1、Healthcare ServicesReportPE trends and investment strategiesINDUSTRY RESEARCHQ32022Sponsored byLaunchREPORTContentsQ3 2022 Healthcare Services ReportPG 2PublishingReport designed by Joey Schaffer and Drew Sanders Published on November 14,2022Rebecca Springer,Ph.D.Senior Analyst,Healthcare Institutio

2、nal Research Group AnalysisDataMatthew Nacionales Data AnalystSponsored byVertical overview4PE activity7Healthcare services PE ecosystem market map10Healthcare services PE investor map12Q1 to Q3 2022 timeline13Key regulatory developments14A word from UnitedHealthcare15Segment overview17Generalist pr

3、oviders18Multispecialty providers25Physician practice management companies(PPMs)32Skilled care and behavioral health41Appendix50Q3 2022 Healthcare Services Report PG 4Sponsored byVertical overviewHealthcare services is the largest vertical within PE healthcare investing,accounting for roughly 10%of

4、PE buyout and growth deals overall in the US in 2022.The vertical includes traditional healthcare providers that offer medical treatment in hospitals,clinics,residential facilities,and homes.As one of the oldest PE buy-and-build plays,healthcare services continues to attract investor interest due to

5、 its favorable demographic trends,acyclical characteristics,and consolidation opportunities.According to Centers for Medicare&Medicaid Services(CMS)data,US healthcare services care expenditures reached$2.9 trillion in 2020 and is projected to exceed$4 trillion by 2027.This figure includes government

6、 and commercial payer reimbursement and out-of-pocket spending on care categories excluding retail prescriptions and medical products.1 We estimate that US PE firms currently have$62.0 billion in dry powder available to deploy in healthcare services,which translates to roughly$150 billion in cumulat

7、ive company enterprise value.Historical and projected US healthcare services expenditures by type($T)*Source:Centers for Medicare&Medicaid Services|Geography:US|*2021 to 2030 projectedSource:Centers for Medicare&Medicaid Services|Geography:US|*2021 to 2030 projected$0$1$2$3$4$5$6200020004

8、200520062007200820092000002220232024202520262027202820292030Residential nursing and careHome healthOtherProfessional servicesHospital careHistorical and projected US healthcare services expenditures by funds source($T)*$0$1$2$3$4$5$6OtherMedicaidMedicareCo

9、mmercial insuranceOut of pocket2000200042005200620072008200920000022202320242025202620272028202920301:“National Health Expenditure Data,”CMS.gov,n.d.,accessed October 20,2022.Q3 2022 Healthcare Services Report PG 5Sponsored byPopulation aging dr

10、ives the growth of healthcare spending in the US.Not only are a growing proportion of people living in the US aged 60 or older,but as life expectancy increases,more people are living well past 80,which is when medical care becomes most expensive.More sophisticated and specialized care may also lead

11、to increased costs.Unequal access to care and disproportionate care costs incurred by a small proportion of people also contribute.For example,5%of Americans account for roughly 50%of the countrys healthcare costs.2 Much of PE healthcare services investing represents an effort to capitalize on demog

12、raphic trends by consolidating specialties that provide advanced care to older adultsand,under value-based models,using preventative care to improve health outcomes for the sickest individuals.Although healthcare is traditionally considered a haven for investors during market downturns,the COVID-19

13、pandemic and subsequent labor disruption have resulted in unprecedented stress for the industry.Most healthcare businesses saw revenue recover to pre-pandemic levels in 2021,and valuations hit all-time highs in many provider categories due to intense investor demand.However,acute carer,nurse,and pro

14、vider shortages have become endemic in the industry,threatening both profitability and care quality.Cost inflation can be especially troublesome for healthcare providers because reimbursement rates are typically negotiated with payers on multiyear contracts,many of which do not include inflation adj

15、ustments.PE investors must help their platforms navigate labor supply-demand dynamics through carefully planned expansion,improved employee satisfaction,and streamlined recruitment processes in order to stem potential losses.In previously red-hot categories such as behavioral health,multiples may be

16、gin to cool as growth slows due to staffing limitations.Competition and disruptionPE firms investing in healthcare services face competition from other PE-backed platforms;hospitals and health systems;publicly traded healthcare services companies such as Acadia,DaVita,and McKesson;and vertically int

17、egrated payer-providers(“payviders”)including UnitedHealth Group,Humana,Elevance,and CVS Health.Hospitals and health systems dominate the US healthcare system,accounting for 37.5%of US healthcare services spending.Historically,hospitals have also been the leading consolidators of independent physici

18、an practices in the US.As of January 2022,hospitals and health systems employed 341,200 physicians nationallyan 18.3%increase since January 2020.However,corporate entities,which include PE-backed platforms,publicly traded provider groups,and payviders,are now consolidating at a faster rate than hosp

19、itals.In January 2022,they employed 142,900 physicians,a 39.4%increase from January 2020.3 Healthcare services is also experiencing disruption from new telehealth,membership-based,and direct-to-consumer healthcare models,as well as from digital and brick-and-mortar retailers such as Amazon,Walmart,W

20、algreens,and CVS.In the face of healthcare consumerization,PE healthcare services investors must help providers adapt their care delivery models to be more convenient,digital,and patient-centric.Additionally,many PE investors in specialist physician categories seek to avoid direct competition with d

21、igital-first disruptors by backing“medically oriented”as opposed to consumer-orientedplatforms that specialize in complex cases,or cases that garner higher margins and require in-person care and longer-term clinician-patient relationships.By contrast,the potential for disruption in categories such a

22、s primary care,home health,and behavioral health is significant,as these are typically lower-margin businesses that lend themselves to tech-enabled access and care coordination innovations.VERTICAL OVERVIEW2:“How Do Health Expenditures Vary Across the Population?”Peterson-KFF Health System Tracker,J

23、ared Ortaliza,et al.,November 12,2021.3:“COVID-19s Impact On Acquisitions of Physician Practices and Physician Employment 2019-2021,”Physicians Advocacy Institute,Avalere Health,April 2022.Q3 2022 Healthcare Services Report PG 6Sponsored byPE strategy trendsTraditionally,PE investment in healthcare

24、services focused on consolidating medical specialties such as dentistry,dermatology,and vision,with returns driven primarily by multiple arbitrage,financial leverage,and the development of ancillary business lines.Firms have also looked for opportunities to finance de novo expansion in provider cate

25、gories with favorable supply-demand dynamics,such as behavioral health.Across provider categories,scale enables not only fixed cost efficiencies but market power.By increasing market share in a given metropolitan,state,or regional geography,a platform can position itself to negotiate more favorable

26、payer contracts.For categories that are not referral-based,scale also helps to increase brand awareness,thereby driving patient volume.While PE investment in these established provider categories is still going strong,PE firms have become more sophisticated healthcare services investorsnot only ente

27、ring new provider categories but also seeking out opportunities wherein scale and capital availability provide second-order advantages in improving patient care and returns.Nowhere is this more apparent than in value-based care,which requires care coordination,data analytics capabilities,finesse in

28、payer negotiations,and sheer scale far beyond what most independent provider groups can achieve.The industrys push toward value-based care has also spurred greater PE experimentation with building multispecialty medical practices and taking on population health management for communities with higher

29、 Medicare and Medicaid spend.VERTICAL OVERVIEWQ3 2022 Healthcare Services Report PG 7Sponsored byPE activityAmid macroeconomic turmoil,healthcare services PE deal activity has shown resiliency so far in 2022,especially in the lower middle market.Our estimated deal count for Q1 to Q3 2022 already exc

30、eeds 2020s full-year number.However,the industry faces growing headwinds.Staffing shortages are squeezing virtually every type of healthcare services organization,increasing costs and inhibiting growth.The financial strain is most acute for hospitals,which have significant fixed costs due to facilit

31、y overhead,and which had little time to regroup financially after the worst of the pandemic abated.Also heavily affected are healthcare organizations that rely on low-or moderately skilled care providers and operate on lower per-visit margins,such as home care agencies,applied behavior analysis(ABA)

32、therapy clinics,and group homes for people with intellectual and developmental disabilities(IDDs).Despite these challenges,the healthcare services deal pipeline overall has been resilient.According to Jeff Friedman and Matthew Brohm,Partners and Co-heads of Healthcare PE at Arnall Golden Gregory,man

33、y lower-middle-market platforms are still growing aggressively,and where multiples have relaxed,they have done so only slightlyto pre-pandemic levels.While reimbursement and staffing cost pressures have prompted buyers to more closely scrutinize quality of Healthcare services PE deal countHealthcare

34、 services PE exit countSource:PitchBook|Geography:US and Canada|*As of September 30,2022Source:PitchBook|Geography:US and Canada|*As of September 30,20224055505937211,00450212022*Deal countEstimated deal count436044440212022*Q3 2022 Healthcare Services Rep

35、ort PG 8Sponsored byearnings and forward EBITDA projections,they have also continued to push independent practice sellers into the market.4 Looking at the top end of the market,Q3 also saw several large platform trades,including Monte Nido,Action Behavior Centers,EyeSouth Partners,and Paradigm Oral

36、Surgery.In the syndicated loan market,although new-issue spreads for healthcare services have ticked upward in line with macroeconomic pessimismmeaning that leveraged finance in the syndicated market is becoming more expensivethe industry has not yet seen a decrease in average EBITDA purchase multip

37、les or leverage ratios.This is partly because most deals closed so far this year were initiated in late 2021 or early 2022,before financing conditions deteriorated,and partly because only higher-quality assets can access syndicated loan finance.Exit activity is tracking close to the pace set in 2017

38、 to 2020.No longer are PE investors pulling forward realization timelines to take advantage of frothy multiplesat least not on the scale we saw in 2021.Additionally,with the denominator effect shrinking allocations to PE,GPs are less motivated than they were in 2021 to return capital to LPs and rest

39、art the fundraising cycle.Public listings,which in 2021 were becoming a viable exit route for both Medicare Advantage(MA)-focused primary care aggregators and a broader range of healthcare services platforms,are decidedly off the table.By contrast,the landscape of strategic buyers has become more dy

40、namic as payviders and retailers jostle in the MA,employer-direct,behavioral,and home health markets.Looking ahead,the shuttering of leveraged loan markets will strongly dissuade assets over$1 billion or so from coming to market for the remainder of 2022.The exception may be carveouts and sales of b

41、usinesses that are over levered and struggling to stay above water as staffing costs rise;whereas current deal activity selects toward resilient and high-quality assets,we expect to see more distressed deals beginning in 2023 if the macroeconomic picture does not improve.In the meantime,we believe t

42、hat high-quality platforms at or below the$1 billion threshold will still be able to secure financing(often via private credit)and find willing buyers at respectable multiples.PE ACTIVITY4:Jeff Friedman and Matt Brohm,Partners and Co-heads of Healthcare PE at Arnall Golden Gregory,phone interview wi

43、th Rebecca Springer,September 20,2022.About the dataWhat is estimated deal count?The 2022 estimated deal count shown represents the likely actual deal count through the third quarter of 2022.Because of the difficulty of gathering private markets data,our deal counts lag for recent quarters,especiall

44、y for the smaller deals that characterize many healthcare services roll-ups.We arrived at the estimation by reviewing average data lags in our historical datasets for companies within the healthcare services vertical.We do not provide this estimation at the segment or category level due to lower dat

45、a counts.What do platform,add-on,and growth mean?In our methodology,an“add-on”is any acquisition by a PE-backed company(regardless of target size),and a“platform”is any buyout(majority equity acquisition)that is not an add-on.“Growth”refers to any minority equity investment,including follow-on inves

46、tments by the same PE firm.Note that very small tuck-in and no-goodwill deals are unlikely to appear in our dataset.Why is the data scoped to the US and Canada?This report focuses on US healthcare services.In general,PE-backed healthcare providers based in the US do not expand overseas due to the si

47、ze and idiosyncrasy of the US healthcare services market.However,some platforms in categories such as dental and veterinary straddle the US and Canadian markets.Therefore,we include both US-and Canada-headquartered healthcare providers in deal figures.How can I ensure my companys M&A activity is cap

48、tured in your data?Please reach out to to submit data.Q3 2022 Healthcare Services ReportPG 9Sponsored byNew-issue spread for health services loansSource:LCD|Geography:US|*As of October 17,202200500Spread(basis points)over base rate20000202022*Average LBO l

49、everage ratioSource:LCD|Geography:US|*As of September 30,2022Note:Based on borrowers with EBITDA of$50 million or more0 x1x2x3x4x5x6x7xAll dealsHealth services20000202022*Average LBO purchase price multipleSource:LCD|Geography:US|*As of September 30,2022Note:Based on

50、 borrowers with EBITDA of$50 million or more0 x4x8x12x16xAll dealsHealth services20000202022*Leveraged buyout-related health service loan value and shareSource:LCD|Geography:US|*As of October 17,2022Loan value($B)Share of total value0%2%4%6%8%10%$0$2$4$6$8$1020122013

51、20021820202022*4%5%PE ACTIVITYQ3 2022 Healthcare Services ReportPG 10Sponsored byHealthcare services PE ecosystem market mapClick to view the interactive market map on the PitchBook Platform.Market map is a representative overview of active PE-backed platforms headquartered in

52、the US or Canada.Companies listed have undergone a PE buyout or growth equity investment.Health services category oneHealth services category twoHealth services category threeGeneralistsMultispecialtySkilled care and behavioral healthABA and pediatric therapyAmbulatory surgical centersOccupational a

53、nd correctional healthHome health and hospiceClinical staffingPrimary careIDD careMultispecialty clinics and networksUrgent and emergency careInfusionHospitals and health systemsMental health and SUD treatmentSkilled nursingQ3 2022 Healthcare Services ReportPG 11Sponsored byHealthcare services PE ec

54、osystem market mapClick to view the interactive market map on the PitchBook Platform.Market map is a representative overview of active PE-backed platforms headquartered in the US or Canada.Companies listed have undergone a PE buyout or growth equity investment.Health services category onePPMsMusculo

55、skeletalUrology/renalVeterinaryVisionCardiovascularObstetrics and gynecologyDentalOncologyDermatologyOther medical specialistsEar,nose,and throatReproductive medicineGastroenterologyQ3 2022 Healthcare Services ReportPG 12Sponsored byHealthcare services PE investor mapClick to view the interactive in

56、vestor list on the PitchBook Platform.Investor map is a representative overview of active investors in US and Canada healthcare services buyouts and growth equity.Investors are classified by the size of the fund out of which they primarily invest in healthcare services.An asterisk denotes either tar

57、get fund size or,in an open fund,capital raised to date above the target fund size.Health services category oneHealth services category twoHealth services category threeLower middle market(less than$500 million)Middle market($500 million to$1.5 billion)Upper middle market($1.5 billion to$5 billion)S

58、trategic Healthcare Fund II open$255M 2022 Fund II$300M 2019 Healthcare Fund$365M 2022 Fund II$225M 2022 Opportunities FundFund III open$225M 2021 Fund IIFund II open$225M 2021 Fund IX$208M 2019 Fund IVFund IV open$147.5M 2020 Fund IVFund II open$453M 2022 Fund IIFund II openFund III open$368.7M 202

59、1 Fund IV$650M 2021 Fund II$759M 2022 Fund II$550M*Fund VI open$796.8M*Fund III openFund VII open$900M 2022 Fund V$1.4B 2021 Growth Buyout Fund X$1.3B 2020 Fund VI$800M*Fund II open$467M Fund IV*openFund V open$1.2B*Fund III open$800M 2022 Fund VI$460M 2021 Fund VIFund I open$600M*Fund IV open$500M*

60、Fund IV openFund VI open$3.3B*Fund III openFund VII open$1.9B 2022 Fund VIIFund I open$2.4B 2021 Fund IV$2.5B*Fund VIII open$2.7B 2021 Fund IV$5B*Fund XIV open$1.7B 2022 Fund VHealth services category oneLarge cap($5 billion+)$20B*Fund XII open$13.6B evergreen fund$3.8B 2021 Healthcare Strategic Gro

61、wth Fund II$14.7B 2022 Fund IX$15B 2021 Fund IV$8.3B 2021 Fund XIQ3 2022 Healthcare Services ReportPG 13Sponsored byQ1 to Q3 2022 timelineJan 1Apr 1Jul 1Oct 31PE activity211total deals in Q3(estimated)725total deals in Q1 to Q3(estimated)1,089TTM deal count(estimated)-23.6%QoQ change in deal count-1

62、0.3%YoY change in Q3 deal count17.8%TTM YoY change in deal countPE dealFebruary 10Partners Group buys Forefront Dermatology from Leonard Green&Partners for$1.5 billion.Coming on the heels of Epiphany Dermatology and Pinnacle Dermatology trades,the deal points to reinvigoration in the category.PE exi

63、tApril 3Continuing its buying spree,Optum acquires TPG-backed Kelsey-Seybold Clinic for approximately$2 billion.Kelsey-Seybold is a multispecialty group with a value-based care emphasis.NewsJuly 21Amazon agrees to by One Medical,edging out CVS and other suitors,before announcing the shuttering of Am

64、azon Care.The announcement refocuses attention on the future of retail giants as healthcare providers.PE exitPE dealMarch 24Kelso Private Equity sells Refresh Mental Health to Optum less than 18 months after investing in the company,underlining the attractiveness of mental health assets.May 16Welsh,

65、Carson,Anderson&Stowe(WCAS)inks another joint venture with Humana to develop CenterWell clinics,this time for$1.2 billion.The partnership cements WCAS close relationship with the second-largest MA player.NewsOctober 28Axios reports that Western Veterinary Partners has begun a sale process,with a lik

66、ely valuation in the$1 billion ballpark.5 The news demonstrates that large platform trades are still viable even as syndicated loan markets falter.5:“Axios Pro:Health Tech Deals,”Axios,Erin Brodwin and Sarah Pringle,October 28,2022.Q3 2022 Healthcare Services Report PG 14Sponsored byKey regulatory d

67、evelopmentsFinalized Medicare rates for 2023On November 1,2022,CMS issued finalized Physician Fee Schedule(PFS),Home Health Prospective Payment System(HH PPS),and Hospital Outpatient Prospective Payments System(OPPS)and Ambulatory Surgical Center(ASC)rules,with implications for several PE healthcare

68、 services investmentcategories.PFS:CMS will reduce the PFS conversion rate,which is used to calculate reimbursement,by about 4.5%from 2022s level.The PFS accounts for the bulk of Medicare reimbursement in most provider categories.HH PPS and Home Infusion Therapy Services rules:Payments to home healt

69、h agencies will increase in aggregate by 0.7%,with additional cuts via behavior adjustments planned for 2024 and beyond.Legislation introduced in the Senate would delay these phased-in cuts until 2026,but the bills fate is uncertain.6 Although the final rule is significantly better for the home heal

70、th industry than CMS initial proposal of an aggregate 4.2%cut in 2023,providers argue it is not sufficient to ameliorate the margin pressure that home health agencies are facing,discussed below.OPPS and ASC rules:CMS will increase OPPS and ASC rates by 3.8%in aggregate.This is 1.1 percentage points

71、higher than the initially proposed rate increase,but providers argue it is still insufficient to mitigate increased staffing costs.Telemedicine and behavioral healthThe final 2023 PFS provides for the extension of telehealth policies enacted under the public health emergency(PHE),with a couple of no

72、teworthy exceptions.Under current legislation and the finalized rule,151 days after the end of the PHE(likely in H1 2023),virtual direct supervision will not be covered under Medicare.Additionally,providers will not be able to bill separately for audio-only evaluation and management(E/M)behavioral h

73、ealth telemedicine visits,except for SUD treatment and some other exceptions,including a patients inability to access two-way audio/video.7 H.R.4040,currently before the Senate,would further extend PHE telehealth waivers through 2024.8 SUD treatment and controlled substances:Under the 2019 SUPPORT A

74、ct,telehealth treatment of SUD and co-occurring mental health disorders are payable by Medicare without in-person visit requirements.However,providers face a dynamic policy landscape around controlled substances prescription.The US Drug Enforcement Administration has not yet made the PHE waiver of i

75、n-person evaluation requirements permanent.The finalized 2023 PFS rule permanently extends the PHE allowance for opioid use disorder treatment programs to begin medication-assisted treatment(MAT)with buprenorphinebut not methadonevia telehealth.This may help PE-backed providers serve patients with l

76、imited transportation access,although methadone is more cost effective thanbuprenorphine.Other behavioral-health-related provisions:The finalized PFS allows providers to bill for services provided by licensed counselors and therapists,as well as mental health disorder and SUD treatment,under general

77、,rather than direct,supervision.This should increase the capacity of PE-backed behavioral health companies to treat more patients amid provider shortages.6:“S.4605 Preserving Access to Home Health Act of 2022,”Congress.gov,117th Congress(2021-2022),July 25,2022.7:“Medicare Telehealth Services for 20

78、23 CMS Proposes Substantial Changes,”Foley&Lardner LLP,Rachel B.Goodman,Nathaniel M.Lacktman,and Thomas B.Ferrante,July 14,2022.8:“H.R.4040 Advancing Telehealth Beyond COVID-19 Act of 2021,”Congress.gov,117th Congress(2021-2022),June 22,2021.PG 15Sponsored byQ3 2022 Healthcare Services ReportA WORD

79、FROM UNITEDHEALTHCAREAccelerating the pace of innovation in healthcareDeep knowledge of industry challenges and strategic collaborations are helping build a future of personalized care and more seamless digital experiences.Todays healthcare landscape is changing fast.Age-old industry challenges rema

80、in pressing today,with stakeholders collaborating to develop solutions that aim to lower costs,improve health outcomes,and create experiences that are better tailored to unique member needs.Beyond the challenges associated with the traditional Triple Aim,health inequities and social determinants of

81、health(SDOH)have garnered more attention than ever since the onset of COVID-19.Yet despite all the challenges facing healthcare todaymany becoming more apparent and urgent during the pandemicthe public health crisis also spurred rapid innovation and an influx ofinvestment.These important development

82、s in healthcare innovation can be categorized into three overarching trends affecting employers and their employees,now and moving forward:Personalized care grounded in data Members increasingly expect providers to personalize their experienceto recognize them at an individual level across the spect

83、rum of touchpoints,as is increasingly common in other industries.9 Personalization in healthcare can mean many thingseverything from providers virtually delivering care to wearable devices enabling individualized management of chronic diseases such as diabetes.10“No two human beings are the same,but

84、 too often they are treated the same in a medical setting,”said Jaime Murillo,Senior Vice President and Chief Medical Officer of Optum Labs.He sees a future wherein clinicians have access to an AI-based algorithm that draws on various data streamsincluding medical history and relevant demographic an

85、d SDOH-related datato suggest the best treatment.For instance,data-informed tools can help clinicians direct members to available lower-cost drugs and proactively push prescription savings opportunity alerts.“Its a good example of how innovation efforts can drive costs out of the system while improv

86、ing the member experience,”said Susan Maddux,Chief Pharmacy Officer at UnitedHealthcare.“Affordability and improving that experience are core goals for us.”The impact of data and personalization is also seen in the providers office.Real-time access to improved data about the quality of network speci

87、alists,for example,could help reduce overall costs and suggest a care regimen more tailored to members unique needs.“We can help providers better support members by providing this kind of information so they can adjust their decision-making based on potential impacts on each patient sitting before t

88、hem,”said Dr.Gerald Hautman,Chief Medical Officer and Senior Vice President of UnitedHealthcare National Accounts.Digital fuels the provider-patient relationship The future of digital is about more than specific tools and platforms used to improve the member experience:apps,member portals,virtual ca

89、re,and remote monitoring devices.These things matter,but the value of digital goes beyond channels and devices.Sponsored by9:“New Survey Shows Consumers Expect Better Healthcare ExperiencesBut Are Often Disappointed,”Forbes,Deb Gordon,December 7,2021.10:“UnitedHealthcare Taps Wearables,Individualize

90、d Coaching To Enhance Diabetes Management,”Fierce Healthcare,Evan Sweeney,January 10,2018.PG 16Sponsored byQ3 2022 Healthcare Services Report“Its great that these devices will ping you and say you need to stand,or you need to walk,or your blood pressure is too high,”said Craig Kurtzweil,Vice Preside

91、nt,UnitedHealthcare Center for Advanced Analytics.“But what members really struggle with is,What do I do with that information?What does it mean?”By putting data-driven tools and analytics in the hands of providers,outcomes may be improved.“Some of Optum Labs innovation efforts have focused on devel

92、oping decision-support tools and algorithms to help providers make better decisions by surfacing information that helps streamline administrative tasks and overall care delivery,”said Troy Anderson,Vice President of Product Management at Optum Labs.For example,Optum Labs is developing a care-enablem

93、ent tool that helps providers identify patients who are at higher risk for mild to moderate mental health challenges and facilitates collaboration with mental health professionals,which is designed to be as seamless as possible.Strategic collaboration powers innovation Given the complexity of health

94、care delivery and systems,strategic collaborations to drive innovation take many forms.UnitedHealth Group,the parent company of UnitedHealthcare and Optum,collaborates with stakeholders both inside and outside the organization to advance its innovation agendafrom nurturing promising startups through

95、 direct investments via Optum Ventures,a venture capital fund with more than$600 million in assets under management,to helping early-stage startups foster growth through mentorship and investing,thereby enabling pathways to commercialization via the UnitedHealthcare Accelerator program.As Vice Presi

96、dent of Innovation at UnitedHealthcare,Kaylene Thompson oversees the Accelerator program.The immediate goal is to help startups grow,but the program plays an important role in reinforcing the culture of innovation at UnitedHealthcare by providing exposure to new ways of thinking and risk-taking.“My

97、team is really focused on how we accelerate the pace of innovation and how we bolster the right capabilities to innovate with speed and confidence,”said Thompson.In healthcare,a common obstacle to successful innovationmeaning new products and services that work at scaleis the fragmented nature of th

98、e sector.But the integrated nature of UnitedHealth Group brings together a payer(UnitedHealthcare),a technology company(Optum),and a provider(Optum Care)under one roof as innovation collaborators.According to Thompson,that matters because it sets the stage for strategic collaborations:“We have a gre

99、ater chance of being able to actually scale things in a meaningful way.”Strategy is key in private equity and your portfolios healthcare benefit spending.Let the UnitedHealthcare private equity benefits team show you how to lower your portfolios healthcare costs and free up more money for investment

100、 growth.Disease Management programs and services may vary on a location-by-location basis and are subject to change with written notice.UnitedHealthcare does not guarantee availability of programs in all service areas and provider participation may vary.Certain items may be excluded from coverage an

101、d other requirements or restrictions may apply.If you select a new provider or are assigned to a provider who does not participate in the Disease Management program,your participation in the program will be terminated.Self-Funded or Self-Insured Plans(ASO)covered persons may have an additional premi

102、um cost.Please check with your employer.Sponsored byInsurance coverage provided by or through UnitedHealthcare Insurance Company or its affiliates.Administrative services provided by UnitedHealthCare Services,Inc.or their affiliates.Segment overviewGeneralist providersSkilled care and behavioral hea

103、lthPPMsMultispecialty providersInvestors look to generalists to control costs and increase access across the healthcare system.Providers navigate staffing shortages and reimbursement pressure amid sky-highdemand.Staffing costs and reimbursement changes force multispecialty providers to adapt.Amid ma

104、croeconomic turmoil,underlying demand drivers keep dealmaking on pace.Q3 2022 Healthcare Services Report PG 18Sponsored byGeneralist providersInvestors look to generalists to control costs and increase access across the healthcare systemOverviewGeneralist healthcare practitioners provide preventativ

105、e care and treatment for a broad range of acute and chronic conditions.The“front door”of the healthcare system,they often serve as a patients first port of call and refer to specialists as needed.Generalist providers have not always found favor with PE investors because they generate tighter margins

106、 than many specialists,and because pure-play PE platforms cannot use generalists as referral generators in the same way that hospitals and health systems do.However,two key industry shiftsthe adoption of value-based payment models and healthcare consumerizationhave brought generalists to the forefro

107、nt within the last half-decade.Consolidation within primary care has historically been driven by health systems.Beginning in the mid-2010s,payerschiefly UnitedHealth(Optum)and Humanarecognized the benefits of vertical integration and began buying up leading primary Generalist PE deal count by quarte

108、rSource:PitchBook|Geography:US and Canada|*September 30,2022Source:PitchBook|Geography:US and Canada|*September 30,202205101520Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q32002020212022*Generalist PE exit count by type024680022*Public listingAcquisitionBuyoutQ3 2022

109、 Healthcare Services Report PG 19Sponsored byGENERALIST PROVIDERScare practices within their provider arms.Retail giants have also begun to play in the primary care/urgent care space by opening walk-in clinics in their retail stores,including CVS via its MinuteClinics and HealthHUBs,Walgreens via it

110、s subsidiary VillageMD,and Walmart via its Walmart Health locations and Oak Street Health partnership.Recently,retailers have moved to acquire primary/urgent care groups,such as Amazons purchase of One Medical and VillageMDs merger with Summit Health.Medical PE-backed platforms grow through a combin

111、ation of larger group add-ons and de novo expansion.The latter strategy is attractive due to relatively low startup costs and sky-high multiples for scaled groups with proven MA track records.Occupational and correctional health providers operate in a somewhat different sphere due to their narrowly

112、defined patient populations and unique revenue streamsdirect employer contracts and workers compensation insurance in the case of occupational health and criminal justice agency contracts in the case of correctional health.Some strategics have an outsized presence in this category,such as Centenes C

113、enturion Health correctional business.This segment includes the followingcategories:Occupational and correctional health:Occupational health groups contract with employers and workers compensation insurance companies to provide care for employees in physically demanding jobs.They provide services su

114、ch as primary care,urgent care,drug tests,fitness-for-work and hazardous materials physicals and screenings,and injury rehabilitation.They also provide care coordination services and return-to-work planning for injuries and conditions covered under workers compensation policies.Correctional health g

115、roups contract with local,state,and federal criminal justice agencies to provide healthcare to incarcerated individuals.They may also provide community-based services such as re-entry programs or SUD treatment.Primary care:Primary care covers a range of preventative care,wellness,and common illness

116、treatment for adults and children.This category includes family medicine,nonspecialist pediatric medicine,primary care for older adults(“senior primary care”),and internal medicine.Urgent and emergency care:Urgent care providers treat common,time-sensitive injuries and illnesses on a walk-in basis.U

117、rgent care providers work within a similar scope of practice to primary care providers,but focus on acute cases rather than prevention and do not establish long-term patient-physician relationships.Urgent care practices may also incorporate limited on-site radiology and laboratory functions.Emergenc

118、y care provides triage and treatment for severe and extremely time-sensitive injuries and illnesses.This segment encompasses freestanding emergency care clinics only,not emergency department staffing services for hospitals.Investment driversPrimary care at the forefront:An often-cited statistic amon

119、g healthcare investors is that primary care accounts for around 5%of US healthcare spending but directly affects care quality and cost across the other 95%.In an ideal world,a primary care physician(PCP)contributes to a patients overall health and wellness by encouraging healthy lifestyle choices,id

120、entifies risks early before they turn into severe illnesses or emergencies,and proactively helps connect patients to specialist care as needed.This also allows the PCP to manage a patients holistic treatment plan when they are cared for by multiple specialists by understanding their medical history

121、as well as potential interactions between different conditions and treatment regimes.As value-based care and contracting models proliferate,government and commercial payers have become increasingly aware of this important role for primary care and have adjusted reimbursement models to incentivize in

122、vestment in primary care.Q3 2022 Healthcare Services Report PG 20Sponsored byMedicare Advantage:MA is CMS largest value-based care effort.MA plans currently enroll around 48%of Medicare beneficiaries,with leading plan providers UnitedHealth and Humana controlling a combined 46%of the market.The Cong

123、ressional Budget Office estimates MA penetration will reach 60%of the total Medicare market by 2030.11 Because CMS is committed to a wholesale transition from fee-for-service to value-based models,the agency has calibrated MA risk-adjusted payments and performance incentives to offer attractive marg

124、ins on care.Successful MA plans reinvest these earnings into improved plan offerings,such as dental coverage,fitness classes,or transportation to appointments,in turn attracting more members.PCPs that can successfully negotiate with payers to share in these marginsand then effectively lower the cost

125、 of carecan enjoy significant upside.Diverting low-acuity emergency department(ED)visits:Many patients,especially people with lower socioeconomic status and/or health literacy,utilize hospital emergency departments for nonemergency situations because they struggle to get the treatment they need via

126、a PCP.12 The availability of walk-in primary care such as urgent care is inversely correlated with low-acuity emergency department utilization.13 Urgent care facilities also provide significant savings over hospital emergency department rates and are financially easier to manage because they are les

127、s exposed to unpredictable,high-cost utilization episodes and payment collection challenges.Many urgent care practices offer affordable flat-rate,cash-pay options for people without insurance.Rural access:While the first wave of PE investment in urgent care centers focused on Tier 1,or large metropo

128、litan,markets,PE investors have increasingly begun focusing on suburban and rural urgent care centers in areas that are either under-or unserved by primary care and/or hospitals.As of 2019,15.8%of the US population lives in rural areas,while only 9.2%of primary care physicians practice in rural area

129、s.14 As financial pressure on rural and community hospitals increases,rural urgent care is likely to increase in importance.Freestanding EDs are less common,but they offer a similar value proposition:faster,more cost-effective service than hospital EDs due to reduced overhead,and the ability to loca

130、te more EDs in rural areas that cannot support a full hospital.PE activitySo far in 2022,PE investment activity in generalist providers has held steady,exhibiting only a modest slowdown in Q3.Investment activity in occupational and correctional health and urgent and emergency care has been robust,wi

131、th several new platform formations and healthy add-on activity.By contrast,both platform and add-on activity in primary care slowed significantly from the pace we saw in 2018 to 2021 as an increasingly risk-off environment made buyers more hesitant to pay top dollar for MA assets.The years only note

132、worthy MA-focused deal was Revelstoke Capital Partners growth investment in Claremedica Health Partners,already a Beecken Petty OKeefe&Company(BPOC)portfolio company.Instead,investors pursued less trodden primary care themes:TPG GENERALIST PROVIDERS11:“Medicare Advantage in 2022:Enrollment Update an

133、d Key Trends,”KFF,Meredith Freed,et al.,August 25,2022.12:“URGENT CARE INDUSTRY WHITE PAPER 2018(Unabridged)The Essential Role of the Urgent Care Center in Population Health,”Urgent Care Association,Laurel Stoimenoff,PT,CHC,and Nate Newman,MD,FAAFP,2018.13:“Enhancing Value-Based Care With a Walk-in

134、Clinic:A Primary Care Provider Intervention to Decrease Low Acuity Emergency Department Overutilization,”PubMed Central,Cureus,Derek J.Baughman,et al.,February 2021.14:“Primary Care in the United States:A Chartbook of Facts and Statistics,”Robert Graham Center,American Board of Family Medicine,and I

135、BM Watson Health,Brian Antono,et al.,February 2021.Q3 2022 Healthcare Services Report PG 21Sponsored byGENERALIST PROVIDERSOccupational and correctional health PE deal count by typeSource:PitchBook|Geography:US and Canada*As of September 30,20222002020212022*GrowthAdd-onPlatform0246810Pri

136、mary care PE deal count by typeSource:PitchBook|Geography:US and Canada*As of September 30,2022057200212022*GrowthAdd-onPlatformUrgent and emergency care PE deal count by typeSource:PitchBook|Geography:US and Canada*As of September 30,20220500212022*Growth

137、Add-onPlatformrecapitalized Summit Partners-backed Pediatric Associates,while Pine Tree Equity Partners acquired Premier Physician Support Services,a Medicaid-focused group.Unlike in most healthcare services categories,opportunities for generalist platforms skew toward strategics rather than sponsor

138、-to-sponsor buyouts.No significant primary care exits were announced in 2022.However,steady exit activity in urgent care underscored the opportunities associated with moving after-hours care out of understaffed hospitals,and we expect to see resiliency in that category even as market conditions dete

139、riorate.GENERALIST PROVIDERSQ3 2022 Healthcare Services Report PG 22Sponsored byGENERALIST PROVIDERSSpotlight:Primary careOnce eschewed by investors because of low fee-for-service reimbursement,primary carethat is,senior primary carehas become the site of a turf war among payviders,retailers,and PE-

140、backed platforms due to the high margins that MA contracts can generate.PE investors must carefully form geographic and service line strategies and weigh elevated entrance multiples against return prospects and long-term trends.Payvider partnership strategy:Two of the three greatest risks in senior

141、primary care investing are competition from payviders,which wield outsized market power in both the MA plan and provider arenas,and unjustifiable practice valuations.Welsh,Carson,Anderson&Stowes(WCAS)joint-venture-based senior primary care strategy is noteworthy as a hedge against these two risk fac

142、tors.(The third is the possibility of belt-tightening by CMS on risk adjustments,which we believe to be five to ten years away.)The firm has established two joint ventures with Humana to expand the CenterWell primary care brand through de novo clinic openings,the first for a combined$600.0 million i

143、n 2020 and the second for$1.2 billion in May 2022.WCAS up-front capital provision allows CenterWell to expand aggressively through clinic openings in Tiers 2 and 3 markets,while Humana leads clinic operations.The joint ventures also provide a put-call structure for Humana to buy out WCAS majority eq

144、uity share within a defined time frame,giving WCAS a guaranteed exit on its investment.In September 2022,Humana announced it would buy WCAS stake in the clinics established thus far under the first joint venture for between$450 million and$550 million.Geographic greenfields:Due to demographic,reimbu

145、rsement,and market dynamics,senior primary care activity has concentrated in specific geographies,Florida chief among them.PE-backed senior primary care platforms currently active in Florida include Bluestone Physician Services,Claremedica Health Partners,InnovaCare Health,MAXHealth,Millennium Physi

146、cian Group,and MyCare Medical Groupnot to mention strategics Cano Health,CenterWell(Humana),Conviva Care Center(Humana),Oak Street Health,Privia Health,and others.BPOC-backed Southeast Primary Care Partners(SPCP),a noteworthy recent entrant in the PE primary care-backed landscape,has taken a differe

147、nt approach by initially scaling in Georgia.Formed from North Atlanta Primary Care as the platform in 2021,SPCP has avoided the extended ramp-up times associated with de novo openings by prioritizing inorganic growth,expanding from approximately 40 practices in 2021 to around 150 at present.Building

148、 a Georgia-based platform offers several advantages.First,the state has traditionally been dominated by health systems,meaning that remaining independent primary care physicians are wary of health system integration and may be more attracted to the flexible support that a platform like SPCP can prov

149、ide.Second,SPCP has cultivated strong relationships with the local physician community through hands-on engagement by management,in contrast to national players.Third,practice valuations are lower in Georgia,which has relatively low value-based care penetration,than in more competitive markets.Where

150、as Florida primary care practices are valued based on the number of attributable MA lives,SPCP can buy practices on an attractive multiple of EBITDA and then gradually work toward bringing those practices onto a higher proportion of value-basedand ultimately capitatedcontracts.The platform expects t

151、o derive about 25%of its revenue from Medicare ACO and commercial value-based contracts in 2023compared with less than 5%in 2021before entering the MA space in 2024.“Primary care plus”:Strategics and PE-backed primary care platforms are looking to ancillaries to the core primary care business to imp

152、rove holistic patient care and avoid costly care episodes.They may do this through either acquisitions or partnerships.Walk-in clinics and extended opening hours Q3 2022 Healthcare Services Report PG 23Sponsored byGENERALIST PROVIDERSprovide patients with an alternative to visiting the ED.Trinity Hu

153、nt Partners-backed MainStreet Family Care,an adult and pediatric primary care practice operating in rural communities in the Southeast,offers urgent care seven days a week.Home healthcare facilitates screening,medication adherence,and therapy for patients with limited mobility or transportation acce

154、ss,thus allowing care coordination teams to intervene with the most medically in-need patients and avoid acute care episodes.Prominent examples include CVS acquisition of Signify,a provider of in-home health evaluation visits that partially substitute for in-clinic primary care,and Humanas acquisiti

155、on of Kindred at Home,now CenterWell Home Health.Finally,behavioral health has become a popular primary care add-on because behavioral comorbidities such as depression and anxiety drag on health,put patients at risk for SUDs,and interfere with treatment plans.Clayton,Dubilier&Rice-backed Vera Whole

156、Health offers in-person and virtual behavioral healthcare as part of its“advanced primary care”model,and Everside has also incorporated behavioral health into its model,which aims to eventually provide care in additional specialties,such as dental and vision,through either partnerships or M&A.1515:“

157、Axios Pro:Health Tech Deals,”Axios,Erin Brodwin and Sarah Pringle,October 20,2022.Source:PitchBook|Geography:US and Canada|*As of September 30,2022Select generalist PE deals in 2022*CompanyCategoryDeal typeClose dateSponsor(s)AcquirerEverside HealthPrimary careGrowthJuly 25New Enterprise Associates,

158、Alta Partners,Endeavor Catalyst,Oak HC/FTN/APremier Physician Support ServicesPrimary careGrowthJuly 1Pine Tree Equity PartnersN/ATaylor Made DiagnosticsOccupational and correctional healthAdd-onJune 13Welsh,Carson,Anderson&Stowe,Cressey&CompanyConcentraAgile Occupational MedicineOccupational and co

159、rrectional healthGrowthMay 11Angeles Equity Partners,Innova Capital PartnersN/ASmoky Mountain Urgent CareUrgent and emergency careBuyoutMay 10Kinderhood IndustriesN/APerlman ClinicPrimary careBuyoutApril 13FFL PartnersN/AClaremedica Health PartnersPrimary careGrowthFebruary 24Revelstoke Capital Part

160、nersN/AUS Mobile Health ExamsOccupational and correctional healthBuyoutFebruary 23Potomac Equity PartnersN/ACommunity Medical GroupPrimary careCarveout (Centene)February 14Waud CapitalN/APediatric AssociatesPrimary careBuyoutFebruary 8TPGN/AQ3 2022 Healthcare Services ReportPG 24Sponsored byGENERALI

161、ST PROVIDERSCompanyCategoryExit typeClose dateExiting sponsor(s)AcquirerPhysicians Immediate CareUrgent and emergency careAcquisitionJuly 1Elevance Health,LLR PartnersWellNow Urgent CarePeakMedUrgent and emergency careAcquisitionApril 15The Convergence GroupOne MedicalSource:PitchBook|Geography:US a

162、nd Canada|*As of September 30,2022Select generalist PE exits in 2022*Q3 2022 Healthcare Services Report PG 25Sponsored byMultispecialty providersStaffing costs and reimbursement changes force multispecialty providers to adaptOverviewMultispecialty providers provide a broad range of specialized care

163、and treatment,allowing patients to undertake much or all of their care within a single organizational umbrella.The advantages of multispecialty providers are manifold.From the provider perspective,they keep referral-based income in-house and,in the case of health systems,hedge against patient and pa

164、yer pressures to move care from inpatient to outpatient settings.From the patient perspective,they can provide a more integrated care experience by centralizing patient records and billing processes across specialist providers.This segment also includes ambulatory surgical centers,which can facilita

165、te surgeries of a single specialty or across a range of specialties,and clinical staffing groups,which contract with a variety of provider types including hospitals.Competition in this segment occurs primarily within discrete regional markets.This is because one of the greatest advantages Multispeci

166、alty PE deal count by quarterSource:PitchBook|Geography:US and Canada|*September 30,2022Source:PitchBook|Geography:US and Canada|*September 30,202202468101214Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q32002020212022*Multispecialty PE exit count by type024680022*Pub

167、lic listingAcquisitionBuyoutQ3 2022 Healthcare Services Report PG 26Sponsored byMULTISPECIALTY PROVIDERSof multispecialty groupsthe ability to refer internallyrequires geographic concentration.One or more hospital-centered health systems dominate many regional markets,and while some PE firms have in

168、vested in hospitals and health systems,this is relatively unusual;hospitals and health systems more often represent competitors with PE firms for market share and acquisition targets.HCA Healthcare,Community Health Systems,and Tenet Healthcare are the largest national-scale for-profit hospital group

169、s.In the ambulatory surgical center space,national strategics SCA Health(now part of Optum)and United Surgical Partners International have advanced consolidation over the past two decades alongside PE investors.This segment includes the following categories:Ambulatory surgical centers(ASCs):ASCs are

170、 facilities in which physicians can perform outpatient surgeries.An ASC may host surgeries within a certain medical specialty,such as optometry,dermatology,gastroenterology,or orthopedics,or they may offer surgeries across a range of specialties.ASCs may be owned by hospitals/health systems,speciali

171、st physician practices,physicians,ASC management companies,or a combination of these,often through a joint venture.Clinical staffing:These are companies that employ physicians,therapists,nurses,and other skilled medical practitioners and contract these workers out to medical facilities such as hospi

172、tals,clinics,skilled nursing facilities,or home health agencies.These groups may offer a range of staffing solutions or focus on a particular specialty,such as anesthesiology,ED,or physical and occupational therapy.Hospitals and health systems:Hospitals provide inpatient care for acute and chronic c

173、onditions across a broad range of specialties.Around two-thirds of US hospitals are affiliated with health systems,regional organizations that operate outpatient,ambulatory,and inpatient facilities across a range of specialties.Independent(not system-affiliated)psychiatric hospitals and animal hospi

174、tals are excluded from this category.Multispecialty clinics and networks:This category encompasses multisite outpatient provider groups that offer care in numerous specialties.It also includes independent provider networks(IPNs)and clinically integrated networks(CINs).Investment driversOutpatient co

175、nvenience and cost savings:The cost of surgical procedures performed in ASCs is roughly half the cost for the same procedure performed in a hospital outpatient department(HOPD).Cost savings are greater still when comparing an ASC-based procedure with a hospital inpatient procedure.For this reason,ov

176、er recent decades,payers have pushed for more surgeries to be performed in ASCs,and CMS has expanded the ASC Covered Procedures List to allow a greater range of surgical care to take place in outpatient settings.Population health:Hospitals,health systems,and multispecialty networks are well equipped

177、 to take on more advanced risk-bearing contract types(capitation).Because they are often the dominant healthcare provider in a given local area,and because they treat individuals across the care continuum,these groups may be able to observe improved outcomes in the form of reduced high-acuity cases

178、as a result of investments in primary care,case management,and social determinants of health(SDOH)efforts.Staffing shortages:The COVID-19 pandemic brought about severe dislocation in the healthcare workforce,which was already facing provider and nurse shortages in many geographies.While hospitals ar

179、e under immense financial stress as a result,clinical staffing groups have seen demand for contract workers soar.Outsourced solutions can also help hospitals deal with utilization variationdue to pandemic surges,for exampleand can reduce administrative burdens for internal human resources department

180、s.Q3 2022 Healthcare Services Report PG 27Sponsored byClinical staffing PE deal count by typeSource:PitchBook|Geography:US and Canada*As of September 30,20222002020212022*GrowthAdd-onPlatform05101520Ambulatory surgical centers PE deal count by typeSource:PitchBook|Geography:US and Canada*

181、As of September 30,20222002020212022*GrowthAdd-onPlatform012345Multispecialty clinics and networks PE deal count by typeSource:PitchBook|Geography:US and Canada*As of September 30,20222002020212022*GrowthAdd-onPlatform0123456Hospitals and health systems PE deal count by typeSou

182、rce:PitchBook|Geography:US and Canada*As of September 30,20222002020212022*GrowthAdd-onPlatform024681012PE activityDeal activity in the multispecialty provider space has remained fairly consistent.Because investment activity in these categories is limited to a few trackable deals per quar

183、ter,quarter-to-quarter variation is to be expected,and 2022s deal totals are in line with historical norms.Notably,we have not recorded a new clinical staffing platform creation since 2020.One noteworthy platform creation in the ambulatory surgical space was TPGs investment in Blue Cloud Pediatric S

184、urgery Centers via The Rise Fund,the firms impact investment arm.Blue Cloud seeks to address significant unmet demand for Medicaid-eligible pediatric and IDD oral surgerya niche that is also being addressed by VC-backed OFFOR Health.On the whole,multispecialty exit activity has been muted,with spons

185、ors sitting on the sidelines amid an uncertain pricing environment.Optums acquisition of TPG-backed Kelsey-Seybold Clinic,a Houston-based multispecialty group,for a reported$2 billion is a noteworthy exception.Kelsey-Seybold is known to be a leader in commercial value-based care contracts,which most

186、 providers have struggled to developsuccessfully.MULTISPECIALTY PROVIDERSQ3 2022 Healthcare Services Report PG 28Sponsored byMULTISPECIALTY PROVIDERSSpotlight:Clinical staffingWith hospitals,skilled nursing facilities,and other healthcare providers facing acute labor shortages,clinical staffing grou

187、ps are navigating a volatile environment.Although demand for all levels of skilled care is highin most cases above pre-pandemic levelsclinical staffing groups have fared differently depending on the type of service they offer.Nurse staffing:Nurse staffing groups directly bill hospitals,skilled nursi

188、ng facilities,and other provider groups,meaning they have been able to pass along the increased costs of hiring and retaining nurses in a competitive labor environment to their clients.Locum tenens:On the other hand,locum tenens groups,which contract out physicians or advanced practice providers(APP

189、s)for hospital roles such as ED and anesthesiology,hold their own payer contracts and reimburse separately from the facility with which they are contracted,meaning they must negotiate higher rates with payers(a slow process not guaranteed to succeed)to account for increased labor costs.Even so,nurse

190、 and allied health staffing business face labor force limitations on their ability to scale up to meet demand.Publicly traded AMN Healthcare Services offers an informative example.During 2021,the companys nursing and allied health division saw a 31%increase in average bill rate on only a 2%increase

191、in billable hours;by contrast,its physician and leadership solutions segment saw a 20%increase in days filled and only a 6%increase in revenue per day filled.16 In addition to labor supply constraints,some locum tenens groups are navigating a shifting reimbursement environment.The No Surprises Act,e

192、nacted in December 2020 and effective beginning January 1,2021,aimed to reduce patient exposure to unexpectedly high medical bills by prohibiting balance billing by out-of-network providers,instead requiring payers and providers to negotiate cost sharing for out-of-network bills or enter arbitration

193、 if they cannot reach agreement.Prior to 2020,several states had already enacted comparable laws.The precise details of the arbitration processbroadly seen as favorable to payershave been the subject of lawsuits and three rules revisions,with the final revision issued in August 2022.No Surprises Act

194、:High-profile reporting drew public attention to the reliance of large PE-backed provider groups,Blackstones TeamHealth and KKRs Envision Healthcare,on balance billing revenue.However,according to Geoffrey Cockrell,Partner and Chair of the private equity group at McGuireWoods,most PE-backed clinical

195、 staffing groups have already moved to bring as much of their revenue in-network as possible because in-network rates,though lower,represent a more reliable income stream.Instead,middle-market physician staffing groups try to build market presence in specific regions in order to manage in-network ra

196、tes to a tolerable level.17 This is broadly consistent with the trend across PE-backed healthcare services platforms over the last two decades,which has seen firms eschew the higher rates garnered by some out-of-network practices,such as the destination SUD treatment centers that PE firms rolled up

197、in the early 2000s,because of payer rate cuts and efforts to push patients toward in-network alternatives.16:“Annual Report 2021,”AMN Healthcare,n.d.,accessed October 20,2022.17:Geoffrey Cockrell,Partner and Chair of the private equity group at McGuireWoods,phone interview with Rebecca Springer,Marc

198、h 22,2022.Q3 2022 Healthcare Services Report PG 29Sponsored bySpotlight:Hospitals and health systemsAntitrust activity:PE acquisitions of hospitalsas opposed to hospital real estatehave historically been limited to a small number of deals by some of the largest firms.The space is now noteworthy as t

199、he only corner within healthcare wherein antitrust and regulatory action are significantly affectingdealmaking.The Biden administration and Lina Khans Federal Trade Commission(FTC)have been vocal in their desire to increase antitrust scrutiny in several sectors including healthcare.In July 2021,the

200、Biden administrations“Executive Order on Promoting Competition in the American Economy”specifically identified hospital consolidation as a priority enforcement area.At least six hospital mergers,including Cerberus-backed Steward Health Cares proposed sale of five hospitals to HCA Healthcare,have bee

201、n canceled or delayed due to antitrust action so far in 2022.Additionally,in 2021,Leonard Green&Partners Prospect Medical Holdings agreed to put up$80.0 million of sale proceeds in escrow to ensure business continuity after a management buyout after the Rhode Island attorney general threatened to bl

202、ock the deal.Because PartiesStatePE sponsor(if applicable)Antitrust/regulatory actionOutcomeProspect Medical Holdings(two hospitals),management buyoutRhode IslandLeonard Green&PartnersState Attorney General required$80 million in escrow to ensure operating continuity post-sale Sale approved June 1,2

203、021Lifespan,Care New EnglandRhode IslandN/AFTC lawsuit;state attorney general announced intention to join the lawsuitCanceled February 23,2022Hackensack Meridian Health,Englewood HealthNew JerseyN/AFTC lawsuitCanceled April 11,2022Dartmouth Health,GraniteOne HealthNew HampshireN/AState attorney gene

204、ral declined to approveCanceled May 16,2022RWJBarnabas Health,Saint Peters Healthcare SystemNew JerseyN/AFTC lawsuitCanceled June 14,2022Steward Health Care(five hospitals),HCA HealthcareUtahCerberus Capital Management(Steward)FTC lawsuitCanceled June 17,2022Advocate Aurora Health,Atrium HealthIllin

205、oisN/AState Health Facilities&Services Review Board initially declined to approveDelayed September 14,2022Source:PitchBook|Geography:US and Canada|*As of September 30,2022Select hospital deals affected by antitrust/regulatory action*MULTISPECIALTY PROVIDERSQ3 2022 Healthcare Services Report PG 30Spo

206、nsored bySource:PitchBook|Geography:US and Canada|*As of September 30,2022Select multispecialty PE deals in 2022*MULTISPECIALTY PROVIDERShospitals are often the largest and most prominent healthcare providers in a given municipality or rural market,PE activity in the hospital space tends to draw int

207、ense public scrutiny,and the current antitrust climate will significantly hinder further deals in the space for the time being.Effects on PE investors:This will have the greatest effect on the small number of firms with active hospital investments,including Cerberus,Equity Group Investments,and Apol

208、lo Global Management,which may see exit and consolidation options constrained.Few firms are likely to enter the hospital space due to the size of assets,poor financial condition of many hospitals,and the secular shift away from inpatient care.One noteworthy exception is StoneBridge Healthcare,an MPT

209、-and Oaktree Capital-backed holding company launched in 2020 with the aim of buying and turning around distressed hospitals.StoneBridge has not yet announced any acquisitions.We have not yet seen antitrust enforcement significantly impair dealmaking in other healthcare categories in which PE-backed

210、platforms typically grow incrementally.Rather,regulatory action that prevents hospitals from consolidating local markets can be beneficial to PE-backed platforms that compete with those hospitals for market power.CompanyCategoryDeal typeClose dateSponsor(s)AcquirerPhysicians Ambulatory Surgery Cente

211、rAmbulatory surgical centersAdd-onJuly 7Migration Capital,New MainStream CapitalU.S.Urology PartnersAdvanced Surgical SolutionsAmbulatory surgical centersAdd-onJune 14Sentinel Capital PartnersNew York Bariatric GroupIntegrative PhysiatryClinical staffingAdd-onJune 1Webster Equity PartnersIntegrated

212、Rehab ConsultantsAllegheny Health NetworkHospitals and health systemsGrowthApril 26Graham Healthcare CapitalN/ASoCal Anesthesia SolutionsClinical staffingAdd-onApril 20Enhanced Healthcare PartnersSynergy Health PartnersAccountable Care Medical GroupMultispecialty clinics and networksAdd-onApril 7Cre

213、stline InvestorsGenuine Health GroupCumberland Anesthesia AssociatesClinical staffingAdd-onMarch 15Leonard Green&Partners,Ares,American SecuritiesNorth American Partners in AnesthesiaBlue Cloud Pediatric Surgery CentersAmbulatory surgical centersBuyoutJanuary 21TPGN/AQ3 2022 Healthcare Services Repo

214、rtPG 31Sponsored byMULTISPECIALTY PROVIDERSCompanyCategoryExit typeClose dateExiting sponsor(s)AcquirerKelsey-Seybold ClinicPrimary careAcquisitionApril 3TPGOptumEnduraCare Acute Care ServicesClinical staffingAcquisitionMarch 18Fulcrum Equity PartnersEnhance TherapiesSelect multispecialty PE exits i

215、n 2022*Source:PitchBook|Geography:US and Canada|*As of September 30,2022Q3 2022 Healthcare Services Report PG 32Sponsored byPhysician Practice Management Companies(PPMs)Staffing costs and reimbursement changes force multispecialty providers to adaptOverviewPPM roll-ups lie at the heart of PE healthc

216、are services investing.The term PPM refers to the organizational structure that physician groups take on when acquired by PE firms,in which a management services organization(MSO),also known as a PPM,supports administrative and business functions for a physician-owned provider corporation(PC).In the

217、 healthcare services investment industry,“PPM”is shorthand for a single-specialty PE-backed consolidator in a category wherein a physician ownership model is commonplace.PPM platforms compete for market share with other PE-backed platforms,local hospitals and health systems,and,in some categories,st

218、rategicsfor instance,DaVita and Fresenius in urology or McKesson in oncology.Although each category has unique practice structures,revenue and cost levers,PPM PE deal count by quarterSource:PitchBook|Geography:US and Canada*As of September 30,20220500300Q1Q3Q1Q3Q1Q3Q1Q3Q1Q3Q1Q320172018201

219、9202020212022*PPM PE exit count by typeSource:PitchBook|Geography:US and Canada*As of September 30,20222002020212022*01020304050Public listingAcquisitionBuyoutphysician compensation dynamics,and provider landscapes,PPM categories have basic investment themes in common,including the opport

220、unity for multiple arbitrage and enhanced revenue through the development of ancillary business lines.PE consolidation in a given category also tends to follow a predictable pattern.A few firms enter a greenfield space as first movers;they are followed by successive waves of platform creation;platfo

221、rms are traded from smaller PE firms to larger ones as they grow,before consolidating(larger platforms buy smaller ones).Along the way,PE firms also explore variations on the core category play,such as pure-play retina care as a variation onophthalmology.Q3 2022 Healthcare Services Report PG 33Spons

222、ored byPHYSICIAN PRACTICE MANAGEMENT COMPANIES(PPMS)This segment contains the following categories:Cardiovascular:Providers that specialize in treatment of the heart and/or veins.Dental:This category includes orthodontics,prosthodontics,endodontics,periodontics,oral surgery,maxillofacial surgery,and

223、 pediatric dentistry.While the classic dental roll-up incorporates general dentistry along with several oral health subspecialties,pure-play roll-ups in orthodontics,oral surgery,and,to a lesser extent,pediatric dentistry have also become popular in recent years.Dermatology:This category includes pr

224、oviders of medical dermatology services,such as skin cancer treatment,Mohs surgery,treatment of skin diseases,and reconstructive surgery;cosmetic dermatology services,such as plastic surgery;and medspa or aesthetic dermatology services,such as Botox and laser hair removal.Dermatology platforms may i

225、ncorporate a mix of medical and cosmetic/aesthetic services or focus exclusively on one type.Ear,nose,and throat(ENT):These providers may broadly treat conditions affecting the otolaryngeal system or focus exclusively on audiology,allergy,or sleep medicine.Gastroenterology:This category includes spe

226、cialists in the gastrointestinal system.Related specialties include medical weight loss care,such as bariatric surgery;endocrinology,or treatment of the endocrine glands;and hepatology,or treatment of the liver.Musculoskeletal:This broad category is typically used to refer to orthopedic surgeons,phy

227、sical therapists,or,less commonly,chiropractors.Some platforms provide integrated musculoskeletal care across the acuity spectrum,from sports medicine and physical therapy to orthopedic joint replacement.Specialists in the musculoskeletal rehabilitation of a specific body part,such as podiatrists,ha

228、nd therapists,and interventional pain management specialists(“pain and spine”)are also included.Obstetrics and gynecology(womens care):Obstetrics refers to prenatal,maternity,and postnatal care,while gynecology refers to care of the female reproductive organs.Oncology:This category includes all canc

229、er treatment practices except medical dermatology practices focused on skin cancer.There are three main subspecialties within oncology,organized by treatment type:surgical,medical(that is,chemotherapy treatment),and radiation.Current PE oncology investment is concentrated in medical oncology.Reprodu

230、ctive medicine(fertility clinics):These providers focus exclusively on fertility care,including fertility testing,in vitro fertilization,egg donation/freezing services,and LGBTQ family building.Urology/renal:Urologists offer specialist care of genitourinary system,including kidneys,bladder,urinary t

231、ract,and male reproductive organs.This category includes dialysis providers.Veterinary:This category includes all animal clinics and hospitals,including specialists in specific species,such as equine,bird,and reptile,and specific organs or systems,such as eye care.Vision:This category includes optom

232、etry,or primary care related to the eye,as well as ophthalmology,or eye care that can include more advanced treatments,such as surgery.Typical PE-backed vision groups incorporate both ophthalmology and optometry,but some groups focus exclusively on optometry or on retina care,an ophthalmic specialty

233、.Other medical specialists:This category includes medical providers in specialties that have not yet attracted sufficient PE investment to warrant inclusion as a separate category,including pulmonary care,mens health,neurosurgery,and wound care/hyperbaric treatment.Q3 2022 Healthcare Services Report

234、 PG 34Sponsored byIndustry driversFragmentation:The extent of fragmentation varies by specialty,but all the categories included in this segment are dominated by small,independent providers.This allows platforms to grow rapidly via M&Aalthough de novo and within-four-walls growth is also importantand

235、 benefit from multiple arbitrage.Platforms can maximize revenue from the practices they acquire by streamlining administrative processes to allow for increased patient volumeand more importantly by putting capital to work to add ancillary business lines that increase per-patient reimbursement or cre

236、ate cash-pay revenue streams.Aging population:With a few exceptions,demand growth in many PPM categories can largely be attributed to patient demographic trends.Incidence of conditions such as periodontal disease,cataracts,osteoarthritis,and cancer is significantly higher among patients over the age

237、 of 60.Provider demographics and generational turnover:When Generation X physicians graduated from medical school,many started their own practices,thus contributing to the current fragmented landscape.As that generation of physicians approaches retirement,many find acquisition by a PE-backed platfor

238、m an attractive option for liquidating the wealth they have built via their practiceespecially after the harrowing COVID-19 years.By contrast,many newly minted doctors prefer an employment model over starting their own practice,as employment provides greater flexibility and avoids adding startup cos

239、ts to substantial student loan debt.This generational dynamic allows PE-backed platforms to both acquire add-ons and hire young physicians to backfill retirements and expand practices.Changing fertility patterns:While US fertility rates are declining overall,fertility among older women has increased

240、 significantly in the past three decades due to improved fertility care and women pursuing careers prior to having children.Between 1990 and 2019,the number of babies born annually to women aged 30 to 34 increased by 22.1%,aged 35 to 39 by 67.4%,and 40 to 44 by 132.5%.18 This translates to increased

241、 demand for reproductive medicine,because older women are more likely to utilize fertility care to conceive.Pandemic pets:Growing pet ownership and“pet humanization”that is,owners providing their pets with healthcare and products comparable to human equivalentspredated COVID-19,but accelerated as wh

242、ite-collar workers sought companionship while working from home.As a result,demand for veterinary services has increased significantly,making the category highly sought after by investors.PE activityPPM deal activity figuresfor which deal counts are high,thereby allowing quarter-to-quarter analysis

243、with greater certaintypoint clearly to a midyear shift in market sentiment.Note,however,that Q3s actual total deal count is likely higher due to data collection lags.Although we are still seeing platform trades and strong inorganic growth,investors are becoming more circumspect and price conscious.D

244、eal activity in the most popular roll-up categories,including dental,gastroenterology,musculoskeletal,veterinary,and vision,shows a reversion to activity levels resembling what we saw in 2019,although with fewer platform trades occurring.Large platform deals included EyeSouth Partners,GI Alliance,Pa

245、radigm Oral Surgery,People,Pets&Vets,Novum Orthopedic Partners,Mid-Atlantic Dental Partners,Therapy Partner Solutions,Vision Innovation Partners,and the merger of PHYSICIAN PRACTICE MANAGEMENT COMPANIES(PPMS)18:“Fertility Rates:Declined for Younger Women,Increased for Older Women,”US Census Bureau,A

246、nne Morse,April 6,2022.Q3 2022 Healthcare Services Report PG 35Sponsored byPlatinum Dermatology Partners and West Dermatology.The dental,dermatology,musculoskeletal,veterinary medicine,and vision spaces are by now well established,with 50+location platforms being acquired by even larger groups.After

247、 many independent practice sellers pushed to complete deals before years end in 2021 to avoid capital gains tax and take advantage of lofty multiples,the sell-side pipeline for add-ons is somewhat diminished.Of note is the recovery in dermatology transaction activity,which had declined from 2017 to

248、2018 highs but now appears reinvigorated following a handful of large platform trades of established medical dermatology practices(Dermatologists of Central States,Epiphany Dermatology,and Forefront Dermatology)and growth investments in several smaller cosmetic and aesthetic/medspa groups.Smaller de

249、als in interventional pain management(Mays&Schnapp Neurospine and Pain),vascular care(Texas Endovascular Associates),and reproductive health(Fertility Institute of NJ&NY)in 2021 and 2022 demonstrate that GPs are continuing to develop investment theses in emerging subcategories.PHYSICIAN PRACTICE MAN

250、AGEMENT COMPANIES(PPMS)Cardiovascular PE deal count by typeSource:PitchBook|Geography:US and Canada*As of September 30,20222002020212022*GrowthAdd-onPlatform012345678Dental PE deal count by typeSource:PitchBook|Geography:US and Canada*As of September 30,20222002020212022*Growth

251、Add-onPlatform0204060800PPM exits may have slowed significantly from 2021s pace,but 2021 was anomalous,and data through Q3 2022 suggests that the full year could post the second-highest exit count on recordif the market does not completely shutter.We expect that PPM platform trades for th

252、e remainder of the year will skew toward smaller assets due to the condition of syndicated loan markets.Although most PPM exits are sponsor-to-sponsor buyouts,strategics acquired three large platforms so far in 2022:Alpaca Audiology,SAGE Veterinary Centers,and Vein Clinics of America.Q3 2022 Healthc

253、are Services ReportPG 36Sponsored byDermatology PE deal count by typeSource:PitchBook|Geography:US and Canada|*As of September 30,20222002020212022*GrowthAdd-onPlatform0070Musculoskeletal PE deal count by typeSource:PitchBook|Geography:US and Canada|*As of September 30,20222017

254、200212022*GrowthAdd-onPlatform020406080100Ear,nose,and throat PE deal count by typeSource:PitchBook|Geography:US and Canada|*As of September 30,20222002020212022*GrowthAdd-onPlatform05101520Obstetrics and gynecology PE deal count by typeSource:PitchBook|Geography:US and Canada|

255、*As of September 30,20222002020212022*GrowthAdd-onPlatform02468101214Gastroenterology PE deal count by typeSource:PitchBook|Geography:US and Canada|*As of September 30,20222002020212022*GrowthAdd-onPlatform055Oncology PE deal count by typeSource:PitchBook|Geography:U

256、S and Canada|*As of September 30,20222002020212022*GrowthAdd-onPlatform0123456PHYSICIAN PRACTICE MANAGEMENT COMPANIES(PPMS)Q3 2022 Healthcare Services ReportPG 37Sponsored byOther medical specialists PE deal count by typeSource:PitchBook|Geography:US and Canada|*As of September 30,2022201

257、7200212022*GrowthAdd-onPlatform012345678Reproductive medicine PE deal count by typeSource:PitchBook|Geography:US and Canada|*As of September 30,20222002020212022*GrowthAdd-onPlatform05101520Urology/renal PE deal count by typeSource:PitchBook|Geography:US and Canada|*As of Septe

258、mber 30,20222002020212022*GrowthAdd-onPlatform02468101214Veterinary PE deal count by typeSource:PitchBook|Geography:US and Canada|*As of September 30,20222002020212022*GrowthAdd-onPlatform0500Vision PE deal count by typeSource:PitchBook|Geography:US and Canada|*As of

259、 September 30,20222002020212022*GrowthAdd-onPlatform020406080100120PHYSICIAN PRACTICE MANAGEMENT COMPANIES(PPMS)Q3 2022 Healthcare Services Report PG 38Sponsored bySpotlight:OncologyAlthough we have not tracked an oncology platform creation since 2018,numerous independent providers remain

260、 candidates for acquisition by active PE-backed platforms,including OneOncology,Verdi Oncology,Integrated Oncology Network,and The Oncology Institute,which is now public.Oncology is also noteworthy as one of the few PPM specialties wherein experimentation with total cost of care(TCOC)capitation mode

261、ls is taking place,and is therefore an important bellwether for firms seeking to understand the tradeoffs associated with moving further along the risk spectrum.Enhanced Oncology Model:In August,CMS announced the Enhanced Oncology Model(EOM),a new five-year reimbursement model pilot building on the

262、previous Oncology Care Model(OCM),which ran from 2016 to 2021.CMS seeks to improve cancer outcomes while controlling costs,as cancer is among the costliest conditions to treat,with incidence concentrated in the growing 65+population.Counterintuitively,advancements in oncology are expected to lead to

263、 ballooning treatment costs as expensive but effective new therapies,such as checkpoint inhibitors,become the clinical standard of care and patients live longer.Additionally,advances in precision oncology,including liquid biopsy,and real-world evidence,though nascent,hold promise for improving early

264、 cancer detection,refining clinical pathways,and more accurately predicting outcomes.EOM improvements over OCM:Although the OCM produced mixed results,the EOM incorporates several improvements,which should result in more favorable outcomes.One problem with the OCM was that novel therapy adjustmentsi

265、ntended to account for treatment with clinically superior,yet expensive,drugswere calculated in aggregate rather than by cancer type,thereby exposing practices to significant cost variation.Another was that cost prediction modelsused to set a target total cost of care based on a patients risk profil

266、ewere based solely on claims data,which does not capture nuances in indication that inform care regimens and therefore costs.19 In contrast,the EOM uses cancer-type-specific price prediction models and novel therapy adjustments and will also incorporate clinical data into price prediction.Limiting t

267、he EOM to common cancer types helps ensure that sufficient data will be available to support this.20 Finally,the OCM proved to be a poor fit for low risk/low intensity cancer episodes such as hormonal treatment for prostate or breast cancer.This is because one of the primary ways oncologists can low

268、er TCOC for patients undergoing chemotherapy is through care coordination to alleviate chemotherapy symptoms that may result in acute episodes such as ED visits due to dehydration.Oncologists have less opportunity to affect TCOC savings in this way for lower-risk cancer patients.21 The EOM addresses

269、 this by excluding patients who are receiving hormonal therapy.Other updates incorporated in the EOM include a requirement for all participants to start the program with both upside and downside risk,reduced practice-level payments to better align with actual costs,an incentive to treat dual-eligibl

270、e(Medicare and Medicaid)patients,and more extensive participant redesign requirements including health equity planning.22 Taken as a whole,the EOM updates will require greater upfront administrative lift from participants than the OCMwhich was already administration-intensivebut should lead to less

271、cost variation,which will be attractive to PE-backed platforms that have already invested in the OCM and other value-based care capabilities.PHYSICIAN PRACTICE MANAGEMENT COMPANIES(PPMS)19:“The Oncology Care Model at 5 YearsValue-Based Payment in the Precision Medicine Era,”JAMA Network,Viewpoint,Sa

272、myukta Mullangi,MD,MBA,Stephen M.Schleicher,MD,MBA,and Ravi B.Parikh,MD,MPP,July 1,2021.20:“The Enhanced Oncology Care Model and What it Means for Participating Oncology Practices,”OneOncology,Dr.Davey Daniel,August 29,2022.21:Ibid.22:“What You Need To Know About CMS New Enhancing Oncology Model,”Ad

273、visory Board,Lindsey Paul and Ashley Riley,July 1,2022.Q3 2022 Healthcare Services Report PG 39Sponsored byPE opportunities:Unlike the lucrative radiation oncology space,which strategics and PE firms consolidated in the early 2000s,medical oncology practices have tighter margins and have traditional

274、ly relied on patient volume as the primary revenue lever,according to Nick Hernandez,CEO of ABISA.23 Risk-based arrangements like the EOM offer potential for greater upside,while the scale and capital availability enjoyed by PE-backed platforms gives them an advantage in building the administrative,

275、technological,and clinical capabilities necessary to succeed in the program.For example,General Atlantic-backed OneOncology announced in October 2022 that all 14 of its practices had applied to participate in the EOM(although application is not binding).Although questions about the design of the EOM

276、 remainespecially around the narrowing of the eligible patient populationparticipation is likely to be attractive for PE-backed platforms looking to improve clinical outcomes and demonstrate their ability to succeed in a value-based environment to commercial payers and prospective buyers.PHYSICIAN P

277、RACTICE MANAGEMENT COMPANIES(PPMS)Source:PitchBook|Geography:US and Canada|*As of September 30,2022Select PPM PE deals in 2022*23:Nick Hernandez,CEO of ABISA,phone interview with Rebecca Springer,March 22,2022.CompanyCategoryDeal typeClose dateSponsor(s)AcquirerArbor Centers for EyecareVisionAdd-onS

278、eptember 15Shore Capital PartnersEyeSouth PartnersMays&Schnapp Neurospine and PainMusculoskeletalBuyoutSeptember 13Compass Group Equity PartnersN/AFertility Institute of NJ&NYReproductive medicineAdd-onSeptember 6Partners GroupAxia Womens HealthPeople,Pets&VetsVeterinaryAdd-onSeptember 1Harvest Part

279、nersVetCorNovum Orthopedic PartnersMusculoskeletalAdd-onJuly 20Welsh,Carson,Anderson&StoweUnited Musculoskeletal PartnersVets Best FriendVeterinaryAdd-onJune 30Revelstoke Capital Partners,Halle Capital Management,et al.Rarebreed Veterinary PartnersMid-Atlantic Dental PartnersDentalAdd-onJune 22New M

280、ountain CapitalSonrava Health(FKA Western Dental)Platinum Dermatology Partners,West DermatologyDermatologyMergerJune 21Sterling Partners(Platinum),Sun Capital(West)N/AVision Innovation PartnersOpthalmologyBuyoutApril 7Gryphon InvestorsN/ATexas Endovascular AssociatesCardiovascularBuyoutJanuary 14Ful

281、crum Equity PartnersFulcrum Equity PartnersQ3 2022 Healthcare Services ReportPG 40Sponsored byPHYSICIAN PRACTICE MANAGEMENT COMPANIES(PPMS)CompanyCategoryExit typeClose dateExiting sponsor(s)AcquirerEyeSouth PartnersVisionBuyoutOctober 7Shore Capital PartnersOlympus PartnersVein Clinics of AmericaCa

282、rdiovascularAcquisitionOctober 4Frazier Healthcare PartnersUSA Vein ClinicsGI AllianceGastroenterologyManagement buyoutSeptember 15Waud Capital PartnersManagement,Apollo Global ManagementParadigm Oral SurgeryDentalBuyoutSeptember 2InTandem Capital PartnersBlackRock Private Equity PartnersSAGE Veteri

283、nary CentersVeterinaryAcquisitionJune 3Chicago Pacific FoundersNational Veterinary AssociatesDermatologists of Central StatesDermatologyBuyoutJune 1Sheridan Capital PartnersSkyKnight CapitalAlpaca AudiologyENTAcquisitionFebruary 28Thompson Street Capital PartnersSonovaForefront DermatologyDermatolog

284、yBuyoutFebruary 10OMERS Private Equity,Penfund ManagementPartners GroupEpiphany DermatologyDermatologyBuyoutFebruary 1CI Capital PartnersLeonard Green&PartnersTherapy Partner SolutionsMusculoskeletalBuyoutJanuary 14Broadcrest Asset Management,Walnut Grove Capital PartnersLee Equity PartnersSource:Pi

285、tchBook|Geography:US and Canada|*As of September 30,2022Select PPM PE exits in 2022*Q3 2022 Healthcare Services Report PG 41Sponsored bySkilled care and behavioral healthProviders navigate staffing shortages and reimbursement pressure amid sky-high demandOverviewSkilled care and behavioral health pr

286、oviders focus on rehabilitation,chronic conditions,and overall health and wellness management rather than acute conditions.The segment includes care and treatment carried out largely by nurses,licensed therapists and technicians,and sometimes overseen by physicians.These providers deliver some of th

287、e most in-demand healthcare services in the US today.Much of the skilled care industry focuses on providing nursing and therapy for older adults,whether in the home or in residential facilities,meaning that demand for these services will continue to expand as the US population ages.Another key const

288、ituency is people with IDDs.For decades,IDD healthcare has been an Skilled care and behavioral health PE deal count by quarterSource:PitchBook|Geography:US and Canada|*As of September 30,2022Source:PitchBook|Geography:US and Canada|*As of September 30,20220070Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q

289、3Q4Q1Q2Q3Q4Q1Q2Q32002020212022*Skilled care and behavioral health PE exit count by type0002020212022*Public listingAcquisitionBuyoutQ3 2022 Healthcare Services Report PG 42Sponsored byunderinvested area,creating immense growth opportunities.Finally,a societal shift t

290、oward recognizing behavioral health as an important dimension of overall health and wellness,coupled with rising rates of mental illness,has underscored the need for a significant increase in behavioral health provision,especially in rural and underserved areas.This segment contains the following ca

291、tegories:ABA and pediatric therapy:ABA refers to a type of therapy that can be used to treat a range of developmental disorders,but it is typically associated with the treatment of autism spectrum disorder(ASD)in children.ABA groups often provide a combination of ABA and other speech,educational,occ

292、upational,or physical therapy,and may provide services in the home or in schools,in addition to in clinics.ABA therapy is provided by board-certified behavior analysts(BCBAs)and registered behavior technicians(RBTs).Home health and hospice:This category encompasses Medicare-focused home health and h

293、ospice agencies and Medicaid home and community-based services(HCBS)providers,as well as home-based medical care for children.Our data excludes companies that offer exclusively unskilled home care or facilitate self-directed care.IDD care:This category encompasses a variety of medical and support se

294、rvices for adults and children with intellectual and developmental disabilities.These services include residential group homes,adult day care,home care,and community-based care.Infusion:Infusion therapy refers to the intravenous or subcutaneous administration of specialty drugs.Infusion providers ma

295、y be specialty pharmacies or providers that work with such pharmacies.They may provide infusion therapy in an ambulatory clinic and/or in the home.Rheumatology clinics,which use infusion therapy to treat conditions such as rheumatoid arthritis and osteoporosis,are included in this category.Mental he

296、alth and SUD treatment:At the lowest acuity level,mental health treatment involves“talk therapy”for conditions such as anxiety and depression,or simply to improve a patients mental well-being.Further up the acuity scale,patients may be treated through intensive outpatient programs(IOPs),partial hosp

297、italization programs(PHPs),or in inpatient psychiatric hospital settings.Eating disorder treatment is a subcategory of mental health,and can be provided in inpatient,residential,or day treatment(IOP or PHP)settings.Many PE-backed SUD treatment providers focus on opioid use disorder and utilize medic

298、ation-assisted treatment(MAT).Others may provide daytime/community-based programs,intensive outpatient treatment via IOPs or PHPs,and/or residential programs.Providers may focus on one type of treatment,such as mental health,eating disorder treatment,or SUD treatment,or offer a combination thereof.S

299、killed nursing:This segment includes nursing homes and residential rehabilitation facilities that offer short-term/post-acute care and/or long-term care.This can be care for older adults or other patients who are recovering from an injury,illness,or medical procedure,including traumatic brain injury

300、(TBI).Assisted living and retirement communities that do not provide medical care are excluded from our dataset.Investment driversAging population:Demand in the home health,palliative care,and hospice and skilled nursing categories is driven primarily by demographic trends.As more US residents live

301、into their eighties and beyond,families,government agencies,and SKILLED CARE AND BEHAVIORAL HEALTHQ3 2022 Healthcare Services Report PG 43Sponsored bypayerschief among them Medicareare searching for better and more affordable ways to care for older adults.Rising autism rates:Rates of ASD diagnosis a

302、mong US children have increased steadily from about 1 in 150 in 2000 to about 1 in 44 in 2018,the last year for which data is available.24 This is believed to be due to a combination of increased prevalence,increased diagnosis rates,and expansion in the clinical definition of autism.Rising autism ra

303、tes have created significant unmet demand for ABA,the clinical gold standard in ASD treatment.The supply of BCBAs,practitioners who oversee ABA therapy,is also increasing rapidly to catch up to demand,thereby creating opportunities for de novo expansion by PE-backed ABA platforms.The number of BCBAs

304、 in the US increased by 65%between 2018 and 2021,but 37.4%of counties still had no BCBAs practicing in 2021.25 Shift from skilled nursing to home care:Even prior to the COVID-19 pandemic,patient and family preferences and cost pressures were leading to a shift away from skilled nursing facilities(SN

305、Fs)and toward in-home care for older adults.The pandemic accelerated this movement,as many SNFs struggled with virus outbreaks,staffing shortages,and the need to strictly limit visitors.While SNFs still play an important role in rehabilitation and care for some patients,demand trends have made in-ho

306、me care an extremely attractive investment area.Mental health and SUD rates:In recent years,the medical field has moved toward a more holistic approach to patient care,including treatment of behavioral comorbidities alongside physical ailments.The COVID-19 pandemic exacerbated unmet demand for provi

307、ders,as many struggled to cope with lockdowns,social isolation,and economic instability,thus resulting in elevated rates of depression,anxiety,and SUD.Additionally,public awareness of and interest in treating behavioral health issues has grown,thus prompting more people to seek care.Specialty drugs:

308、As generics and patent phase-out put pressure on commonly used drugs and biologics technology advances,pharmaceutical companies have developed a promising pipeline of specialty drugs,many of which are administered via infusion.As a result,the number of patients receiving infusion therapy is increasi

309、ng,and payers are highly motivated to control infusion therapy costs by moving infusion therapy into ambulatory settings,which offers a roughly 60%cost savings over hospital infusion,and the home,which offers 80%to 90%cost savings over hospital infusion,wherever possible.PE activityThe dramatic decl

310、ine in deal and exit activity in the skilled care and behavioral health segment underscores the dual-pronged staffing and reimbursement pressure that many businesses face.ABA and pediatric therapy deal activity has held up,although platform creation in the category has slowed since 2018 to 2019.ABA

311、has experienced flat reimbursement amid rising staffing costs,but the space is not under the same margin pressure as home health and continues to be buoyed by high demand and a growingif still insufficientworkforce.The category saw three larger platform trades so far in 2022:Autism In Motion Clinics

312、,Theraplay,and,most recently,Action Behavior Centers.Additionally,deal activity in SKILLED CARE AND BEHAVIORAL HEALTH24:“Data&Statistics on Autism Spectrum Disorder,”CDC,March 2,2022.25:“Trends in Geographic Access to Board Certified Behavior Analysts Among Children with Autism Spectrum Disorder,201

313、82021,”Springer Link,Journal of Autism and Developmental Disorders,Marissa E Yingling,Matthew H.Ruther,and Erick M.Dubuque,January 5,2022.Q3 2022 Healthcare Services Report PG 44Sponsored byinfusion,which represents a small proportion of the segments overall deal flow,has been strong this year,with

314、2022s deal activity already on par with 2021s whole-year record.Finally,although deal activity in mental health and SUD treatment has declined modestly from the levels seen in 2020 and 2021,the category still saw several noteworthy deals in 2022,including trades of Monte Nido&Affiliates and Bradford

315、 Health Services and Vistria Groups acquisition of adolescent-focused Sandstone Care.Despite the near-term economic headwinds that skilled care and behavioral health segments are experiencing,investors continue to flock to the space due to compelling long-term demand trends.Two high-profile acquisit

316、ions by Optum in 2022Refresh Mental Health,which Kelso Private Equity sold less than 1.5 years after buying,and home health provider LHC Group,which Optum has agreed to buy for$6.0 billiondemonstrate that the space will see attractive exit opportunities once valuations normalize and macroeconomic un

317、certainty recedes.In response,Optums competitors,including both payviders and retailers,will undoubtedly look to the behavioral health and home health spaces to augment their primary care plays.As a result,we expect deal activity in skilled care and behavioral health to bounce back in 2023.SKILLED C

318、ARE AND BEHAVIORAL HEALTHHome health and hospice PE deal count by typeSource:PitchBook|Geography:US and Canada*As of September 30,202202040608020022*GrowthAdd-onPlatformGrowthAdd-onPlatformABA and pediatric therapy PE deal count by typeSource:PitchBook|Geography:US and Canada*A

319、s of September 30,202205002020212022*GrowthAdd-onPlatformInfusion PE deal count by typeSource:PitchBook|Geography:US and Canada*As of September 30,2022024680022*GrowthAdd-onPlatformIDD care PE deal count by typeSource:PitchBook|Geography:US and Canada*As o

320、f September 30,2022GrowthAdd-OnPlatform024680022*Q3 2022 Healthcare Services Report PG 45Sponsored bySKILLED CARE AND BEHAVIORAL HEALTHMental health and SUD treatment PE deal count by typeSource:PitchBook|Geography:US and Canada*As of September 30,2022020406080200202

321、0212022*GrowthAdd-onPlatformSkilled nursing PE deal count by typeSource:PitchBook|Geography:US and Canada*As of September 30,2022024680022*GrowthAdd-onPlatformSpotlight:Home health and hospiceDealmaking falters:For many years,demographic trends and a widespread consumer-and pay

322、er-led transition from residential skilled nursing facilities into the home have made home health a compelling investment opportunity.However,after a banner 2021,the space has seen a sharp decline in deal activity,with only two platform buyouts in Q3 2022.Humanas$2.8 billion sale of 60%of Kindred at

323、 Homes hospice business to Clayton,Dubilier&Rice is an exception that proves the rule,as it completes a divestment that Humana publicly committed to in April 2021.Two forces have temporarily hobbled the space,with different effects on different subcategories:rising staffing costs and unfavorable rei

324、mbursement dynamics.According to Barry Freeman,Managing Director and Co-head of Healthcare at Lincoln International,these dynamics have created seller-buyer pricing misalignment.In early 2021,multiples for small platforms$10 million to$20 million EBITDAwere as high as mid-to-high teens for home hosp

325、ice businesses,low teens for skilled home health,and low double digits for nonmedical home care(Medicaid and private duty).Many sellers are still seeking multiples at this level,whereas buyers are seeking adjustments to account for uncertainty about future EBITDA and margin projections.26 This means

326、 that deal activity will likely resume in late 2022 or 2023albeit at lower multiplesas operators adjust to a“new normal”staffing and reimbursement environment and a pricing consensus emerges.Home care(Medicaid and private duty):Although much of the healthcare industry is struggling with staffing sho

327、rtages,the home care space has been particularly hard hit due to its reliance on low-skilled care workers,who are more likely to leave healthcare altogether for more attractive low-skilled work in other industries.Medicaid-focused and private duty agencies that provide personal care and companionshi

328、p services have therefore been the hardest hit.As low-margin businesses,many smaller home care agencies are now struggling to fill authorized hours and maintain profitability.Well-run multistate platforms that enjoy advantages of scale are best-positioned to weather the storm.Home care providers are

329、 also lobbying states and MCOs for reimbursement rate increases.However,any rate increases are likely to take effect slowly,and providers may need to pass a portion of these improved rates on via wages in order to retain staff.On the positive side,margin pressures may prompt small operators to sell,

330、thus enabling existing platforms to grow opportunistically via M&A.SKILLED CARE AND BEHAVIORAL HEALTH26:Barry Freeman,Managing Director and Co-head of Healthcare at Lincoln International,phone interview with Rebecca Springer,October 14,2022.Q3 2022 Healthcare Services Report PG 46Sponsored bySKILLED

331、 CARE AND BEHAVIORAL HEALTHHome health and hospice(Medicare):Medicare-focused home health and hospice businesses have also come under pressure.These agencies,which employ primarily registered nurses and therapists,are also seeing staffing costs rise,though not to the extent of Medicaid and private d

332、uty home care companies.However,the Medicare reimbursement environment has faced a series of challenges.Since the introduction of the Prospective Payments System(PPS)in 1997,Medicare has provided capitated home health reimbursement based on patient risk scoring.First,beginning January 1,2021,CMS new

333、 patient-driven grouping model(PDGM)removed the opportunity to receive upward adjustments on these capitated payments in exchange for providing physical and/or occupational therapy sessions.Second,CMS finalized 2023 home health PPS rule provides a scant 0.7%upward revision for home health payments,and the agency has said it will continue to phase in reimbursement cuts in the form of behavior adjus