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Health Evolution Partners-backed CenseoHealth returns to the market

Health Evolution Partners, the healthcare fund run by a former George W. Bush administration official, is looking to exit its investment in CenseoHealth, three sources told Buyouts.

Goldman Sachs is serving as financial adviser to the provider of in-home physician-conducted health assessments, the sources said.

The Dallas company generates EBITDA in the ballpark of $40 million, one of the sources said. A multiple of EBITDA of about 9x is possible, another source speculated. If the asset trades, a sale to private equity is most likely, the sources said.

San Francisco’s Health Evolution Partners bought its controlling interest in CenseoHealth in 2012. The firm ran a process to sell the company a few years ago but failed to secure a buyer, two of the sources said.

Founded in 2009, CenseoHealth’s network of doctors visits seniors at home to evaluate their health for Medicare Advantage plans. In other words, patient data is collected and used by private health plans to bill Medicare.

Executive Chairman Kevin McNamara took the helm as CEO in March 2015, after Co-Founder Jack McCallum retired in July 2013. In conjunction with McNamara’s appointment, former George W. Bush administration official David Brailer became chairman at CenseoHealth. Brailer is also managing partner and CEO of Health Evolution Partners.

The medical-assessment market in which CenseoHealth operates is a competitive space, and while market dynamics have improved, the regulatory landscape over the years has added to uncertainty, sources said.

Competitors include Matrix Medical, which Welsh, Carson, Anderson & Stowe in October 2014 sold to Providence Service Corp for $400 million. Frazier Healthcare Partners acquired a 60 percent equity interest in Matrix in an October 2016 deal that valued the company at about $538 million. Health Evolution Partners had hoped to unload CenseoHealth after Providence scooped up Matrix, one of the sources noted.

Other players include Advance Health, which secured $40 million in funding from Summit Partners and Noro-Moseley Partners in January 2015. Besides a number of smaller players, insurers have increasingly brought in-home medical assessment in-house, one source said.

CenseoHealth, for its part, has also had overcome public scrutiny linked to Medicare fraud.

A whistle-blower lawsuit was filed against CenseoHealth in 2014 by a former employee and medical-billing coder, Becky Ramsey-Ledesma. The coder alleged that she was fired in August 2013 after questioning the company’s practices. Ramsey-Ledesma in the lawsuit claimed the medical-assessment firm overstated how sick patients were and thus how much health plans should ultimately be paid.

Brailer’s Health Evolution Partners has also struggled, losing its only limited partner in 2014 when California Public Employees’ Retirement System chose to end the relationship. Among other things, the performance of the healthcare-focused fund was an issue for CalPERS, Buyouts reported at the time.

HarbourVest Partners around the end of 2014 bought CalPERS’s stake in the growth fund in a deal representing about $400 million of net asset value, a source told Buyouts at the time. Sources said then that Health Evolution Partners was not winding down and had plans to raise a new fund.

The latter has yet to happen, and it’s also unclear whether the firm has since exited its remaining investments: Freedom Innovations, Halcyon HealthcareKisimul and Prolacta Bioscience. The firm, which does not list any investments on its website, is likely looking for any exits, one source said.

Representatives of Health Evolution Partners and CenseoHealth did not return requests for comment.

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