PE Hub’s ongoing series on private equity firms investing in healthcare continues with insights from Elliot Cooperstone, founder and managing partner of InTandem Capital Partners. Prior to starting the firm in 2011, Cooperstone was previously CEO of Prodigy Health Group, a health plan services company acquired in 2011 by Aetna. Prior to Prodigy Health, he was the vice president and general manager of the Employer Group at Intuit. Cooperstone joined Intuit in 2000 upon that company’s acquisition of EmployeeMatters, a company he co-founded in 1999 and for which he served as CEO. He outlined InTandem’s approach to healthcare investing.
Investment strategy
“We are sector focused and concentrate only on provider services and payor services. As a firm, we are focused on a subset of those sub-sectors in the healthcare sector,” Cooperstone told PE Hub.
He said the firm spends time and work to develop theses, refining them and meeting companies to figure out how to find an entry point.
“What tends to unite our themes or strategies is the healthcare triple aim – which refers to a company that will simultaneously work to improve healthcare outcomes, improve member experience and lower cost. These were once upon a time thought to be mutually exclusive – they are not, they work together.”
What makes the healthcare space so attractive to PE investors?
“There is so much to be fixed, so much to be improved and so much inefficiency and waste and if you go back many years, the sector didn’t attract the best problem solvers to address these issues, it wasn’t the place people wanted to go,” he said. “The flip side of the problem is opportunity: there are folks searching for those problems that can be solved effectively where a fair margin can be generated as well.”
He added that the healthcare system needs to be fixed, especially for people who live in underserved communities.
“Cano Health is focused on those who are underserved and delivers better care than is generally available in the broad, affluent market.”
Private equity for the greater good
Cooperstone said the firm feels an “extra special responsibility to do things the right way and to be socially thoughtful.” Partner Bob Patricelli pioneered legislation in Congress that tries to address “a major chink” in the armor of capitalism and democracy and that is “the growing and significant wealth gap and the biggest driver of that is equity ownership or lack thereof,” according to Cooperstone.
“There is also a chink in the PE compensation model where approximately 10 percent of company equity is set aside for management from the start of a new deal, in the form of a stock option plan for them,” he said. “The conventional wisdom in PE has been that management should play in that pool and everyone else would not value or understand or be motivated by it. We believe that is wrong.”
He noted that when there is a big capital gain, shareholders and senior management share in that success and everyone else does not.
“For all of those reasons, we launched Private Equity for Greater Good which is a commitment to share the success that is achieved during the investment period with all employees,” he said. “In our case, 5 percent of every gain will be distributed among employees that are not otherwise shareholders.”
He added that this is meant to be both a challenge and an invitation to other PE firms to do the same.
“Our hope is that we can encourage the rest of the PE world to make a similar pledge. There is no reason not to join other than the belief that you ought not share some of the success with the people who helped create it. How is that supportable?”
Competitive advantage
Cooperstone believes in the meantime, PE for greater good gives the firm a leg up on all the other firms.
“This gives us a competitive advantage. There are significant challenges when it comes to attracting and retaining top talent and this is a tool that provides incentive to get and keep top talent and therefore, we think will improve investment returns.”
He also believes creating a good culture can help mitigate some of the macroeconomic pressures all firms are facing.
“The best people want to work with the best people. Yes, there are inflationary pressures in the market, but we can help address all those pressures if we can create the sector’s leading company, where everyone wants to work and the sense of what we are trying to create is so much deeper than compensation – though compensation is always important.”
Cooperstone said the firm has not changed its identity and how it operates since it was founded.
“The way we differentiate ourselves is the same as it has since the beginning: We are on-the-field players with the management teams of our portfolio companies, we do not coach from the press box or yell in plays from the sideline,” he said. “We work with and for the CEO and we are trying to give them resources, frameworks, templates, experience and energy that they would not otherwise have from other firms. They will get a check from any of us, but they only get the kind of on-the-field partnership and participation that they do with us, from us.”
Firm facts
InTandem was founded in 2011 and is based in New York City. The firm invests in small to mid-sized companies in select healthcare services sectors. The firm’s goal is to build businesses working with its management team partners. In February, the firm closed a supplemental private equity investment fund (InTandem Capital Opportunities Fund, LP), at the hard cap of $225 million. The Fund provides expansion capital to existing portfolio companies and additional capital for future platform investments from Fund II.
Recent investment
Recent investments include Vivo Infusion in March and Providence Care in January. The firm also made a number of add-on acquisitions in January for its platform investment Ivy Fertility, including Utah Fertility Center, Nevada Center for Reproductive Medicine, Nevada Fertility Center and Pacific NW Fertility and IVF Specialists. (See the sidebar, below, for more details.)
Recent exits
InTandem partially exited Cano Health, as the company debuted on the NYSE in June of 2021 via SPAC.
InTandem’s healthcare portfolio highlights:
(Dates refer to initial investments.)
Cano Health: Operates health care centers and pharmacies in Florida that specialize in Primary Care for Seniors. The mission is to improve patient health by delivering superior primary care medical services, while forging a life-long bond with its members. (2016)
Paradigm Oral Health: A provider of oral surgery. Paradigm’s uniqueness comes from their ability to hire the most elite oral surgeons in the country and train them on their proprietary platform of excellence. The company continues to revolutionize and reinvent implant surgery through their ongoing technology and digital work-flow advancements. (2019)
Pediatric Home Service: An independent pediatric home care company that helps children with medical complexities and technology dependencies live safely and successfully where they’re most comfortable – at home with their families, rather than in a hospital. (2018)
Providence Care: Provider of post-acute and end-of-life services throughout the state of South Carolina. By utilizing an integrated home care model, Providence provides its patients with specialty services including house calls, home health care, telehealth, palliative and hospice care services. (2021)
Ivy Fertility: Building families by delivering personalized fertility services using the most advanced technology with compassion and commitment to patient success. (2021)
Turning Point Centers: The company is dedicated to addressing behavioral health needs and enhancing treatment quality for both adolescents and adults by providing one-on-one care with master level therapists and staff physicians. (2018)
Vivo Infusion: The company utilizes specialty prescription drugs providing more than 50 therapies for chronic, complex diseases. Vivo provides the highest-quality care in a safe and comfortable setting. (2021)
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