Investors Shifting Their Focus to Value-Based Care Businesses

In 2021 alone, a handful of investment organizations have launched with the objective of operating within the value-based care space. The existence of these companies exemplifies how businesses in value-based care are increasingly becoming attractive commodities.

Broadly, value-based care is the concept of paying providers based on some measure of the quality of their care instead of the volume of services they deliver, or types of procedures performed. This largely means centering on patient outcomes.

In total, recently emerged value-based care companies make up $60 billion of the $1.3 trillion health care market, according to reports from PE Hub.

One company that cropped up this year was the investment firm Rubicon Founders. The firm launched in April with the goal of building and growing transformational health care companies.

Recently, Rubicon Founders made its first purchase. The company bought a majority stake in U.S. Medical Management (USMM) — a home-based health care and aging services company — from Centene Corp. (NYSE: CNC).

In terms of investment focus, USMM checks off many of Rubicon Founders’ boxes.

“Our focus is, ‘Where can you make a very significant difference from a value-based care perspective,’” Adam Boehler, CEO of Rubicon Founders, told Home Health Care News. “Obviously, the home is a major part of that.”

Boehler would know. As the former Center for Medicare and Medicaid Innovation (CMMI) director and former CEO of Landmark Health, he has a keen understanding of value-based care.

As a company, USMM has excelled in a number of value-based care initiatives and received high patient-satisfaction ratings. Plus, USMM’s service lines include skilled home health care and hospice.

Additionally, USMM has developed and owns an array of allied health assets, which assist in the provision of home-based primary care.

“We’ve known [USMM] for 10 years,” Boehler said. “And one of the interesting and intriguing things about the company is not only are they doing home-based medical care, but they also have a broader continuum of home health and hospice. You’re talking about bringing a number of different home-based care modalities together. We think that brings unique value to the patient.”

When it came to locking down the deal to purchase USMM, Rubicon Founders’ experience in the value-based care space was a major asset, according to Boehler.

“It came together through a conversation with me and Michael Neidorff, CEO of Centene,” he said. “They recognized that with our value-based care experience, we could really take this company further than they could in-house. For Michael, it was an opportunity to have a partner like us that knows the space very well. Ultimately, he’s interested in lowering costs and improving quality.”

For Boehler, lowering costs and improving quality means embracing and delivering care in the home.

“The home has become more prevalent, and for us, a major focus going forward,” he said. “I think with any value-based care element, these days, the convenience and the benefits of seeing people in the home is almost always the focus.”

Another company with investment ties to USMM, Valtruis, also launched this year.

In August, private equity firm Welsh, Carson, Anderson & Stowe (WCAS) announced the formation of Valtruis. The purpose of the new portfolio company was to identify, support and help grow value-based care companies.

The company rolled out with an initial capital commitment of $300 million.

“We’re seeing much more innovation in health care,” Karey Witty previously told HHCN. “In fact, there’s more innovation happening now than we’ve ever seen. Entrepreneurs from all backgrounds are focused on bringing technology, data and consumerism into focus, with the ultimate hope of finding a better way.”

Along with Witty, Anna Haghgooie and Tracy Bahl serve as managing partners at Valtruis.

Since its launch, Valtruis led Cricket Health’s $83.5 million Series B funding round. Cricket Health is a San Francisco, California-based provider of integrated nephrology and dialysis care, which it provides in the home and institutionally.

In addition to the value-based care dedicated investors, 2021 has also seen players in this space receive attention.

In November, post-acute analytics and metrics firm Trella Health closed on a major funding round led by Cressey & Company LP, a private investment firm focused on health care services and information technology businesses.

Atlanta-based Trella Health solidified itself as a player in the space by helping companies see success with the transition to value-based care.

“Market transparency will be key as the market evolves and disrupts the normal revenue procedure, and agencies adjust from volume of services rendered to the value of the care provided,” Trella Health CEO Scott Tapp previously told HHCN. “As CMS pushes more providers into risk-based contracts, Trella assists these organizations by giving them the ability to evaluate providers, referral relationships and [where] risk-bearing entities are sending their patients.”

A month earlier, Walgreens Boots Alliance (Nasdaq: WBA), the holdings company for pharmacy store giant Walgreens, announced a $5.2 billion investment in VillageMD.

Chicago-based VillageMD, through its subsidiary Village Medical, provides primary care services across 15 markets to more than 1.6 million patients.

The investment, which stems from a 2019 partnership between the two companies, is meant to accelerate the delivery of value-based primary care.