DuPage Medical Group, the largest independent physicians' group in the Chicago area, has received a $1.45 billion infusion from Ares Management, a Los Angeles-based asset management firm. The transaction closed Tuesday.
Ares invested in DuPage Medical's practice management subsidiary, which is named Boncura Health Solutions and provides billing and other services to the physician group. The new money, which includes equity and debt financing, will be used to buy doctors' practices and open additional outpatient clinics, said Mike Kasper, CEO of DuPage Medical.
"This now puts us in a position where we can start to look outside metro Chicago in terms of growing the group, and putting together a regional and national plan," Kasper said.
Kasper declined to comment on where DuPage Medical was thinking of expanding, but said it would think regionally, then nationally—"a natural progression." The medical group is the fourth-largest in the Chicago area behind physicians' groups affiliated with Advocate Health Care, Northwestern Medicine and NorthShore University HealthSystem. Patients can expect to see DuPage Medical facilities located outside the region within three years, Kasper said. And within 24 months, DuPage Medical plans to expand to 1,000 doctors from 688 today, Kasper said.
As part of its investment, Ares acquired the stake of another private equity firm, Summit Partners, which invested $250 million in DuPage Medical in December 2016 and was originally expected to hold an interest in DuPage for at least seven years. But when DuPage Medical performed three years ahead of schedule, generating $741 million in revenue and acquiring a number of local doctors' practices in 2016, the health care system started seeking outside investors.
"It was an inflection point, and a good time to take a look at what the market had to offer," Kasper said.
Summit will exit as an investment partner.
Kasper said DuPage started talking with outside investors in January and met with Ares in mid-April. He did not comment on who the other parties were but said he had face-to-face meetings with at least 20 other investors.
Ultimately, his group chose Ares because of the firm's understanding of the industry, shared company culture and "strong healthcare vertical" that includes investments in Aspen Dental Management, CHG Healthcare Services staffing firm and Ob Hospitalist Group, the largest outpatient obstetrics and gynecology specialty provider, Kasper said. The transaction took about four months to close.
Under the terms of the transaction, DuPage Medical's physician group, DuPage Medical Group Ltd., will remain wholly physician owned and directed. Physicians will also retain a "significant ownership" stake in the practice management company.
"DuPage Medical Group snags $1.45 billion to expand outside metro Chicago" originally appeared in Crain's Chicago Business.