CareCentrix, backed by Summit, enlists Morgan Stanley to weigh options

Summit Partners' investment in the post-acute care benefits manager dates to September 2011.

CareCentrix, the Summit Partners-backed home- and post-acute care benefits manager, is evaluating options in response to inbound interest, according to three sources familiar with the matter.

The company hired Morgan Stanley after fielding unsolicited interest from strategic parties, with initial bids for CareCentrix submitted over the last couple weeks, the people said.

A strategic outcome is most likely should a transaction occur, some of the sources said, pointing to healthcare insurers as logical suitors.

“The COVID-19 pandemic has accentuated how important home health care is to the future of health care. Beyond that, we have no comment,” a CareCentrix spokesperson wrote to PE Hub in an email.

Boston-based Summit, which did not return requests for comment, completed its growth equity investment in CareCentrix in 2011. Water Street Healthcare Partners previously owned the company.

Morgan Stanley declined to comment.

Led by John Driscoll, CareCentrix manages care for 26 million members through over 8,000 provider locations. The company uses analytics to determine the appropriate site for post-acute care, providing support and coordination for patients and their families throughout care transitions, including to and from skilled nursing facilities (SNFs) and through home health, home durable medical equipment, home infusion and sleep services.

CareCentrix produces normalized EBITDA of approximately $80 million, accounting for the loss of its Cigna contract (effective January 2021) plus new business. Cigna, its largest client, contributed more than 50 percent of the company’s earnings and cash flow, according to Moody’s.

CareCentrix in May bought Turn-Key Health, which serves palliative care plans. Turn-Key is the remaining piece of Enclara Health that Consonance Capital did not sell to Humana in December 2019.

For CareCentrix, its current deal talks follow a sale process conducted by UBS and Allen & Co in late 2017.

Consistent with reports at the time, sources told PE Hub that the previous process was anticipated to produce a deal valued north of $1 billion, but CareCentrix ultimately shelved the process amid potential buyer concern around Cigna concentration.

In October 2017, pharmacy benefits manager Express Scripts said it would buy EviCore Healthcare – another benefits manager – for $3.6 billion. Just a few months later, Cigna in March 2018 announced a $54 billion deal for Express Scripts.

In other relevant activity, UnitedHealth Group’s Optum unit in May bought naviHealth, whose tech-enabled tools and services help healthcare providers reduce the costs associated with post-acute care.

The seller, Clayton, Dubilier & Rice, generated a 2.5x multiple of invested capital on naviHealth through its sale, which valued the company at approximately $2.5 billion, sources familiar with the matter told PE Hub at the time.

Action Item: Read about Summit’s investment in CluePoints earlier this month.