Private Equity Health Care Acquisitions – October 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 October 2021. We will continue to track acquisitions on a monthly basis.

See September 2021 acquisitions here.

Dental Acquisitions

Private equity firms acquired at least ten dental services and supplies companies in October 2021, continuing a growing trend of increased private equity investment in the sector.

Shore Capital Partners, through its orthodontic practice management company Southern Orthodontic Partners (SOP), acquired three companies in Illinois and Missouri with a total of seven locations.[1]

SOP has grown quickly – from five orthodontic practice locations when it launched in 2020 to 31 locations across seven states: Texas, Florida, Georgia, Virginia, Tennessee, Illinois, and Missouri.[2]

Dental Acquisitions by PE Firms – October 2021

Western Dental, owned by New Mountain Capital, acquired Summit Dental Center and its seven practice locations in Texas. Western Dental is the largest dental chain in California, and has 343 locations across California, Nevada, Arizona, Texas and Alabama.[3] The company is the largest provider of dental services under Medicaid in California.[4]

New Mountain Capital has owned Western Dental since 2012 when it acquired the company from private equity firm Court Square Capital Partners. New Mountain reportedly tried to sell Western Dental in 2019 but was unsuccessful.[5]

In August 2021, Western Dental agreed to pay up to $3 million to settle a class action lawsuit alleging that the company charged unlawful late fees. The alleged unlawful activity took place between 2014 and 2019, entirely under New Mountain’s ownership.[6]

In July 2020, Western Dental settled another class action lawsuit alleging that it sent unsolicited telemarketing text messages to consumers after they actively opted out.[7]

In addition to Western Dental, New Mountain also owns pediatric dental company Benevis (formerly known as Kool Smiles). New Mountain acquired Benevis out of bankruptcy in October 2020 after Benevis went through several other private equity owners and paid a $24 million settlement with the US Department of Justice for Medicaid fraud, including allegedly performing medically unnecessary root canals on babies.[8]

Earlier this year PESP released a report examining the impacts of private equity ownership of Dental Service Organizations (DSO) like Western Dental and Southern Orthodontic Partners, which contract with dentists and orthodontists to provide practice management services to dental practices.

PESP found that while DSOs still make up a relatively small portion of the overall US dental industry, private equity firms dominate the DSO market; 27 of the top 30 DSOs are private-equity-owned.[9]

The report raises concern about private equity’s growing footprint in the dental industry and impacts on patient care:

“The private equity investment model, which typically targets outsized returns over relatively short time horizons, may incentivize profit-seeking tactics that are harmful to patients. Payment structures between DSOs and dentists have been found to create perverse incentives that lead to overtreatment of patients, misleading advertising schemes, Medicaid fraud, and other problematic practices in order to reach revenue targets set by DSOs and maximize profit.”[10]

See our July 2021 report “Deceptive Marketing, Medicaid Fraud, and Unnecessary Root Canals on Babies: Private Equity Drills into the Dental Care Industry”

October PE Buyouts

OctoberPE Add-on Acquisitions

[1]https://www.yahoo.com/now/southern-orthodontic-partners-sop-announces-165200403.html

[2]https://www.businesswire.com/news/home/20210903005384/en/Southern-Orthodontic-Partners-Expands-to-Dallas-With-Two-New-Partnerships

[3]https://www.brident.com/en-us/about-us/news-room-videos/summit-dental-center-in-texas-joins-western-dental-and-brident ; https://www.westerndental.com/en-us/about-us

[4]https://webcache.googleusercontent.com/search?q=cache:-2NJHEtjX60J:https://www.pehub.com/new-mountains-western-dental-returns-to-auction-block/+&cd=4&hl=en&ct=clnk&gl=us

[5]https://webcache.googleusercontent.com/search?q=cache:-2NJHEtjX60J:https://www.pehub.com/new-mountains-western-dental-returns-to-auction-block/+&cd=4&hl=en&ct=clnk&gl=us

[6] Settlement: https://westerndentalsettlement.com/Portals/0/Document%20Files/2021.08.09%20Final%20Approval%20Order.pdf?ver=2021-08-10-083830-000 pg. 7.

Complaint: https://westerndentalsettlement.com/Portals/0/Document%20Files/Consolidated%20Complaint.pdf?ver=2021-01-07-081005-000

[7] Settlement: https://www.govinfo.gov/content/pkg/USCOURTS-cand-3_19-cv-00612/pdf/USCOURTS-cand-3_19-cv-00612-1.pdf

[8]https://www.justice.gov/opa/pr/dental-management-company-benevis-and-its-affiliated-kool-smiles-dental-clinics-pay-239#:~:text=Under%20the%20agreement%2C%20Benevis%20and,dental%20services%20performed%20on%20children

[9]https://pestakeholder.org/wp-content/uploads/2021/08/PESP_DSO_July2021.pdf

[10]https://pestakeholder.org/report/deceptive-marketing-medicaid-fraud-and-unnecessary-root-canals-on-babies-private-equity-drills-into-the-dental-care-industry/