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

See June 2021 acquisitions here.

Several private equity acquisitions of behavioral health companies in July reflect growing investor interest in the behavioral health industry, which includes mental health providers, addiction treatment, and autism services.

Industry analysts have noted increased private equity deal activity in behavioral health in recent years. For example, private equity firms were involved in 20 of the 27 behavioral health deals in the fourth quarter of 2020.[1] Growing investor interest stems from a combination of opportunities for consolidating the fragmented industry and increased demand for mental health services as a result of decreasing stigma associated with mental illness and expanded coverage for treatment.[2]

See our report: Understaffed, Unlicensed, and Untrained: Behavioral Health Under Private Equity

Private equity’s tendency to demand outsized returns in a sector that is already vastly underfunded and serves vulnerable populations raises serious concerns about its potential impact on patient care. The risks of increased private equity investment in behavioral health services include the potential for inadequate staffing or reliance on untrained and unlicensed staff, pressure on physicians to provide unnecessary and costly services, or abuse of federal funding programs at the expense of patient care.[3]

July Behavioral Health Acquisitions

Mentor Network Add-on Acquisitions – Centerbridge Partners

The Mentor Network, owned by private equity firms Centerbridge Partners and Vistria Group, made multiple add-on acquisitions in July. Mentor provides residential and community services to adults and children with intellectual and developmental disabilities and brain and spinal cord injuries, and to and to youth with emotional, behavioral and medically complex challenges. It is also one of the largest for-profit foster care companies in the US.[4]

In July Mentor acquired multiple programs for people with intellectual and developmental disabilities from Embassy Management LLC, including Aacres in California and Nevada, SL Start and Aspire in Idaho, and Creative Work Solutions in New Mexico.[5]

Mentor has attracted scrutiny for allegations of allegations of widespread abuse, neglect, and deaths in its foster care and residential programs including as recently as last Fall, when

state regulators in Oregon discovered so many violations at a Mentor home that they shut the facility down for good.[6]

Despite ongoing issues, Centerbridge Partners and Vistria Group have collected almost half a billion dollars in debt-funded dividends from Mentor over the course of its two-year ownership, including a $375 million debt-funded dividend in February 2021.

Lighthouse Autism Center – Cerberus Capital Management, ABRY Partners

Cerberus Capital Management has invested in Lighthouse Autism Center alongside current owner private equity firm ABRY Partners.[7] Lighthouse is a provider of applied behavioral analysis (ABA) services for children with autism. The company operates in the Midwest, with 20 locations in Indiana and 3 locations in Michigan. Abry Partners has owned Lighthouse since October 2018.[8]

ABRY Partners executive Nick Scola, who is responsible for ABRY’s investment in Lighthouse, previously oversaw private equity firm H.I.G. Capital’s investment in behavioral health firm Community Intervention Services (CIS), a platform company that acquired and operated regional behavioral health companies. H.I.G. and South Bay Community Services, its CIS subsidiary operating mental health clinics in Massachusetts, were sued by Massachusetts Attorney General Maura Healey for violating the False Claims Act by fraudulently billing Medicaid for mental health care services provided to patients by unlicensed, unqualified, and unsupervised staff members. South Bay Community Services agreed to pay $4 million settlement in 2018, but litigation against H.I.G remains ongoing. Community Intervention Services filed for bankruptcy in January 2021.

Newport Academy – Onex Partners

Private equity firm Onex Partners has acquired a majority stake in Newport Academy from the Carlyle Group in a deal valued at $1.3 billion.[9] Newport Academy operates behavioral health programs for teens, including addiction treatment, eating disorders, mental health, and services for “troubled teens.”[10]

Buyouts

Add-on Acquisitions

[1]https://mertztaggart.com/behavioral-health-ma-quarterly-report-q4-2020/?utm_source=Q4%20BH%20Media%20Eblast&utm_medium=Eblast&utm_campaign=Q4%20Quarterly%20Report

[2]https://pestakeholder.org/wp-content/uploads/2020/09/PESP-behavioral-health-9-2020.pdf

[3]https://pestakeholder.org/wp-content/uploads/2020/09/PESP-behavioral-health-9-2020.pdf

[4]https://www.thementornetwork.com/who-we-are/about-the-mentor-network/

[5]https://finance.yahoo.com/news/mentor-network-completes-acquisition-embassy-130000351.html

[6]https://webcache.googleusercontent.com/search?q=cache:GF9gfUjjLXQJ:https://www.finance.senate.gov/chairmans-news/grassley-wyden-issue-reports-on-developmental-disability-care-facilities-in-iowa-and-oregon+&cd=2&hl=en&ct=clnk&gl=us

[7]https://www.businesswire.com/news/home/20210726005183/en/Lighthouse-Autism-Center-and-Cerberus-Announce-Strategic-Partnership

[8]https://www.prnewswire.com/news-releases/lighthouse-autism-center-announces-strategic-investment-from-abry-partners-300729271.html

[9]https://bhbusiness.com/2021/07/20/onex-partners-finalizes-60-purchase-of-newport-in-reported-1-3b-deal/

[10]https://www.newportacademy.com/?utm_source=google&utm_medium=cpc&utm_campaign=Brand&utm_term=newport%20academy&kpid=go_cmp-1773503711_adg-69436319499_ad-343020851885_kwd-297554434310_dev-c_ext-_prd-&gclid=CjwKCAjwmK6IBhBqEiwAocMc8vuk9VSYaXHFwyFGeCDfeycpFCmYRxVjrHNcNEADyPJOOYi9bkMsqBoCMlcQAvD_BwE