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

See July 2021 acquisitions here.

Women’s Health USA – Unified Women’s Healthcare (Altas Partners and Ares Management)

Unified Women’s Healthcare, which is owned by private equity firms Altas Partners and Ares Management, is acquiring Women’s Health USA. In a joint press release, the companies claim that the acquisition will create the largest physician practice management company for women’s health providers in the United States. [1]

Unified Women’s Healthcare (UWH) and Women’s Health USA are both physicians’ practice management companies in the women’s health sector.[2] The combined company will have over 900 locations in 17 states and the District of Columbia.[3]

Atlas and Ares are financing the acquisition $425 million deal with approximately $170 million in debt. Credit ratings agency Moody’s Investor Service estimates the transaction will bring UHW’s adjusted debt to EBITDA to 7.3x before declining toward 6.5x over the next year.[4] Historically, lending above 6x EBITDA has drawn regulatory scrutiny.[5]

This is the third add-on acquisition Atlas and Ares have made through UWH over last year. It acquired gynecological imaging company Mid-Atlantic Women’s Care in December 2020 and IVF company Colorado Center for Reproductive Medicine in July 2021.[6]

Private equity firms have increasingly been buying up women’s health and fertility companies. A 2020 Harvard study found between 2010 and 2019, 24 women’s health companies not previously owned by private equity firms were acquired by private equity firms. Acquisitions accelerated over that time, with 17 occurring between 2017 and 2019.[7]

UHW, like many OBGYN and women’s health companies, is a physician management services company. Because private equity firms are prohibited from owning physician practices in most states, private equity firms create management services companies to provide business and administrative services to affiliated practices, effectively owning practices while remaining in compliance with the law.[8]

Both Ares and Atlas own several other healthcare companies. Ares has previously drawn scrutiny for aggressive collection debt-funded dividends from multiple healthcare companies it owns. For example, earlier this year Ares and other owners collected an over $200 million debt-funded dividend from its physician practice DuPage Medical Group soon after DuPage received nearly $80 million in CARES Act aid.

In 2016 Ares and Leonard Green & Partners together collected a $525 million debt-funded dividend from their healthcare staffing company CHG Health Services.[9] Ares and Leonard Green also own Aspen Dental Management, from which the firms have collected hundreds of millions of dollars in debt-funded dividends despite facing scrutiny for numerous consumer complaints and allegations that its profit-driven business practices negatively impacted patient care.[10]

See our report October 2020 report: Dividend Recapitalizations in Health Care: How Private Equity Raids Critical Health Care Infrastructure for Short Term Profit

Atlas owns two companies operating for profit-medical schools: Medforth Global Healthcare Education and University of St. Augustine for Health Sciences.[11] For-profit medical schools were banned in the United States until 1996 for their low educational standards, and remain controversial for their perceived higher risk of predatory behavior.[12]

Buyouts

Add-On Acquisitions

[1]https://www.businesswire.com/news/home/20210824005773/en/Unified-Women%E2%80%99s-Healthcare-Acquires-Women%E2%80%99s-Health-USA

[2]https://www.businesswire.com/news/home/20210824005773/en/Unified-Women%E2%80%99s-Healthcare-Acquires-Women%E2%80%99s-Health-USA

[3]https://www.womenshealthusa.com/who/ ; https://unifiedwomenshealthcare.com/medical-affiliates/

[4]https://www.moodys.com/research/Moodys-Unified-Womens-Healthcare-ratings-unchanged-following-WHUSA-acquisition–PR_451910

[5] https://www.reuters.com/article/us-lev-regulation/regulated-banks-soften-stance-on-leveraged-lending-guidance-idUSKBN1HQ2XV

[6]https://unifiedwomenshealthcare.com/mid-atlantic-womens-care/ ;

[7]https://scholar.harvard.edu/files/srichard/files/jamainternal_bruch_2020_ld_200049_1603479564.31041_2.pdf

[8]https://jamanetwork.com/journals/jama/fullarticle/2761076?guestAccessKey=4eb6959c-7cec-43f1-95b3-93a8c6ea6f6b&utm_source=For_The_Media&utm_medium=referral&utm_campaign=ftm_links&utm_content=tfl&utm_term=021820

[9]https://www.wsj.com/articles/chg-healthcare-to-pay-525m-to-leonard-green-and-ares-1463773859

[10]https://pestakeholder.org/wp-content/uploads/2020/10/PESP-HC-dividends-10-2020.pdf

[11]https://www.altas.com/businesses

[12]https://www.npr.org/sections/health-shots/2021/06/07/1002477044/once-banned-for-profit-medical-schools-are-on-the-rise-again-in-the-u-s