Ripple Effects of Health Reform: Private Equity Firms Trade Multiplan – 07/12/10

JUL 12

Last week Multiplan, the leading independent preferred provider organization (PPO) network for healthcare payers and providers covering more than 55m lives was sold by Carlyle Group to BC Partners and Silver Lake Partners.   The Company’s customer base includes more than 2,300 payor clients, and its provider network comprises 5,000 hospitals, 115,000 ancillary facilities, and 625,000 practitioners. In 2008, the company processed 61 million claims.  Below is a brief assessment on the deal which our team prepared for some key clients.

  • This acquisition is the first for Silver Lake in the healthcare industry which will allow both BC Partners and Silver Lake Partners to be at the forefront of the changes occurring in the US Healthcare Industry
  • The transaction consists of a combination of equity to be invested by BC Partners and Silver Lake and debt financing to be provided by Credit Suisse, Barclays, and Bank of America Merrill Lynch. BC Partners and Silver Lake are equal equity partners in this transaction
  • Thompson Reuters reported that the deal is expected to be made up of roughly $2 billion in debt

MultiPlan is one of the nation’s largest independent PPOs in what TripleTree views as a highly competitive and fragmented market.

Recent consolidation of Beech (Concentra), CCN (First Health), Concentra and First Health (Coventry) and PPOM (Aetna) leaves Multiplan as the leading remaining independent PPO Network.

  • With over 43m lives covered by MultiPlan and an additional 12m by Viant, an acquisition Multiplan closed in Q1 2010, all signs point to a consolidating PPO industry
  • With around 125m lives covered under the top 25 PPO networks, Silver Lake Partners and BC Partners now own 44% of the top market (PPO Network companies with non-risk networks. Source: AIS’s Directory of Health Plans: 2010, Copyright © 2010 Atlantic Information Services.)

The federal health care reform as laid out under the various current proposals does not seem that it will directly affect MultiPlan, its business model could be affected if reform changes the current fee-for-service-based provider reimbursement model.  As primarily a transaction processor, the company is exposed to the claims volume volatility of its client base. Based on current federal health care reform proposals, companies such as MultiPlan will be affected indirectly through structural changes to the health insurance industry and provider community.

If you’re interested in learning more, check out our most recent industry research.

Chris Hoffmann
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