Private Equity Health Care Acquisitions – August 2022

In light of the growing investor interest in healthcare and the risks associated with private equity ownership of healthcare companies, the Private Equity Stakeholder Project will be tracking private equity-backed healthcare acquisitions. Below is a list of private equity healthcare buyouts and add-on acquisitions completed or announced during August 2022. We will continue to track acquisitions on a monthly basis.

See July 2022 acquisitions here.

Apollo Global Management Acquires Psychiatric Hospitals and Gastroenterology Chain

This month, private equity firm Apollo Global Management made two major acquisitions: Springstone, a chain of behavioral health hospitals, and GI Alliance, the largest gastroenterology practice in the US.

Apollo-Owned LifePoint Health Acquiring Behavioral Health Chain Springstone

Apollo-owned rural hospital system LifePoint Health is acquiring psychiatric hospital chain Springstone.[1] The acquisition continues Apollo’s streak in buying up and combining large providers into the LifePoint platform.

Springstone operates 18 behavioral health hospitals and 35 outpatient locations in nine states: Arizona, Colorado, Indiana, Kansas, North Carolina, Ohio, Oklahoma, Texas, and Washington.[2]

Springstone is currently owned by healthcare REIT Medical Properties Trust (MPT), which will continue to own and lease the real estate to the hospitals.[3] MPT had acquired Springstone from private equity firm Welsh, Carson, Anderson, & Stowe (WCAS) in June 2021 and separated out the real estate from the operating business.[4] WCAS created Springstone in 2010 as a single newly constructed psychiatric hospital and has constructed each new facility since.[5]

This is not the first time LifePoint and MPT have partnered; in November 2019, LifePoint executed a sale-leaseback transaction with MPT, selling 10 acute care hospitals to the REIT for $700 million and leasing them back.[6]

The acquisition is a significant expansion of LifePoint’s behavioral health services, which currently includes 30 behavioral health units in various community hospitals and three inpatient behavioral health facilities in Texas and Washington.[7]

LifePoint has grown substantially since Apollo acquired it in 2018 and merged it with another hospital chain, RegionalCare Hospital Partners.[8] Then in December 2021, Apollo acquired acute care hospital chain Kindred Healthcare and merged it with LifePoint. As part of the transaction, LifePoint shifted some of the acquired facilities and some its existing hospitals into a new company called ScionHealth, which is also controlled by Apollo.[9]

See PESP’s previous research on LifePoint:

• Private Equity Firms Reap Payouts After Hospital Chain Received $1.6 Billion in CARES Act Support (September 2021)
• Apollo Global Management Completes Merger of Kindred Healthcare and LifePoint Health, Shifts Some Hospitals to New Company (January 2022)

“Independent hospital systems have greater difficulty weathering prolonged periods of financial stress,’’ Apollo wrote to its investors in May 2020. “A consolidation strategy will provide meaningful upside for Apollo funds’ investment.’’[10]

With LifePoint and Scion together, Apollo owns over 140 hospitals and 170 outpatient and post-acute facilities. The acquisition of Springstone adds another 18 behavioral health hospitals and 35 outpatient locations.[11]

LifePoint’s building out its behavioral health offerings echoes a broader trend of private equity increasingly investing in the sector. PESP has found that private equity has a troubling track record in investing in behavioral health where cost-cutting tactics at such as cutting staff, relying on unlicensed staff, and failing to maintain facilities, have been shown to create harmful outcomes for patients.[12]

See our reports on private equity in behavioral health:

• The Kids Are Not Alright: How Private Equity Profits Off of Behavioral Health Services for Vulnerable and At-Risk Youth (Feb 2022)
• Understaffed, Unlicensed, and Untrained: Behavioral Health Under Private Equity (September 2020)

Apollo Acquiring Major Gastroenterology Provider GI Alliance

Apollo also announced in August that it is acquiring a majority stake in GI Alliance, the largest gastroenterology practice in the US, for $785 million. A group of physicians will buy back the remaining 30% minority stake in the company from Waud Capital Partners.[13] GI Alliance employs roughly 700 physicians in 15 states.[14]

This is part of a trend of private equity is increasingly making investments in the broader digestive health market. According to a 2021 report by Physician Growth Partners, nearly 10% of the 14,000 gastroenterologists in the United States were partners or employed by a private-equity-owned company.[15]

When GI Alliance made several add-on acquisitions of smaller GI practices while still under Waud Capital’s ownership, PESP noted that several forces may be driving private equity investment in the sector:

“An aging population means more people are getting colonoscopies to screen for colorectal cancer, and for patients age 65 and older these screenings are covered entirely by Medicare. In 2021 the CDC lowered the recommended age for colorectal cancer screening from age 50 to 45,[16] in part due to increasing incidence of early-onset colorectal cancer in younger adults.[17]

These factors have increased demand for gastroenterology services, aggravating a shortage of gastroenterology providers. The Health Resources and Services Administration (HRSA) estimates that by 2025, the US will face a shortage of more than 1,600 gastroenterologists nationwide.[18]

Finally, the gastroenterology industry has historically been fragmented, creating opportunities for private equity firms to use platform companies to buy up and consolidate providers, as Waud Capital has done over the four years since it acquired GIA.”[19]

August 2022 Buyouts

August 2022 Add-On Acquisitions

August 2022 PE Growth/Expansion Investments

[1]https://www.businesswire.com/news/home/20220828005040/en/Medical-Properties-Trust-Announces-Agreement-for-LifePoint-Health-to-Acquire-Majority-Interest-in-Springstone

[2]https://springstone.com/locations/

[3]https://www.businesswire.com/news/home/20220828005040/en/Medical-Properties-Trust-Announces-Agreement-for-LifePoint-Health-to-Acquire-Majority-Interest-in-Springstone

[4]https://www.businesswire.com/news/home/20210615005735/en/Medical-Properties-Trust-to-Invest-950-Million-in-Behavioral-Health-Platform

[5]https://webcache.googleusercontent.com/search?q=cache:umozoEj0uEsJ:https://www.pehub.com/wcas-backed-springstone-seeks-1bn-plus-in-sale/&cd=4&hl=en&ct=clnk&gl=us

[6]https://www.businesswire.com/news/home/20191105005624/en/LifePoint-Health-Signs-Real-Estate-Agreement-with-Medical-Properties-Trust

[7]https://lifepointhealth.net/

[8]https://www.wsj.com/articles/lifepoint-health-agrees-to-apollo-buyout-1532347207?mod=article_inline

[9] “LifePoint Health Completes Kindred Healthcare Transaction,” December 23, 2021, https://lifepointhealth.net/news/2021/12/23/lifepoint-health-completes-kindred-healthcare-transaction.

[10] https://www.bloomberg.com/news/articles/2020-09-14/a-wall-street-giant-tapped-1-5-billion-in-federal-aid-for-its-hospitals

[11] Following the Kindred acquisition and spinoff of ScionHealth, LifePoint has around 65 community hospitals, 30 behavioral health and rehab hospitals and an additional 15 in the works, 170 outpatient and post-acute facilities and 50,000 employees.[11] ScionHealth consists of 79 hospital campuses in 25 states, including Kindred’s 61 long-term acute care hospitals and 18 of LifePoint’s community hospitals and associated health systems.

[12]https://pestakeholder.org/wp-content/uploads/2022/02/PESP_Youth_BH_Report_2022.pdf

[13]https://webcache.googleusercontent.com/search?q=cache:j2KsSJcfqMEJ:https://www.bloomberg.com/news/articles/2022-08-19/apollo-backs-2-2-billion-gastro-medical-practice-gi-alliance&cd=5&hl=en&ct=clnk&gl=us

[14]https://webcache.googleusercontent.com/search?q=cache:j2KsSJcfqMEJ:https://www.bloomberg.com/news/articles/2022-08-19/apollo-backs-2-2-billion-gastro-medical-practice-gi-alliance&cd=5&hl=en&ct=clnk&gl=us

[15]https://physiciangrowthpartners.com/gastroenterology-private-equity/#:~:text=While%20private%20equity’s%20presence%20in,a%20private%20equity%20backed%20platform.

[16]https://blogs.cdc.gov/cancer/2021/06/08/45-is-the-new-50-for-colorectal-cancer-screening/

[17]https://www.nejm.org/doi/full/10.1056/NEJMra2200869#:~:text=In%20the%20United%20States%2C%20the,2015%2C%20a%2063%25%20increase.

[18]https://bhw.hrsa.gov/sites/default/files/bureau-health-workforce/data-research/internal-medicine-subspecialty-report.pdf pg. 5.

[19]https://www.beckersasc.com/asc-transactions-and-valuation-issues/gastroenterology-an-emerging-trend-in-private-equity-healthcare-transactions.html