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Great Point Partners makes 3.8x its money on Citra 

GTCR’s Cedar Gate buys Citra, whose software helps healthcare providers and payers transition to value-based care – a trend poised to accelerate amid the downturn.

Great Point Partners has generated a 3.8x return on its sale of Citra Health Solutions, whose technology helps healthcare providers and payers transition to value-based care models, according to a source with knowledge of the matter. 

The Greenwich, Connecticut-based private equity firm last week struck a deal to sell Citra to GTCR-backed Cedar Gate Technologies. Financial terms weren’t disclosed. 

The deal concludes a Cain Brothers-run process that kicked off early this year and persisted through the downturn. 

Headquartered in Raleigh, North Carolina, Citra is a tech-enabled software company that automates and manages complex capitation arrangements for healthcare payers and providers. Its platform, EZ-SUITE, helps its partners manage and transition to value-based models of care, as opposed to the traditional fee-for-service model of reimbursement.  

Under value-based or risk-based payment models, providers assume financial risk and are encouraged to prioritize quality and lower costs as opposed to the volume of services. 

From GTCR’s perspective, this model has proven more sustainable amid covid-19, said John Kos, a principal at the Chicago PE firm.

Many healthcare providers operating the traditional fee-for-service model have been hit hard over the last three months amid government-mandated closures, said Kos. “It has woken people up to the idea that, ‘if I had revenue not coming from fee-for-service, I would have been fine.’”

Citra’s customers in the meantime have largely remained unaffected, Kos said.

Under GPP’s backing, Citra over the last five years grew revenue at an 18 percent annual rate alongside EBITDA growth of 43 percent per year, according to GPP’s June 24th announcement

“We think there will be an acceleration in the kind of value-based care that [Cedar Gate and Citra] enables,” said Kos, who declined to provide additional financial detail.  

In 2014, GPP invested in Citra, formerly Orange Health Solutions/MZI HealthCare. The investment was made through its second fund, GPP II, which closed on $215 million in December 2014. 

For Cedar Gate, the acquisition follows its formation almost six years ago by GTCR in partnership with industry veteran David Snow.

Snow most recently was the CEO of Medco, one of the country’s largest pharmacy benefit managers. Medco under Snow’s leadership saw its revenue grow from $34 billion to more than $70 billion prior to its eventual sale to Express Scripts in 2012.

The acquisition is the second for Cedar Gate since its formation. The platform in October 2018 acquired Global Healthcare Alliance. 

GTCR completed most of its diligence on Citra before pandemic-driven market chaos accelerated in March, Kos said. The platform will continue to seek growth both through additional M&A and organically, he said.

“The key for us is finding high-quality businesses before big strategics do,” Kos said.

Great Point declined to comment.

Action Item: Check out GTCR’s latest form ADV here

Correction: A previous version of this report incorrectly said Cedar Gate’s customers have largely remained unaffected from covid-19. The report has been updated to clarify that Kos was discussing Citra, not Cedar Gate.