Earlier this month, buyout giant Blackstone agreed to acquire Chicago-based Chartis Group from Audax Private Equity. Although financial terms were not disclosed, people familiar with the deal said Chartis could be valued at about $1.4 billion, including debt.
Chartis founder and CEO Ken Graboys sat down with Crain's to discuss the future of the company following an investment in a partner with the size and scale of Blackstone. (Edited for clarity and brevity.)
Related: Blackstone agrees to buy Chartis from Audax
Crain's: What does the Blackstone investment and ownership mean for Chartis?
Graboys: Chartis started out 23 years ago as a purpose-driven organization with the objective to materially improve healthcare in the United States. Our initial focus over the first decade was really strategic economic planning for providers. We were a small boutique firm about 12 years ago when we took external investment to help us grow in terms of reach and impact, first with Los Angeles-based RLH. That really helped us grow in the area of informatics and technology. And RLH helped us grow into a professional firm that really was a leader in the field.
Then five years ago we took an investment from Audax that helped us grow our ability to help clients with their clinical transformation needs and their operational needs, as well as begin to work across the spectrum with payers and other providers.
The chance now is to have an investment partner like Blackstone that I think will provide us with a great deal of resources and capital that will enable us to do even more in the industry.
So, going forward with Blackstone, what's the next strategy?
Well, first and foremost it is to continue on the path we are on to provide strategic clinical and financial transaction services and digital and technology services. And with our recent acquisitions of HealthScape Advisors and our previous investment in Crankfrog, to do the same with the nation's leading payers.
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Moving ahead, there are really four things we are seeking to do:
One is to build cross-sector solutions that span payers, providers and life sciences, to create more holistic approaches in certain communities.
The second is we'll be investing much more in our center for digital technology and AI.
Third, we'll be meaningfully getting into the space of publicly funded care in America, both in terms of finance and how its delivered.
And fourth, finally, we will have a greater role in policy research and development.
Tell us more about the combining of those worlds of payers and providers in the healthcare system.
Bringing HealthScape on board has been terrific. Increasingly providers and payers are asking the same questions around "How do we better serve our populations?" There's a realization that better serving and providing access, quality and affordability is a shared solution set.
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So, more and more of our work between payers and providers is at really that point of confluence: shared solutions, value-based care, care models for defined populations and, in particular, care models for the most vulnerable populations — those we find in Medicaid or those we find in some clinical cohorts with chronic conditions, like diabetes or cardiac disease or demographic cohorts that are actually most in need of payers and providers really working together to provide a foundation for accessible, affordable quality care.
How are plans for Chartis to work more in the publicly funded healthcare sector different from what you've done in the past?
Publicly funded care increasingly bears the burden of healthcare in the United States. And it is a challenge that grows ever more dire.
If you look at the socioeconomic trends that are occurring — the age of the population, the changing of the American workforce, the role that employer benefits play in subsidizing care — we see there are these countervailing trends of the growing demand for publicly funded care and truncated supply of resources both to finance and deliver care.
We think there is a role to play in bringing together providers, managed care organizations, state government, the federal government, city and county government, and community-based organizations in developing more holistic programs for defined communities and patient populations.
We think we are in a unique position to do that. And with the capabilities that we have today, we think we can help organizations craft these solutions.
In terms of future acquisitions, what kind of investments are you looking at?
We are looking on a few fronts. There are organizations serving the healthcare landscape that specialize in healthcare regulations and opportunities both on a federal level and state level that would be quite an asset to what we're trying to do. We have also made significant investments in digital technology and the current and future role of AI and digital learning that will play a critical role for our clients but also would be an important part of solutions for populations.
In terms of AI investments, how do you go about determining what's going to be useful and the future growth of AI?
It depends. While AI remains in its nascency with a promise before it that everyone can appreciate, there is still a high enough "cost of defect" that its uptake is somewhat measured.
So, in the healthcare ecosystem, there are organizations that can innovate with AI, that can afford to fail fast, while there are other organizations, for example safety-net hospitals, that can't afford the cost of defect versus the promise of AI. For them, it is a more tempered approach to how they think about when to participate, and how to do so with the highest likelihood for success.
We operate across the landscape on that continuum.
Tell us a little more about what you want to do in policy research.
Today we work with 900 clients across 1750 communities in the United States, making healthcare more accessible, more affordable, more reliable, more equitable, more human. And we'll continue to grow and work with payers and public sector agencies so our access to data, married to our understanding of how that data interacts, puts us in a position to conduct and provide policy research that we think could be very influential in policy development on a national, state and local level.
And so we have this wealth of opportunity, resources and capability. We think it is incumbent upon us to make use of that to help healthcare in this country.
This story first appeared in Crain's Chicago Business.
