Private Equity-Backed USPI in a Big Healthcare Deal in the US


March 24, 2015

One of the largest hospital chains in the US, Tenet Healthcare Corporation, is joining forces with United Surgical Partners International (USPI), which is owned by the private equity firm Welsh Carson Anderson & Stowe. It is a latest attempt by healthcare companies in the US to adjust to the changing scene since healthcare reforms.


The Details of the Deal
The joint venture will see Tenet Healthcare contribute 44 freestanding surgery centres and 20 imaging locations. USPI will provide 202 ambulatory surgery centres and 16 surgical hospitals. It will establish the largest ambulatory surgery provider in the country. Furthermore, the hospital chain will own 50.1% of the operation, but the official statement states the company has the right to buy the remaining stakes over five years.


The company will pay the private equity firm as well as the shareholders $425 million as part of the deal. According to Wall Street Journal, the deal will value USPI at $2.6 billion.


In the official statement, Tenent’s CEO, Trevor Fetter, said, “the partnership accelerates Tenet’s and USPI’s shared strategy to expand our ambulatory service offerings to meet growing consumer demand for services that are provided in a lower cost, more convenient setting and that are aligned with the long-term transition to value-based care. In addition, together Tenet, USPI and Conifer Health Solutions will be even better positioned as a strategic and capital partner to not-for-profit health systems.”


Responding to the Changing Healthcare Sector
The deal is a sign of how healthcare companies are responding to the changing scene in the US. According to Bloomberg analysts, patients and insurers are looking for “more convenient, less costly treatment” alternatives.


Ambulatory surgery centres are perfect for this, as the fewer overhead expenses mean the upkeep of the centres cost less. According to the article, the centres cost around $5 million to $8 million to build and can break even in around 18 months. Bloomberg had previously interviewed Trevor Fetter, who said the centres could create 30% profit margins within two to three years.  The healthcare reforms in the country have led to a number of big mergers and acquisitions. For instance, Community Health Systems was involved in a $4 billion deal last year.


Another Deal for a UK Company
In addition to the USPI deal, Tenet is also acquiring Aspen Healthcare from the private equity company. The company currently operates nine private hospitals and clinics around the UK. The company was previously part of USPI, but the company spin it off in 2012 during its restructuring programme. Welsh Carson continues to remain the owner of the company. This separate deal will see the private equity firm receive $215 million in cash.


Furthermore, the private equity firm announced another big deal in the healthcare sector. It is joining forces with Select Medical Holdings in acquiring Humana Inc.’s Concentra unit. The unit runs clinics as well as wellness centres in the US. This deal was worth $1.06 billion. As the reforms continue to take place in the US, it is very likely more deals take place in the healthcare sector in the coming months.

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