ICYMI: Top Deals & Developments

Author: JC Lupis

Published each Tuesday starting the second week of 2021, our Top Deals & Developments column recaps the most popular deals and developments from the previous week’s set of Daily Notes. Not a subscriber to the Daily Note? Sign up here.

Week of 1/19-1/22/21

Top Deals

1. Rancho Family Medical Group Announces Growth Investment from LightBay Capital. LightBay Capital has executed a growth investment in Rancho Family Medical Group, a family practice in South California that has been providing services since 1942. Rancho Family, which focuses on personalized care and a medical home model, has almost 50 providers managing 50,000 lives across almost a dozen locations as well as at clinics, senior centers, urgent care, senior nursing facilities and hospital locations.

For LightBay Capital, formed by two former Ares Management partners, it’s the second healthcare investment of 2021, following a significant minority investment in Femwell Group Health, an MSO offering solutions to more than 650 women’s health and primary care providers across roughly 300 practices.

Press release: Link

2. MultiPlan Corporation to Acquire Discovery Health Partners. MultiPlan has announced its second acquisition following the closing of its deal with SPAC Churchill Capital Corp III in October 2020. In this latest transaction, MultiPlan has agreed to acquire Discovery Health Partners for $155 million. Discovery is an analytics-driven business that helps healthcare payers solve payment and revenue integrity challenges, and the acquisition will extend MultiPlan’s footprint in the in-network claims and government markets.

MultiPlan previously announced it would spend $140 million to acquire HST, a health tech company that enables value-based health benefit plan designs.

Press release: Link

3. The Vistria Group and Excellere Partners Invest in SCA Pharmaceuticals.

Last week brought the news that an outsourcing facility (though not a contract manufacturing organization that have proven popular with private equity firms) has traded PE hands. In this latest deal Vistria Group and Excellere Partners have acquired SCA Pharmaceuticals from Enhanced Healthcare Partners, which first invested in SCA in October 2017.

SCA, founded in 2010, is an FDA-registered 503B outsourcing facility that provides compounded drugs to more than 1,200 hospitals and health systems in the US. It recently announced plans to grow its physical footprint by more than 50% by expanding its sterile pharmaceutical manufacturing sites in Connecticut and Arkansas.

Press release: Link

Honorable mentions (deals):

  • Solis Mammography Acquiring Largest Radiologist-Owned Practice in the Washington Metropolitan Area (Link)
  • Advent International and Great Hill Partners Announce Recapitalization of RxBenefits, a Leading Pharmacy Benefits Optimizer (Link)
  • NC-Based Behavioral Healthcare Company Acquires Operations in SC (Link)
  • Phoenix Physical Therapy Completes Three Acquisitions In Q4 2020 (Link)

Top Developments

1. Webster Equity’s Bristol Hospice Preps Sale Process. Bristol Hospice, an acquisitive hospice platform of scale owned by Webster Equity, will soon hit the market, per reporting from PE Hub, whose sources placed its EBITDA in the mid-to-high-$70 million range.

Bristol Hospice operates 35 locations across 10 states, and has completed a reported 14 acquisitions since Webster’s investment in November 2017, including 9 last year. It will likely command a high multiple as one of few available hospice platforms of scale in an environment of continued private equity interest in the hospice space, driven in part by an aging population and increasing hospice utilization.

Recent acquisitions in the hospice space include Addus HomeCare’s purchase of Queen City Hospice from Stonehenge Partners and H.I.G Capita’s acquisition of St. Croix Hospice from Vistria Group at a reported mid-teens EBITDA multiple.

The PE Hub article (subscription required) can be found here.
Additional reporting from Hospice News is here.

2. Physician Medical Group M&A Peaked in Fourth Quarter for 2020. Physician group M&A in Q4 2020 couldn’t quite match the year-earlier period’s total, but with 60 publicly announced transactions the quarter set the pace for 2020 overall and indicated a strong 2021, per data from HealthCareMandA.com reported by Healthcare Finance News. Private equity continued its outsized role, accounting for almost three-quarters of the announced deals in Q4, per the report.

Article: Link

3. Centene CEO: Behavioral Health ‘Has to Be Integrated’ Insurer Centene’s CEO Michael Neidorff has made the case for integrated, holistic care, following Centene’s plan to acquire Magellan Health. Neidorff points to the potential for integrated behavioral and physical health services to lower costs and deliver better outcomes.

Arguments for the integration of behavioral and physical health are not new, but the Centene-Magellan tie-up certainly provides the scale and capability. The deal follows Anthem’s purchase last year of Beacon Health Options, another behavioral healthcare provider.

For more on behavioral health, download GHA’s “The State of the Outpatient Mental Healthcare Practice,” covering rising mental health needs, patient access issues, reimbursement challenges, and more, here.

Article: Link

Week of 1/11-1/15/21

Top Deals

1. CareMetx, General Atlantic and The Vistria Group Announce Strategic Growth Partnership. General Atlantic will become the majority owner of CareMetx, which provides commercialization services for specialty pharma, biotech and device manufacturers. Other pharma commercialization service providers recently acquired include YourEncore (by Advarra), Precision Medicine Group (by Blackstone), and Two Labs (by Envision Pharma Group).

In this case, the seller was The Vistria Group, which has been the majority shareholder of CareMetx since 2017 and will maintain a “significant” position via a reinvestment through its third fund. PE Hub reports that Vistria will make an ~4.8x return on its initial investment.

Press release: Link

PE Hub reporting: Link

2. Talkspace to Merge with Hudson Executive Investment Corp., Forming the Only Publicly Traded Pure Play Virtual Behavioral Health Company. Just a couple of months after reports surfaced that Talkspace was working with an advisor on a potential sale, the news broke that the digital and virtual behavioral healthcare company would go public by merging with a SPAC sponsored by Hudson Executive Capital LP.

The deal values Talkspace at an initial enterprise value of $1.4 billion. It has no doubt benefited from the pandemic, which has resulted in a surge of demand for both telehealth and mental health services, with a recent study finding that the boom in telehealth usage early on in the pandemic resulted not from COVID symptoms but from behavioral health diagnoses.

While Talkspace is a “pure play” virtual behavioral health company, other providers are moving quickly into this space. Amwell is reportedly considering a behavioral health acquisition, while Hims & Hers has added mental health to its suite of telehealth services.

Press release: Link

3. Global Nephrology Solutions Receives Strategic Growth Investment from Audax Private Equity. Audax has had a busy start to this year, with a few platform transactions already. This particular deal establishes one of, if not the only, private equity-backed nephrology organizations. Global Nephrology Solutions boasts more than 300 providers and 500 employees supporting physicians across 10 states. It will be interesting to see if – and how quickly – other platform deals are announced in this specialty.

Given that more than 37 million Americans live with kidney disease, as cited in the press release, there is a strong demand profile for this specialty. Staffing shortages – a key challenge in this area – may also boost the value of large existing nephrology practices.

Press release: Link

Honorable mentions (deals):

  • South Florida ENT Associates and Texas ENT Specialists Join Forces as a Combined Entity Backed by Audax Private Equity (Link)
  • Linden Capital Partners and Audax Private Equity Invest in StatLab Medical Products (Link)
  • United Urology Group® Expands Footprint in Arizona with Newest Affiliates, Arizona Institute of Urology and Urological Associates of Southern Arizona (Link)
  • One GI Expands Mississippi and Tennessee Presence by Welcoming Associates in Gastroenterology and Gastroenterology Associates and Endoscopy Center of North Mississippi (Link)
  • Solaris Health Partners with MidLantic Urology Partners (Link)
  • Assured Healthcare Partners (AHP) Announces Partnership with Allied Digestive Health (ADH) (Link)

Top Developments

1. Stark Law and Anti-Kickback Statute Reform: Six Key Insights for Private Equity Healthcare Affiliations. Long-anticipated recent changes to the Stark Law and Anti-Kickback Statute – made to conform these rules more to a value-based care world – have generated plenty of interest and press. In this summary and analysis of the changes, McGuireWoods indicates, crucially, that all organizations currently in compliance will remain that way and that “no action is needed at this time for healthcare providers to maintain compliance with these federal fraud and abuse laws.” Among the other interesting takeaways are that “fewer transactions are expected to necessitate disclosure through the Stark Law Self-Referral Disclosure Protocol” and that “the final rules provide new ways to protect previously problematic arrangements under the Stark Law’s strict liability status.”

Read the full analysis here.

2. JPM21: Oak Street Health, One Medical CEOs Explain How Healthcare Models Can Actually Scale. We’ve seen a lot of interest in value-based primary care (see last week’s recap), and so it’s important to see how entities such as Oak Street Health are approaching their expansion plans. Consistency appears to be the key theme here, with Oak Street pointing out a “consistent, branded feel to [its] locations” and that they have “the same staffing ratios with standardized training.” As for those locations? Oak Street favors a retail-like model in high-traffic locations, rather than a medical office building.

Article: Link

3. The Big Four: The Table Is Set for a New Center of Gravity in Healthcare Put aside Oak Street Health and its peers for a moment. The real “center of gravity” in healthcare, per Paul Keckley, is currently occupied by Amazon, Walmart, Optum and CVS. These four share a few similarities, per the analysis, including a commitment to reducing healthcare costs, expertise in B2C (business-to-consumer) relationships – with an expanding primary care footprint, a focus on employers as “gatekeepers,” and huge market caps.

Notably, Keckley sees Amazon as the real winner of the disbanded Haven venture, and notes that there’s a strong opportunity for private equity firms, flush with cash, to create mega-competitors within the next couple of years.

Article: Link

Week of 1/4-1/8/21

Top Deals

1. UnitedHealth to Purchase Change Healthcare for $8 Billion. UnitedHealth will pay $25.75 per share in cash – a 41% premium over Change Healthcare’s closing price the day before the deal’s announcement – to acquire Change Healthcare, which is 20% owned by the Blackstone Group. Change Healthcare, a leading data analytics and revenue cycle management company based in Nashville, will be combined with UnitedHealth’s OptumInsight. Per reporting from Modern Healthcare, this will boost its provider business, which currently accounts for 35% of OptumInsights’ revenue.

Bloomberg article: Link

Modern Healthcare reporting: Link

2. Varsity Healthcare Partners Completes Significant Growth Investment in Peak Dental Services. A new platform deal in the dental space, with Varsity picking up Peak Dental Services, a fast-growing dental services organization that has 35 locations in Colorado supporting more than 65 dentists. Peak will use the partnership to grow with de novo clinics and acquisitions not only in Colorado but into adjacent markets. For Varsity, this adds to a healthcare portfolio that includes platforms in pediatric home health, gastroenterology, and orthopedics, among others.

Press release: Link

3. Kinderhook Invests $105 Million in AbsoluteCARE, a Leading Value-Based Primary Care Provider. This is the 16th healthcare services platform for Kinderhook Industries, which has invested $105 million into AbsoluteCARE, a value-based integrated healthcare provider currently operating out of 5 facilities in Atlanta GA, Baltimore MD (2), Prince George’s County MD and Philadelphia PA. This is the latest indication of burgeoning interest in value-based primary care providers, as Q4 2020 saw a spate of transactions, including:

  • A Deerfield-sponsored SPAC making a deal with CareMax Medical Centers and IMC Health;
  • Sun Capital Partners acquiring Miami Beach Medical Group from Gauge Capital;
  • Arsenal Capital Partners buying Best Value Healthcare; and
  • Cano Health merging with SPAC Jaws Acquisition Corp.

Press release: Link

Honorable mentions (deals):

  • Centene Signs Definitive Agreement to Acquire Magellan Health (Link)
  • AmerisourceBergen and Walgreens Boots Alliance Announce Strategic Transaction (Link)
  • Integrated Oncology Network Announces Strategic Partnership with Southwest Urology (Link)
  • One GI Expands Mississippi and Tennessee Presence by Welcoming Associates in Gastroenterology and Gastroenterology Associates and Endoscopy Center of North Mississippi (Link)
  • Southern Scripts Accelerates Expansion with Water Street Healthcare Partners (Link)
  • ENT Partners Announces Acquisition of Arlington ENT – Head & Neck and Facial Plastic Surgery (Link)

Top Developments

1. Atul Gawande: To Fix Our Broken Healthcare System, Start with Primary Care. In this interview with Fast Company, Atul Gawande talks about the now-disbanded Haven, as well as trends in healthcare business. A few key quotes:

  • “I have a rule of thumb, which is that you have a variety of things that you need to pull together to make things happen to change healthcare. You need access to the patients, you need access to the clinicians, you need access to the incentives that guide the patients and the clinicians, and you need access to data. Nobody has all four… Your choices are you’re either small and have control of all four or to get to scale you have to learn to partner.”
  • “I think [the consumerization of healthcare] is a natural consequence of weakened primary care. And it is extremely damaging to the long term health of people… Having someone who can follow you over time and bring you the powers of what science is discovering can save your life years in advance. When you bounce around the system, you miss out on that opportunity.”
  • “We’ve only had about a decade of really bringing tech to changing delivery in healthcare. We have 30, 40 years of doing that in retail. We haven’t even learned how to make innovation organizations that really know how to do this well in healthcare.”

Article: Link

2. Private Equity Sees Robust Markets in Healthcare. This article recaps a recent webinar hosted by Bass, Berry & Sims in which panelists reported a focus on digital tech, home healthcare, and value-based care (see above), with the pandemic cited as a tailwind for these areas. Other categories noted as major focus areas include “high-cost specialties targeting distinct populations – women, LGBTQ people, those with autism, and kidney patients among them,” while anything with a technology component is commanding “Covid-proof premiums.” PE investors are wary of areas that struggled more during the pandemic, including hospitals, nursing homes, dental, FFS- and volume-based providers, and those reliant on elective procedures.

Article: Link

3. Envision, UnitedHealthcare Break Ties: 5 Things to Know Negotiations between physician staffing giant Envision Healthcare and UnitedHealthcare broke down last year, and Envision is no longer in UnitedHealthcare’s provider network as of January 1st. Envision blames UnitedHealthcare for the break, claiming that it has been cutting reimbursement rates (numerous sources have similarly alleged such rate pressure from UnitedHealthcare, which canceled its contracts with TeamHealth last year). For its part, UnitedHealthcare has argued that Envision’s reimbursement rates are 3 times higher than their median rate.

This is the second time the companies have feuded: in December 2018 following legal battles they agreed to a contract extension for 2019; at the time, UnitedHealthcare had claimed that Envision’s reimbursement rates were twice the national average.

Becker’s Healthcare article: Link
Additional reporting from Fierce Healthcare: Link