.e., Myers-Briggs, DiSC Assessment, Lumina) along with thorough soft and back-channel references will be taken.

Do you have any predictions for how 2023 may further evolve the CFO role?

At this time, 2023 will mostly come down to the state of corporate transactions. While we don’t expect the IPO markets to reopen, certainly not to the extent they were in 2021, there is increasing optimism around M&A. CFOs are usually on the chopping block post acquisition and therefore we could expect to see an increase in available CFO talent. This is something to watch for if you are in the market for a CFO. 

For companies not going through a corporate transaction, we expect the role of the CFO to be heavily focused on executing according to plan and focusing on profitability. CFOs who have led companies through prior market turbulence are highly coveted at this time, given the value they can bring to their executive counterparts, board members and employees broadly. 

The Strategic CFO

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Chicago, IL and Waltham, MA (March 12, 2024) – 

Linden Capital Partners ("Linden"), a Chicago-based private equity firm focused exclusively on the healthcare industry, announced today the completion of its acquisition of Alcresta Therapeutics, Inc. ("Alcresta"), a leader in commercializing novel enzyme-based products designed to address challenges faced by patients living with gastrointestinal disorders and rare diseases, from Athyrium Capital, Bessemer Venture Partners, Frazier Healthcare Partners, and HealthQuest Capital. HealthQuest Capital subsequently re-invested in Alcresta and will continue as a minority shareholder and board member.

Linden Capital Partners acquires Alcresta Therapeutics inc.

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