Private Equity Healthcare Acquisitions – November 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 November 2022. We will continue to track acquisitions on a monthly basis.

See October 2022 acquisitions here.

Grant Avenue Capital’s QHR Health Will Partner to Manage Rhode Island Hospitals

Rhode Island safety net hospital system CharterCare Health has announced it has agreed to be acquired by the nonprofit Centurion Foundation with consulting services provided by private-equity-owned hospital management company QHR Health, pending regulatory approval.[1]

CharterCare, which includes Our Lady of Fatima Hospital, Roger Williams Medical Center, and several health centers in the Rhode Island, is currently owned by Prospect Medical Holdings.[2]  Prospect was owned by private equity firm Leonard Green & Partners between 2010 and 2021.[3]

Leonard Green and Prospect’s minority owners have come under fire for siphoning hundreds of millions of dollars in fees and debt-funded dividends from the hospital chain even as many of its hospitals suffered deteriorating financial conditions and quality concerns.[4]

See our November 2022 report: How Private Equity Raided Safety Net Hospitals and Left Communities Holding the Bag

When Leonard Green tried to sell its stake to Prospect to the chain’s minority owners in 2020, Rhode Island Attorney General Peter Neronha delayed the sale pending an investigation into the private equity firm’s financial practices and issued a highly critical report. After a year-long contentious fight—including a threat by Prospect to shut the two Rhode Island hospitals—Neronha approved the sale with the condition that Leonard Green and the new majority owners commit $80 million to an escrow account to ensure the hospital stay open.[5]

Now, the announced partnership between QHR and Centurion Foundation formed to acquire Prospect’s Rhode Island hospitals raises red flags. Centurion has announced that it will acquire CharterCare and that QHR will provide “ongoing consulting support” to the system. It is currently unclear how involved QHR will be in managing the hospitals if the transaction is approved.[6]

Private equity firm Grant Avenue Capital acquired QHR when it spun off from Quorum Health Corporation in June 2021 after Quorum filed for bankruptcy.[7] QHR, which enters partnerships with independent hospitals to provide a range of management services,[8] calls itself the “largest hospital management firm in the U.S.[9] By forming these partnerships instead of outright acquiring the hospitals, QHR can harvest profits from nonprofit and public healthcare providers that may be otherwise inaccessible to private equity. These management relationships may also allow QHR to elude the regulatory scrutiny paid in some states to changes in ownership, even if it is ultimately responsible for managing a hospital’s operations.

The structure of the proposed acquisition – with Centurion as the sole signing party and QHR acting as consultant[10] – may mean that QHR is not subject to the same level of disclosure and review as a traditional hospital buyer in Rhode Island.

As the Rhode Island Health Department and Office of the Attorney General review Centurion’s application to acquire CharterCARE, it will be critical that the regulators scrutinize both Centurion and QHR to ensure that, in the wake of Leonard Green’s looting of Prospect, another private equity firm cannot take advantage of Rhode Island’s safety net hospitals.

Grant Avenue’s Entry into Clinical Trials

Formed in May 2019, Grant Avenue is a relatively new private equity firm focused on middle-market healthcare companies.[11] CharterCARE is not the firm’s only new deal announced this month; it also announced its launch of Helios Clinical Research, a healthcare company that runs clinical trials. Grant Avenue created Helios by rolling up 20 smaller trial sites, capitalizing on the highly fragmented clinical research industry.[12]

The recent trend of private equity roll-ups of clinical research companies made headlines in December. In KHN’s article “The Business of Clinical Trials Is Booming. Private Equity Has Taken Notice”, PESP’s Michael Fenne points out the advantage of clinical research firms beefing up their data capacity: “It kind of ties into access and control of patients,” Fenne said. “Technology makes accessing patients, and then also having more reliable information on them, easier.”[13]

Buyouts

Add-on Acquisitions

Growth Investments 

[1] CharterCARE. “CharterCARE Health Partners to Return to Nonprofit Status; The Centurion Foundation Signs Definitive Agreement | CharterCARE.” Press release, November 22, 2022. https://www.chartercare.org/news/chartercare-health-partners-to-return-to-nonprofit-status/.

[2] CharterCARE. “CharterCARE Health Partners to Return to Nonprofit Status; The Centurion Foundation Signs Definitive Agreement | CharterCARE.” Press release, November 22, 2022. https://www.chartercare.org/news/chartercare-health-partners-to-return-to-nonprofit-status/.

[3] O’Grady, Eileen. “How Private Equity Raided Safety Net Hospitals and Left Communities Holding the Bag.” Private Equity Stakeholder Project, November 2022. https://pestakeholder.org/wp-content/uploads/2022/11/Prospect_Primer_Nov-2022.pdf.

[4] O’Grady, Eileen. “How Private Equity Raided Safety Net Hospitals and Left Communities Holding the Bag.” Private Equity Stakeholder Project, November 2022. https://pestakeholder.org/wp-content/uploads/2022/11/Prospect_Primer_Nov-2022.pdf.

[5] Laura Cooper, “Rhode Island Regulator Approves Hospital Sale,” Wall Street Journal, June 1, 2021, https://www.wsj.com/articles/rhode-island-regulator-approves-hospital-sale-11622591539.

[6] Gagosz, Alexa. “Roger Williams, Fatima Hospitals’ Owners May Be Acquired by Nonprofit Group – The Boston Globe.” Boston Globe, November 22, 2022. https://www.bostonglobe.com/2022/11/22/metro/roger-williams-fatima-hospitals-owners-may-be-acquired-by-nonprofit-group/.

[7] Kara Hartnett, “Quorum Sells Consulting Arm to NYC Firm,” Nashville Post, accessed September 19, 2022, https://www.nashvillepost.com/business/health_care/quorum-sells-consulting-arm-to-nyc-firm/article_3605d49e-c300-11eb-a939-3f746ce4a35f.html ; “QHR Health Becomes Independent Company Through Acquisition by Grant Avenue Capital,” QHR Health, June 1, 2021, https://qhr.com/news/qhr/qhr-health-becomes-independent-company-through-acquisition-by-grant-avenue-capital/.

[8] QHR Health. “Strategic Hospital Management Services.” Accessed September 26, 2022. https://qhr.com/solutions/hospital-management/.

[9] “Strategic Hospital Management Services,” QHR Health, accessed September 26, 2022, https://qhr.com/solutions/hospital-management/.

[10] Gagosz, Alexa. “Roger Williams, Fatima Hospitals’ Owners May Be Acquired by Nonprofit Group – The Boston Globe.” Boston Globe, November 22, 2022. https://www.bostonglobe.com/2022/11/22/metro/roger-williams-fatima-hospitals-owners-may-be-acquired-by-nonprofit-group/.

[11] Grant Avenue Capital. “Grant Avenue Capital Launches Healthcare Private Equity Firm.” Press release, May 21, 2019. https://www.prnewswire.com/news-releases/grant-avenue-capital-launches-healthcare-private-equity-firm-300853188.html.

[12] Hamlin, Jessica. “Exclusive: Grant Avenue Capital Launches Helios Clinical Research | PitchBook.” PitchBook News, November 17, 2022. https://pitchbook.com/news/articles/grant-avenue-helios-clinical-launch.

[13] Pradhan, Rachana. “The Business of Clinical Trials Is Booming. Private Equity Has Taken Notice.” Kaiser Health News, December 2, 2022. https://khn.org/news/article/business-clinical-trials-private-equity/.