Zelis backers Parthenon, Bain, step in to lead amid CEO departure

The company announced Tuesday that Doug Klinger would be stepping down as CEO to spend more time with family.

Amid the departure of Zelis Healthcare’s CEO, a newly established operating committee comprising members of its private equity owners, Parthenon Capital and Bain Capital, is set to lead the healthcare-fintech giant on an interim basis, according to sources familiar with the matter. 

The company announced Tuesday that Doug Klinger would be stepping down as CEO, a Zelis representative confirmed with PE Hub. Klinger, founding CEO of Zelis, departed to spend more time with his family and work on other personal and professional interests, the spokesperson said. 

As the Zelis board begins its search for a permanent replacement, a newly formed two-member operating committee – including Parthenon co-CEO and managing partner Dave Ament and Bain Capital operating partner Amanda Eisel – will lead the company alongside the executive team, the sources told PE Hub

The CEO transition is unusual, as portfolio companies of scale typically appoint inside executives to stand in until the executive search is completed.

Still, Klinger’s departure aligns with its PE backers’ long-term plans now that the merger integration is complete and is not related to performance, which remains strong amid the crisis, one of the sources said. 

Representing one of 2019’s largest sponsor deals on the healthcare technology front, Parthenon last year merged its portfolio companies, Zelis Healthcare and RedCard, while bringing in Bain Capital as an investor. 

The transaction valued the newly created company at approximately $5.7 billion, sources close to the deal told PE Hub at the time

Bain, among the world’s largest private equity firms, took a minority stake of 35-40 percent in the combined company, while Parthenon, a growth-oriented mid-market investor, remained a lead investor. At the same time, the two Boston-based private equity firms agreed to a partnership governance structure, PE Hub wrote.

The existing management teams of Zelis and RedCard were set to maintain a significant minority equity stake in the new combination, sources said at the time. 

Zelis, which pre-crisis was projecting 2020 EBITDA around $300 million, is likely projecting a 25-30 percent reduction in EBITDA for the year – consistent with other companies in the healthcare payments arena, one source familiar with the company said. 

Zelis, formed in 2016 through the merger of Parthenon-owned Stratose, Premier Healthcare Exchange and its GlobalCare subsidiary, and Pay-Plus Solutions, encompasses payment integrity services and network pricing, helping healthcare payers manage costs. It also runs a healthcare payment processing business, serving both payers and providers. 

RedCard, co-founded by its former CEO Eric Schaefe, provides technology that helps healthcare payers, providers and members improve enrollment and claims communications, as well as simplify electronic payment processes for providers. 

Parthenon completed its minority investment in RedCard in February 2018.  

Parthenon and Bain declined to comment. 

Action Item: Read more about last year’s $5.7 billion marriage of Zelis and RedCard.