BBH takes American Physician Partners off the auction block amid regulatory overhang

Congressional inquiries facing APP's larger PE-backed peers, TeamHealth and EmCare, ultimately weighed on the process.

BBH Capital Partners called off the auction for American Physician Partners late last year after industry noise around surprise medical billing distracted potential suitors, according to sources familiar with the matter.

Cerberus Capital Management was a contender in the private equity-focused sales process, with initial discussions that valued the provider of outsourced emergency services at $1 billion-plus, sources said.

As the auction evolved and unexpected regulatory concerns facing certain APP peers emerged, price talk paired back significantly, sources said, ultimately contributing to BBH’s decision to hold and grow the business until the dust settles.

Moelis and Brentwood Capital Advisors were retained for financial advice on the sales process, PE Hub initially reported, with marketing materials distributed in early September.

The timing of the sales process grew complex quickly thereafter.

Catching parties involved in the process off guard, Congressional leaders on Sept. 16 sent letters to PE firms including KKR, Blackstone Group and Welsh, Carson, Anderson & Stowe, which own or have owned physician staffing companies. The inquiry questioned the firms’ roles in surprise medical billing practices, also known as “balance billing,” citing specific examples of patients receiving unexpected large bills following medical procedures.

The letters specifically note Blackstone-backed TeamHealth and EmCare, which KKR acquired through its $9.9 billion mega deal for Envision Healthcare in 2018.

While sources tell PE Hub that APP has never lost a contract and does not do any balance billing, the regulatory challenges facing TeamHealth and EmCare created a significant overhang on the process, sources say.

Adding to the complexity of valuing a potential transaction, APP’s October acquisition of TruePartners Emergency Physicians brought the company’s adjusted pro forma Ebitda to $125 million-plus, from the approximately $100 million that was initially marketed, one source says.

Through both organic growth and M&A efforts, APP has expanded quickly since its April 2015 inception. Initially created through the acquisitions of Align MD and Elite Emergency Services, APP, including its latest purchase, encompasses more than 140 care sites across the country.

BBH, the private equity arm of Brown Brothers Harriman, completed its recapitalization of APP in January 2017.

Brentwood Capital advised APP on the January 2017 transaction, while a $42.2 million private equity fund affiliated with Brentwood Capital, BCP II, co-invested alongside BBH.

Led by industry veteran and CEO John Rutledge, APP provides outsourced emergency department and hospitalist management services to medical surgical hospitals.

APP, Cerberus, Moelis and Brentwood declined to comment. BBH did not return requests for comment.

Action Item: Check out BBH’s latest Form ADV: