Narrow processes in remote environment: Cancer Treatment Centers of America, ENT & Allergy

Deal conversations pick up in the healthcare landscape.

Hey hey, everybody.

It seems deal conversations are picking back up a bit in healthcare land.

Apax came out on top in the process for Welsh, Carson’s InnovAge, which offers an interesting alternative to traditional nursing home care. The two firms are set to own equal stakes in the provider of PACE (Program of All-inclusive Care for the Elderly), I learned. Read more.

In another new development… there are two processes I covered this week in which the parties are scheduling to hold some sort of in-person meeting or on-site walk through later this month, sources told me.

Is this a sign of some return to normalcy or are people just desperate to leave their homes? As more processes move forward, such considerations are likely to be case specific and geography specific, one banker told me. It also may add another benefit to running a tightly conducted process requiring fewer engagements.

Cancer care
Many of you have probably heard of Cancer Treatment Centers of America, which operates integrated cancer care across five cancer hospitals and five outpatient care centers.

CTCA has grown increasingly well-known through its aggressive direct-to-consumer branding and advertising efforts over the years – a big differentiator from other oncology care providers, sources said. Other health organizations like Mayo Clinic, Kaiser Permanente and Cleveland Clinic have followed with expanding advertising budgets, but CTCA was well ahead, I’m told.

Now, a little more than a year after bringing on a new CEO — Pat Basu, a former Optum/UnitedHealthcare exec, private equity investor and White House aid — the company is poised for a potential sale, I learned.

Turns out, a quietly run process for CTCA is well underway, with two of the bidding groups comprising a private equity fund and a not-for-profit health system that have teamed up, I learned.

Check out my story for more info on the process.

CTCA underscores a theme that some say they expect to see more in today’s everything-remote universe. That is, folks are realizing the benefits of running a super narrow and exclusive sale process.

“In this environment, it’s tough to get someone started from scratch if you haven’t met management and had in-person connectivity pre-covid,” said one source familiar with the CTCA process. CTCA, for its part, fielded inbound interest pre-pandemic, sources said.

CTCA also got me wondering: How can a not-for-profit entity own a for-profit organization? Turns out, they have certain limits on how much for-profit earnings/cash flow can be generated and not risk their status, this source explained.

For example, non-profit health system Dignity Health in 2012 acquired U.S. HealthWorks, following which the latter operated through a wholly-owned for-profit subsidiary focused on occupational medicine.

Not-for-profits could choose to ultimately convert an acquired for-profit business to a non-profit status, but that’s not to say everyone would choose that path. For example, if a non-profit and financial sponsor jointly bought a for-profit business, the non-profit could have the optionality at the end of the PE hold to fully acquire, sell or convert the organization into its non-profit status, the source said.

Top Scoops
An exception: In the world of physician practice management, I’m told that, largely speaking, the unloading of larger PPM platforms for sale is being put off by 12 months. If you were planning to hit the auction block this summer, it’s now looking like summer 2021, one banker told me.

“It will be the near term era of the bolt-on,” the person said. “We will see massive platforms brought to market the second quarter of next year.”

Of course, there are exceptions, but those are few and far between. One of those pushing through, I learned this week, is ENT and Allergy Associates, the largest physician-owned provider of allergy treatment services in the country.

Check out my full report for financial, adviser info, and more on the process.

Any other healthcare assets creating noise in the market? Shoot me a note at springle@buyoutsinsider.com with any tips, feedback or just to say hello.

Have a great weekend!