DuPage Medical deal a near-record sum for Illinois healthcare
DuPage Medical Group, a rapidly growing giant suburban doctors' network, recently recorded Illinois' second-largest healthcare deal in a decade, following a trend of private equity investment in the state's medical industry.
The deal, valued at $1.45 billion, puts the total cash value of investments on track to outpace last year, when $1.83 billion was in invested in Illinois healthcare companies, according to limited return data available from Seattle-based PitchBook Data, which tracks such investing.
PitchBook is still working to confirm smaller, less publicized deals, which would increase those totals. It estimates that, so far in 2017, $2.8 billion has already been invested in Illinois' health care market, compared to an estimated $3.74 billion in 2016.
Still, while cash investments in Illinois healthcare are up, the sheer number of deals is down. In 2016, 28 were recorded; in 2017, only 11 deals have so far been made, according to PitchBook.
"A lot of the best assets have been traded," says Justin Ishbia, founding partner at Shore Capital, a private equity firm. "We've for sure hit the crest of the market." Because of the strong hospital network in Illinois, there's only a limited number of deals that can be made in the state, versus places like Alabama, which offers a lot more private healthcare companies, he added.
As for the investor interest in Illinois' healthcare industry, Ishbia credits the disruption wrought by the Affordable Care Act and savings achieved by consolidating smaller practices under larger firms.
Investors generally acquire large systems, such as DuPage Medical, with the goal of expanding their services and reducing operating costs. Ares, an asset management firm based in Los Angeles, did not respond to questions about why it chose to acquire DuPage Medical. The chain is the largest independent physicians' group in the Chicago area.
Mike Kasper, CEO of DuPage Medical, has said the group intends to use the investment to buy up new doctors' practices and expand across the country.
In December 2015, Summit Partners private equity firm acquired a $250 million stake in DuPage Medical. At the time, Summit was expected to stay invested in the physicians group for at least seven years.
But after DuPage Medical performed three years ahead of schedule, generating $741 million in revenue and acquiring a number of local doctors' practices in 2016, the group's leadership figured it was time to start looking for another investor. It was "a good time to take a look at what the market had to offer," said Kasper, who told Crain's he had face-to-face meetings with at least 20 potential investors. Ares invested in DuPage Medical's practice management subsidiary, which is named Boncura Health Solutions and provides billing and other services to the physicians' group. Doctors still retain ownership of the practice side of DuPage Medical.
Total cash investment in Illinois' health care market peaked in 2015 and has been decreasing since, according to PitchBook. In May 2016, Advent International Corp. bought Bolingbrook-based ATI for an estimated $1.63 billion. ATI's sale is the largest Illinois health care deal recorded by PitchBook in the past decade.
"DuPage Medical deal a near-record sum for Illinois healthcare" originally appeared in Crain's Chicago Business.
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