Private Equity Healthcare Acquisitions – November 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 or announced during November 2021. We will continue to track acquisitions on a monthly basis.

See October 2021 acquisitions here.

Athenahealth – Hellman & Friedman and Bain Capital

In a $17 billion deal, private equity firms Hellman & Friedman (H&F) and Bain Capital announced they will acquire healthcare software company Athenahealth. It is one of the largest healthcare buyouts of the year.[1]

Athenahealth is owned by private equity firm Veritas Capital and hedge fund Elliott Investment, which took the company private for $5.7 billion in 2018.[2]

This is the second major healthcare buyout for H&F this year, which also participated in the $34 billion buyout of Medline Industries this summer. The Medline buyout is largest deal of its kind since the 2008 financial crisis and includes almost $15 billion in debt.[3]

Athenahealth’s software includes tools for electronic health records (EHR) and medical billing and collections, also known as revenue cycle management (RCM).  RCM companies specialize in the collection of medical debt, a service that cash-strapped hospitals pay to outsource.[4] Athenahealth currently partners with more than 140,000 hospitals and ambulatory care providers in every US state.[5]

Private equity firms are increasingly investing in RCM companies; in 2021, there were at least 43 private equity acquisitions of companies that do revenue cycle management valued at $21.4 billion. This compares to 2011, when there were 20 deals valued at $7.4 billion.[6]

Source: Pitchbook, Inc.

While abuses pervade the medical debt collection industry, private equity firms’ ownership of RCM companies raises particular concern. Earlier this year, an analysis by PESP of Consumer Financial Protection Bureau (CFPB) data found that private equity-owned RCM companies face high numbers of debt-related consumer complaints, particularly related to attempts to collect a debt that is not owed, either because it had already been paid, was the wrong amount, or targeted the wrong individual.

See: How Private Equity Profits from Aggressive Medical Debt Collection

Innovacare – Bain Capital

Bain Capital will acquire Innovacare, a physician practice management group with 30 medical clinics across Florida.[7]

Bain’s acquisition of the company is part of a wave of private equity investment in management service organizations (MSO), where private-equity-owned MSOs take over the business functions of physicians’ practices. This often includes management, billing, staffing, credentialing, accounting, and other services. Private equity firms typically acquire or create a platform company, which then makes add-on acquisitions of smaller providers with the goal of expanding regionally and beyond. Physician specialty groups, such as dermatology, orthopedics, and anesthesia, in particular have seen substantial private equity investment.[8]

Bain Capital has a checkered history of healthcare company ownership. For example, Bain used to own pediatric home health company Aveanna Healthcare with private equity firm J. H. Whitney. A 2019 investigation by Bloomberg News found that Avenna was cited for numerous safety violations while under Bain and Whitney’s ownership, with at least seven children dying under its care in just one year. Aveanna employees interviewed by Bloomberg said that company pressure to make a profit jeopardized the quality of care. Employee bonuses at Aveanna were overwhelmingly (90%) tied to earnings growth, patient care hours provided and cash collection, while patient satisfaction and clinical outcomes together counted for just 10%.[9]

Bain also owned CRC Group, a behavioral healthcare company that ran addiction treatment and “troubled teen” programs across the US. Under Bain’s ownership CRC and its subsidiary, Aspen Education Group, faced allegations of widespread abuse and neglect at its facilities.

Private Equity Buyouts

Private Equity Add-On Acquisitions

(Image from https://selectinsuregroup.com/health-insurance/)

[1]https://www.nytimes.com/2021/11/22/business/athenahealth-hellman-friedman-bain-capital.html

[2]https://www.cnbc.com/2021/11/20/bain-capital-hellman-are-reportedly-near-an-athenahealth-buyout-deal.html

[3]https://www.ft.com/content/5c1e4817-0a42-4de5-a281-baad2149a40f

[4]https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3593887 pg. 78.

[5]https://www.healthcareitnews.com/news/athenahealth-bought-private-equity-firms-hellman-friedman-bain-capital

[6] Pitchbook, accessed December 2, 2021.

[7]https://innovacarehealth.com/about/

[8]https://www.modernhealthcare.com/physicians/specialty-physician-groups-attracting-private-equity-investment

[9]https://www.bloomberg.com/news/features/2019-10-22/death-and-deals-sick-children-suffer-private-equity-profits