Private Equity Health Care Acquisitions – October 2024

In light of continued investor interest in healthcare and the risks associated with private equity ownership of healthcare companies, the Private Equity Stakeholder Project is tracking private equity-backed healthcare acquisitions. Below is a list of private equity healthcare buyouts, growth investments, and add-on acquisitions completed during October 2024. We will continue to track acquisitions on a monthly basis.

See September 2024 acquisitions here.

Major Deal for Iowa Nursing Homes

Private equity firm Cascade Capital Group has acquired one of the largest nursing home chains in Iowa for approximately $85 million. The 29 facilities involved in the transaction represent 7% of the 410 nursing homes operating in the state.[1]

The seller is ABCM Corporation and as of 2023, had more than 3,000 employees.[2]

Cascade and its management affiliate, Legacy Healthcare,[3] already own and operate 57 other nursing facilities in Illinois, South Dakota, and Iowa.[4]

The Center for Medicare Advocacy (CMA) analyzed CMS quality and compliance data for the nursing homes Cascade is acquiring and compared it with data for the facilities Cascade already owns and operates. CMA found that Cascade/Legacy’s facilities had “on average, considerably lower health inspection and overall ratings, lower nurse staffing ratings, more abuse citations, higher federal civil money penalties, and more denials of payment for new admissions.”[5]

In particular, CMA noted that Cascade/Legacy facilities have, on average, paid $83,993.77 in federal fines over the most recent three-year period, which is almost five times the national average.[6]

ZT Corporate Adds to its Hospitals in Texas

Private equity firm ZT Corporate announced that it is acquiring STAT Specialty Hospital, which includes three micro hospitals and one free standing emergency center in Texas.[8]

The deal adds to ZT’s already robust presence in Texas. Through its healthcare platform, Altus Community Healthcare, ZT owns 27 freestanding emergency rooms and micro-hospitals under various brands, including Altus Emergency Centers, Neighbors Emergency Center, Austin Emergency Center, and Exceptional Emergency Center. The new acquisitions bring ZT’s total roster to 31 facilities. It claims to be the largest emergency services provider in Texas.[9]

Earlier this year, ZT sold off the real estate for seven of Altus’ acute care facilities in Texas to a real estate investment trust (REIT) and leased it back. ZT said that the deal would allow it to de-lever Altus’ balance sheet and pay off debt.[10]

ZT’s acquisition contributes to private equity’s outsized footprint in Texas hospitals; as demonstrated in PESP’s Private Equity Hospital Tracker, Texas has more private equity-owned hospitals than any other state.

The deal also furthers private equity inroads in the growing market for freestanding emergency departments (FSEDs). FSEDs are emergency medical facilities that are distinct from hospitals or inpatient services.[11] FSEDs have proliferated in recent years – in 2016 they accounted for 11% of all emergency departments, compared with just 1% in 2001 (more recent data is unavailable).[12]

Proponents of FSEDs tout their convenience and faster wait times compared with traditional hospital-based emergency rooms. However, critics point out that the costs for care at FSEDs are exorbitant, which could lead to higher insurance premiums.[13] A study of Texas FSEDs by UnitedHealth Group found that average cost of treating common conditions at an FSED is 22 times more than at a physician office and 19 times more than at an urgent care center.[14]

Resources

[1] Clark Kauffman, “Health Care New owner of 29 Iowa nursing homes has history of regulatory violations,” Iowa Capital Dispatch, October 25, 2024. https://iowacapitaldispatch.com/2024/10/25/new-owner-of-29-iowa-nursing-homes-has-history-of-regulatory-violations/

[2] Clark Kauffman, “Health Care Private-equity firm buys 29 Iowa nursing homes in massive $85 million deal,” Iowa Capital Dispatch, October 21, 2024. https://iowacapitaldispatch.com/2024/10/21/private-equity-firm-buys-29-iowa-nursing-homes-in-massive-85-million-deal/

[3] “CASCADE CAPITAL GROUP ACQUIRES 16 FACILITIES IN SOUTH DAKOTA,” Cascade Capital Group website, July 1, 2019. https://cascade.pointbcommunications.com/2019/07/01/cascade-capital-group-acquires-16-facilities-in-south-dakota/

[4] Legacy Healthcare website, accessed November 5, 2024. https://www.legacyhc.com/collections/

[5] Center for Medicare Advocacy, “When Private Equity Takes Over Nursing Facilities, Residents Beware!” October 31, 2024. https://medicareadvocacy.org/when-private-equity-takes-over-nursing-facilities-residents-beware/

[6] Center for Medicare Advocacy, “When Private Equity Takes Over Nursing Facilities, Residents Beware!,” October 31, 2024. https://medicareadvocacy.org/when-private-equity-takes-over-nursing-facilities-residents-beware/ ; “LTCCC Alert: New Data on Nursing Home Citations and Penalties,” The Long Term Care Community Coalition, July 18, 2024. https://nursinghome411.org/alert-citations-penalties/

[7] See for example: “Atul Gupta, Sabrina T. Howell, Constantine Yannelis, Abhinav Gupta. “Does Private Equity Investment in Healthcare Benefit Patients? Evidence from Nursing Homes,” NBER, February 13, 2021.  https://bfi.uchicago.edu/working-paper/does-private-equity-investment-in-healthcare-benefit-patients-evidence-from-nursing-homes/; and: Peter Whoriskey and Dan Keating, “Overdoses, bedsores, broken bones: What happened when a private-equity firm sought to care for society’s most vulnerable,” Washington Post, November 25, 2018.  https://www.washingtonpost.com/business/economy/opioid-overdoses-bedsores-and-broken-bones-what-happened-when-a-private-equity-firm-sought-profits-in-caring-for-societys-most-vulnerable/2018/11/25/09089a4a-ed14-11e8-baac-2a674e91502b_story.html

[8] ZT Corporate, “ZT Corporate Expands Healthcare Portfolio With Acquisition of South Texas’ STAT Specialty Hospital and Emergency Center,” Businesswire, October 28, 2024. https://www.businesswire.com/news/home/20241028353329/en/ZT-Corporate-Expands-Healthcare-Portfolio-With-Acquisition-of-South-Texas’-STAT-Specialty-Hospital-and-Emergency-Center

[9] Altus Community Healthcare website, accessed November 5, 2024. https://altushc.com/ ; ZT Corporate portfolio, accessed November 5, 2024. https://portfolio.ztcorporate.com/healthcare-portfolio/

[10] ZT Corporate, “ZT Corporate Announces Successful Institutional Exit of Healthcare Real Estate,” Businesswire, April 15, 2024. https://www.businesswire.com/news/home/20240415425134/en/ZT-Corporate-Announces-Successful-Institutional-Exit-of-Healthcare-Real-Estate

[11]https://www.hhs.texas.gov/providers/health-care-facilities-regulation/freestanding-emergency-medical-care-facilities

[12] Alexis Kayser, “The rise of the freestanding ED,” Becker’s Hospital Review. November 17, 2023. https://www.beckershospitalreview.com/capital/the-rise-of-the-freestanding-ed.html

[13] Phil Galewitz, “‘Wildfire’ Growth Of Freestanding ERs Raises Concerns About Cost,” KFF News, July 15, 2013. https://kffhealthnews.org/news/stand-alone-emergency-rooms/

[14] “Freestanding Emergency Departments,” UnitedHealth Group, December 2017. https://www.unitedhealthgroup.com/content/dam/UHG/PDF/2017/Freestanding-ER-Cost-Analysis.pdf