Providence adds OEP’s Simplura, investing in social determinants of health

More healthcare companies are finding that non-clinical interventions can have a meaningful impact on health outcomes, and Providence’s bet in the personal home care sector is just the latest example.

One Equity Partners this week locked down a buyer for Simplura Health Group in a deal that underscores a growing recognition that social determinants of health yield big improvements in overall health. 

Providence Service Corp, the nation’s largest provider of non-emergency medical transportation services, is set to buy Simplura in an all-cash deal valuing the operator of personal home care services at $575 million, a Tuesday announcement said. 

The deal is the second non-medical home care deal in a matter of days, coming on the heels of an even larger bet for Simplura peer Help at Home, the second-largest player behind publicly traded Addus HomeCare. Centerbridge Partners and Vistria Group, preempting a sale process from ever getting underway, surprised the market in September with an approximately $1.4 billion deal for Wellspring Capital’s Help at Home, PE Hub wrote. 

This time around, OEP’s outcome for Simplura was also arguably unexpected.

On the surface, the marriage of a transportation company and personal care provider looks an odd combination. But if you dig a little deeper, it is clear that Providence and Simplura share a common goal: reducing medical costs for complex and vulnerable patient populations. 

“Although not obvious to the investor community, it’s a great fit. Non-emergency medical transportation and personal care services are two of the highest utilized services for Medicaid patient populations,” Brad Coppens, managing director at One Equity Partners, told PE Hub

Importantly, both are built around the mindset that “social determinants of health” play an instrumental role in the spending and need for healthcare utilization. SDOH include any surrounding environmental, social or health factors that contribute to either the improvement or deterioration in someone’s medical conditions. 

Likewise, Providence through its LogistiCare business enables patients to safely travel to and from care settings and their homes; Simplura caregivers offer various non-medical care services and assistance in performing daily living activities – be it medication adherence, access to nutritional foods, companionship or the monitoring of fall risks in the home. 

The joining of the providers lends to a much better patient experience in the delivering of long-term care for Medicaid patients, Coppens said. “When [care services] all come from different, siloed vendors, the coordination can be cumbersome.”

The combination also gives rise to big cross-selling opportunities on both sides, particularly in terms of contracts with Managed Care Organizations. The deal effectively consolidates two large Medicaid managed-care service providers already receiving separate reimbursement for providing different but complementary services to the same (high-risk, low-income) patient cohort, Coppens explained.

“You can imagine other services being wrapped around that combined offering,” Coppens said. “The intention, by the way, is to continue to do that – to continue to expand into new markets and grow. We think, and Providence thinks, it’s far more interesting and meaningful to Medicaid managed-care customers.” 

The newly combined company isn’t alone in its thinking. Other healthcare organizations are building out platforms to remove the barriers that lead to inactivity, food insecurity, social isolation and loneliness. That includes Tivity Health, whose host of programs including NutriSystems and Silver Sneakers are built around this concept.  

Elsewhere, Warburg Pincus last week agreed to a strategic investment in GA Foods, which provides nutritional meals serving healthcare and senior customers. 

Sector resilience

Recent home care activity also reflects the sector’s resiliency through a period in which the crisis has dramatically weighed on many non-essential healthcare service categories ranging from dental to physical therapy.

OEP, whose investment dates to February 2016, originally kicked off a sale process for Simplura ahead of the pandemic, with first round bids fielded in early March. The process was put on pause amid the market volatility that followed, but it quickly became evident around April and May that the business was performing really well, Coppens said. 

In fact, Simplura’s weekly hours of service declined no more than 5 percent to 6 percent relative to a pre-covid benchmark of late February or the first week in March, and is starting to recover from those levels, he said. 

That ultimately provided good justification to re-engage in deal conversations. “Among the various types of care – home health, hospice agencies, skilled nursing care – personal care services seemed to have fared the best,” Coppens said. “We thought that was a very strong feather in the cap.”

Guggenheim advised Simplura on the transaction, while Jefferies and Deutsche Bank advised Providence. 

Action Item: Read about OEP’s August purchase of American Medical Technologies