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TA deal buys into changing US healthcare system

Senior Whole Health consolidates Medicare, Medicaid and Medicare Part D pharmacy benefits into a single coverage plan, an advantage as the US healthcare market adapts to reforms signed into law last year.

TA Associates has completed its investment in Senior Whole Health, a Cambridge, Massachusetts-based healthcare provider that covers “dual eligibles” – individuals that qualify for both US Medicare and Medicaid coverage.

Medicare coverage applies to individuals aged 65 and over, as well as the disabled, and Medicaid is distributed through states based on financial need. Around 9 million Americans qualify for both forms of coverage, according to a statement.

Senior Health integrates Medicare, Medicaid and Medicare Part D pharmacy benefits for “dual eligibles” into an individual plan, as well as provides access to services for plan members living at home, assisted living centres, nursing homes and other locations. 

In a statement, TA principal Mark Carter said Senior Health’s business model is well-suited to recent changes made to the US healthcare system through The Patient Protection and Affordable Care Act of 2010, which instituted a number of sweeping healthcare reforms intended to drive down costs and add an estimated 30 million Americans to the healthcare system.

“Our understanding is that the CMS (Centers for Medicare and Medicaid Services) is starting to look at this population for ways in which to improve the quality of care and improve the cost for the healthcare system,” Carter told Private Equity International. “Ultimately, [Senior Health] saves the system a lot of money … New York state is implementing this type of programme, and there are already a handful of states that have implemented a similar programme.”

Terms of the deal were not disclosed. The firm made its investment through TA Associates XI, which raised $4 billion in 2009. Last month, TA completed its acquisition of data and cloud computing services company CoSentry through the fund. 

The firm made a similar healthcare-related investment late last year when it took a minority stake in MedSolutions, which specialises in the cost management of medical services for commercial, Medicare and Medicaid payers. Earlier this month, TA announced the sale of its portfolio company American Access Care to Fresenius Medical Care. The firm completed a $130 million minority leveraged recapitalisation of AAC in October 2006.

Healthcare has been an active sector for private equity this year. In September, two former executives from The Carlyle Group launched NaviMed Capital, which will specialise in late stage venture capital and growth equity investments in the healthcare sector. Earlier that month, Veronis Suhler Stevenson sold healthcare services company Avatar International to The Riverside Company, generating a more than 4x return multiple, VSS said in a statement.

TA was founded in 1968 and has raised $16 billion since its inception. The firm typically leads buyouts and minority recapitalisations in the healthcare, technology, financial services, business services and consumer industries.