Private Equity Health Care Acquisitions – May 2021

In light of the growing investor interest in health care and the risks associated with private equity ownership of health care companies, the Private Equity Stakeholder Project will be tracking private equity-backed health care acquisitions. Below is a list of private equity health care buyouts and add-on acquisitions completed during May 2021. We will continue to track acquisitions on a monthly basis.

See April 2021 acquisitions here.

Community Psychiatry/Mindpath Care Centers— Centerbridge Partners, Leonard Green & Partners

Community Psychiatry, which is owned by private equity firms Leonard Green & Partners and Centerbridge Partners, has acquired Mindpath Care Centers. Community Psychiatry’s acquisition of Mindpath will double its size to over 900 employees at over 75 locations in California, Virginia, Georgia, North Carolina, South Carolina, Florida and Texas.[1]

Leonard Green and Centerbridge acquired Community Psychiatry in December 2020 from private equity firm New Harbor Capital. Since then, the company has replaced almost its entire executive team and begun acquiring and rolling up other mental health companies.[2]  In March, Community Psychiatry bought Harbor Psychologist, a psychiatric and psychological services company in Lakewood and Long Beach, California.[3]

Both Leonard Green and Centerbridge have come under fire for problems at other health care companies they own, raising questions about how they will ensure that quality of care at Community Psychiatry does not suffer under their ownership.

For example, Centerbridge owns the Mentor Network, which provides residential and other services to adults and children with intellectual and developmental disabilities. Mentor has come under fire for allegations of widespread abuse, neglect, and deaths in its foster care and group home programs. Yet despite profound quality issues, Centerbridge has collected almost half a billion dollars in debt-funded dividends from Mentor over the course of its two-year ownership.[4]

See: Private Equity Has Already Reaped Hundreds of Millions of Dollars of Debt-Funded Dividends from Health Care Companies in 2021

Leonard Green also owns multiple health care companies that have experienced declines in quality of care under its ownership. Over the course of its ten-year ownership of safety net hospital chain Prospect Medical Holdings, Leonard Green and minority owners collected over $650 million in debt-funded dividends despite the hospitals’ deteriorating conditions that jeopardized patient care.[5]Leonard Green also co-owns Aspen Dental with Ares Management, which has had numerous consumer complaints and allegations that its profit-driven business practices directly impacted patient care. Aspen has paid at least $1.7 million in settlements with state attorneys general since 2010.[6]

Private equity ownership of behavioral health companies has come under scrutiny for troubling impacts on patient care. The pursuit of outsized returns over short time horizons may lead to harmful and risky behavior, such as reducing staffing, relying on unlicensed or under-licensed providers, or pressure on staff to provide unnecessary and potentially costly services.[7]Industry analysts expect private equity to continue targeting behavioral health companies and driving acquisition activity in 2021, especially in specialties like autism services.[8]

See our September 2020 report: Understaffed, Unlicensed, and Untrained: Behavioral Health Under Private Equity

Given risks of private equity investment in behavioral health and Leonard Green and Centerbridge’s track records with other health care companies, Community Psychiatry’s growth merits substantial scrutiny.

Buyouts

Add-On Acquisitions

[1]https://www.bizjournals.com/sacramento/news/2021/05/12/community-psychiatry-doubles-with-acquistion.html#:~:text=Sacramento%2Dbased%20Community%20Psychiatry%20Management,Carolina%2Dbased%20MindPath%20Care%20Centers.

[2]https://bhbusiness.com/2021/02/05/former-dialysis-ceo-takes-the-reins-of-community-psychiatry-eyes-nationwide-expansion/

[3]https://www.psychcongress.com/article/community-psychiatry-management-acquires-harbor-psychologist

[4]https://pestakeholder.org/private-equity-has-already-reaped-hundreds-of-millions-of-dollars-of-debt-funded-dividends-from-health-care-companies-in-2021/

[5]https://pestakeholder.org/update-leonard-green-led-ownership-collected-658-million-from-safety-net-hospital-company-despite-challenges-commitment-to-regulators-to-forgo-dividends/

[6]https://pestakeholder.org/leonard-green-partners-reaps-repeated-payouts-from-health-care-companies/

[7]https://pestakeholder.org/wp-content/uploads/2020/09/PESP-behavioral-health-9-2020.pdf

[8]https://bhbusiness.com/2021/01/29/private-equity-to-fuel-behavioral-ma-in-2021-with-outpatients-models-driving-demand/