Bain Capital acquires majority stake in InnovaCare

Bain Capital Private Equity invested an undisclosed amount in InnovaCare Health on Friday, making it the majority shareholder in a group of primary health care providers.

New investments are displacing Summit Partners from its majority stake in the system, which is already 23 years old. InnovaCare will continue to be led by CEO Dr. Richard Shinto and the current management team, who will also retain significant ownership of the business. The Primary Care Provider Network currently serves over 250,000 patients annually, including 27,000 Medicare Advantage members.

Bain’s cash injection will help InnovaCare expand its primary care business nationally and compete with companies such as Optum, Cano Health and VillageMD UnitedHealth Group, Shinto said. The 30-clinic practice is aiming to spread across the country outside of Florida, Shinto said, potentially tripling its presence over the next few years. The company also intends to double its supplier staff to more than 200 doctors within six months of the year, he said.

“We already have a lot of opportunities, we are working our pipeline to get to other states, large groups of suppliers who really want to understand how to do risk-based and value-based medicine differently,” said Shinto.

However, unlike these competitors, InnovaCare will focus on shifting the practice of paid doctors serving all types of patients to full-risk schemes, Shinto said. While the company’s “focus” on a profitable and growing population of Medicare Advantage will drive its geographic growth, InnovaCare’s ability to transform providers that serve a variety of businesses, Medicaid, exchanges, and Medicare into risk-based organizations will make its value proposition more attractive. … – said Shinto.

By equipping suppliers with the technology to more accurately collect safety and quality data through the healthcare performance data and information programs and Medicare STARS, Shinto said, InnovaCare is committed to increasing government reimbursement for them.

“We tell them, ‘I know you have Medicaid, I know you have ads, I know you have service fees, we are going to help you manage your practice across the board,” Shinto said. … “If you have MA-only tools, you deprive them of other possibilities.”

In addition to competing with emerging clinic operators, InnovaCare will compete with a new class of technology-based physician support companies such as Privia Health and Agilon Health, which are also looking to attract service providers with payment for services in cost-based contracts.

“InnovaCare is among a very select group of organizations that help the ecosystem deliver value-based services,” said Andrew Kaplan, head of the Bain Healthcare vertical. “There will be several winners. Our focus is on how to move from service charges to value-based service and this macro trend, as opposed to any single competitor. “

The deal builds on a growing wave of private equity deals in the healthcare sector, which surged in 2020, even as overall private equity activity declined. Globally, private equity deals in healthcare increased 21% year-over-year to 380 deals, up from 313 in 2019, according to a report by Bain & Co. earlier this year.

Bain, co-founded by Utah Republican Senator Mitt Romney, has contributed in part to the growth.

The private equity giant has invested or held investments in everything from mental health management to dialysis centers and methadone clinics. The company’s cash injection comes just a week after a separate investment arm of Bain pledged $ 150 million to launch a new Medicare Advantage-focused health insurance brokerage called Better health.

As the company’s healthcare coverage grew, Kaplan said, Bain learned from its past investments and industry failures, such as the wave of investor-owned physician management companies that went bankrupt after their private equity holders left in the 1990s. … Today’s environment and transactions are different from this era thanks to new resources, technologies and an ecosystem focused on the growth of value aid, he said.

“We are seizing this opportunity knowing the history but looking forward to the future because of the changes that have taken place in the industry,” Kaplan said.

However, the promotion of private equity in healthcare has drawn its fair share of critics, including Bane’s critics, who argue that firms’ need to achieve high profits in a relatively short period of time may conflict with the need to invest in quality and safety measures.

After Bain Capital partnered with JH Whitney Capital Partners LLC to manage the home-based child care provider Aveanna Healthcare LLC, for example, Bloomberg News investigation found that a focus on corporate growth and cost reduction versus safety and quality resulted in the injury and death of some of the children who were entrusted with Aveanna’s care.

“If you think about any business, then there are income and expenses, but the most important part of that is being able to check everything,” Shinto said. “Compliance with the regulatory requirements set by the state, the feds, each of the companies individually, has really led to a lot of control and oversight of this, and this is good for healthcare, because our goal is to take care of patients. in the right way. These omissions are significant. “

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