Summit Partners seeks buyer for InnovaCare

The outcome for the value-based care platform is uncertain, but InnovaCare has already proven a home run for Summit after the platform sold its Puerto Rico-based MMM Holdings earlier this year.

Following the sale of InnovaCare’s Puerto Rico-based assets earlier this year, Summit Partners is seeking a buyer for its remaining Florida-based value-based primary care platform, according to four sources familiar with the matter. 

JPMorgan Securities is providing sell-side financial advice on the process and the company has already received first round bids, the people said.  

The process comes after Anthem in June completed the acquisition of InnovaCare’s MMM Holdings and its Medicare Advantage plan MMM Healthcare, along with affiliated companies and Medicaid plan. Boston-based Summit’s investment in the entire InnovaCare franchise dates to August 2019.

Following the sale of MMM, what remains of InnovaCare is entirely based in Florida.

InnovaCare entered the Sunshine State in late 2018 through its acquisition of Orlando Family Physicians, and the same year it launched its managed care plan MMM of Florida. It followed with the acquisitions of Trinity Medical Group and Family Care Partners in 2020 and 2021, respectively. Its other practice is InnovaCare Lama Medical Center, while it also operates an MSO network, InnovaCare Partners.

While value-based care companies continue to command heightened levels of private equity investment broadly speaking, the rapid M&A-driven growth of its Florida operations adds complexity in valuing the business. In three years, InnovaCare has assembled more than 35 physician practices serving 10 Florida counties – Brevard, Clay, Duval, Hillsborough, Orange, Osceola, Pinellas, Polk, Seminole and Volusia, according to an October announcement.

Value expectations for the business are not clear. Bidders view real EBITDA around $40 million-plus, however the company is marketing adjusted EBITDA in the mid-$70 million range, they said. Adjustments account for a path toward positive EBITDA for its recent acquisition of FCP, as well as other acquisitions including both those that have and have not closed, one person said. 

Whether a buyer ultimately underwrites all of InnovaCare’s marketed EBITDA remains unclear, “but properly managing a risk business – as they’ve shown the ability to do – provides a credible avenue for greater profitability at FCP,” one source said. 

Wherever a potential transaction lands, InnovaCare as a whole is a winning investment for Summit, a third source added. The firm originally bought the entire company in 2019 in a deal valued around the ballpark of $1.3 billion, this person said, and the recent sale of MMM Holdings alone is valued significantly north of that.  

“Wherever this trades is the cherry on the top,” this person said. 

This process comes after InnovaCare was in advanced discussions with large payors regarding a minority deal, but those talks ultimately ended, some of the people said.

Sponsors are in the mix this time around, and although it’s unclear if a primary care platform will step up to the plate to buy InnovaCare, the Florida market, broadly speaking, is a crowded universe. 

Industry behemoth Cano Health has already recently inked two acquisitions in the Florida market, including its June 2021 acquisition of University Health Care for $600 million and its July purchase of Doctor’s Medical Center for $300 million. 

Other public players include CareMax, while P3 Health Partners is poised to go public after announcing a $2.3 billion SPAC transaction in May. 

PE-backed value-based primary care companies are also plentiful, with the likes of Sun Capital Partners‘ Miami Beach Medical Group, Arsenal Capital Partners’ Best Value, Clayton, Dubilier & Rice’s Millennium Physician Group, and TA Associates’ InHealth MD Alliance, and BPOC’s ClareMedica Health Partners among existing platforms.

InnovaCare’s roots date to 1998, when CEO and president Richard Shinto founded North American Medical Management in California. NAMM in 2003 partnered with The Straus Group, with healthcare entrepreneur Daniel Straus serving as chairman of the board. 

The company later acquired MMM Healthcare in Puerto Rico, and in December 2012, the management team sold select properties of NAMM and formally launched InnovaCare to operate the remaining subsidiaries, including MMM.

Summit knows the Florida Medicare Advantage market well. The firm joined InnovaCare’s investor base in 2019 coming off the success of HealthSun, a fast-growing integrated MA health plan and healthcare delivery network in Florida. Anthem bought HealthSun in 2017 after its $54 billion proposed megadeal with Cigna fell apart. 

Summit and JPMorgan declined to comment, while the company did not return requests for comment.