DuPage Medical Group, the largest independent physicians group in the Chicago area, has received a $250 million infusion, including an undisclosed amount from a private equity firm interested in helping the practice continue to expand.
The investment from Boston-based Summit Partners is part of a national trend of private equity firms buying into medical groups, although it's still uncommon in the Chicago area.
With more than 480 doctors and a projected $575 million in 2015 revenue, Downers Grove, Ill.-based DuPage Medical has been growing rapidly by acquiring other medical practices. For instance, it expanded into Will County last fall by acquiring a Joliet-based doctors group. In November it announced plans to buy Pronger Smith MedicalCare, which has more than 60 doctors across 20 specialties in the southwest suburbs.
The new money, which also includes a bank loan, went to a subsidiary of DuPage Medical called Midwest Physician Administrative Services. It will be used to buy doctors' practices and open additional offices for immediate care and outpatient surgery centers, for example. Plans also include investing more heavily in data analytics and programs to better manage patients' health, services the subsidiary sells. University of Chicago Medicine and Edward-Elmhurst Healthcare are among its clients.
As Chicago healthcare systems get bigger through mergers, DuPage Medical is looking to remain an alternative for doctors who don't want to be employed by hospital-focused systems. The medical group is the fourth-largest in the Chicago area behind groups affiliated with Advocate, Northwestern and NorthShore University HealthSystem. It had more than 2.1 million patient visits this year. Mike Kasper, CEO of both DuPage Medical and the subsidiary, aims to have at least 1,000 doctors in the coming years.
“We felt that aligning with a capital partner would help us expedite our growth strategy,” Kasper said.
Under Obamacare, doctors are increasingly paid to focus on preventive care and keep patients out of the hospital. If they do their jobs well, physicians can share in the savings they generate by helping patients stay healthy. That expertise can then be used to help other doctors manage their patients, potentially producing a robust revenue stream. Private equity groups see the potential.
“What they're trying to do is build capabilities around analytics and care management services,” Dan Marino, a Chicago-based executive vice president at healthcare consultancy GE Healthcare Camden Group, said of physician groups snagging investor money.
Summit and Midwest Physician Administrative Services closed their deal on Dec. 31. Summit is a minority investor, with DuPage Medical physicians still owning the majority of the subsidiary. Kasper said they talked to more than 22 potential investors.
Darren Black, a managing director at Summit Partners, said the firm has about $16 billion in assets under management. About 25% of capital invested over more than 30 years has been in healthcare, and many of the deals are with physician groups, Black said.
Summit will remain an investor for at least seven years, Kasper said. After that, it's not clear what will happen.
“All options are on the table,” Kasper said. That includes the subsidiary being sold, going public, or even DuPage Medical buying back Summit's stake.
