Candescent Partners Buying Physician Practices - Case Study Example

? Financial Report on Candescent Partners Buying Physician Practices Candescent Partners gives specific focus toinvestments in healthcare sector as the company finds potential opportunities in the US healthcare. In order to take advantages of those growth opportunities, the organization makes investments in existing private health companies. The major physician group practices bought by the Candescent Partners include Koch Eye Associates, Candescent Healing, Odyssey Healthcare, Inc, SemperCare, Inc and Dynamic Imaging, Inc. This business strategy benefits the organization to eliminate establishment costs and initial launching challenges. Moreover, this investment approach is beneficial for the company to focus more on business expansion and thereby get closer to its long term business goals. Introduction Candescent Partners, LLC is an investment/management company specialized in business expansion activities like buyouts, growth capital, middle market, mezzanine debt investments, and recapitalization. The company was founded by Steve Jenks and Sandy McGrath in 2009 at Boston in the United States. The company is very interested to invest in healthcare, IT sector, software services, consumer products, and business and technology enabled services. Candescent Partners is exploring investment opportunities in US and Canada based companies. As per its investment policy, the company’s investments may range from $2 million to $30 million and the firm tends to invest in companies having a revenue range of $10 million -$50 million, EBITDA between $2million and $10 million, and an enterprise value between $10 million and $75 million (“Company Overview of Candescent Partners”). Candescent Partners maintains a board seat in companies where it has investments. It is interesting to note that the organization raises funds for investments through personal capital. This paper will focus on the healthcare sector investments of the Candescent Partners by giving specific reference to the financial aspects of buying physician group practices such as Koch Eye in RI. Candescent Partners’ Investments in Healthcare Currently, the organization has managed an amount worth over $600 million of private equity investments in 44 private growing companies (Candescent Partners website). In this, a notable percent of private equity investments is accounted for healthcare technology and services. Some of the major physician practices bought by the firm are described below. 1. Koch Eye Associates Koch Eye Associates, one of the leading providers of comprehensive vision care services in Rhode Island, was acquired by Candescent Partners in January 2012. Candescent Partners led this business acquisition in association with other co-investors including Pine Street Capital Partners, First New England Capital, Bush O’Donnell Capital Partners, and BCA Mezzanine Fund, LP. The Koch Eye Associates possesses its own surgery center and offers vision care services ranging from basic optometry to LASIK and cataract surgery. In addition, the organization is operating seven locations throughout Rhode Island. Even though the organization acquired the Koch Eye, Koch business leaders will remain active in the business. The Candescent Partners perceives the partnership with the Koch family as a great opportunity to improve the firm’s growth potential. At the same time, Koch officials consider this alliance as an opportunity to spread its premier vision care services to New England. 2. Odyssey Healthcare, Inc. The Candescent Partners has investments in the Odyssey Healthcare, Inc., which is one of the nation’s leading providers of hospice services. Hospice is a palliative care given to people at the final moments of their life. The company has been delivering palliative care services to people since 1996. One of the notable features of this healthcare setting is that it offers personalized care and support to patients and families. In addition, the organization has a huge and potential workforce including physicians, registered nurses, social workers, bereavement counselors, and trained volunteers (Odyssey Hospice). In addition to providing palliate care services; the organization delivers psycho-social and spiritual support for both patients and their families. The Odyssey Healthcare usually offers its services through patients’ homes, nursing homes, assisted living facilities, and hospitals. The 24/7 support makes the firm one of the leading hospice providers in the country. 3. Dynamic Imaging, Inc. Dynamic Imaging, Inc. is a nation’s leading internet based software platform which helps to capture, store, and view the movement of digital files created by digital medical imaging technology like CT and MRI (Dynamic Imaging, Inc.). The firm greatly serves healthcare providers by capturing and storing digital files created through CT and MRI. Hence, this web based software platform greatly assists physicians to immediately respond to patients’ various medical conditions and thereby improve treatments efficiency; this facility in turn would contribute to patient safety and fast recovery. 4. SemperCare, Inc. The SemperCare, Inc. makes strategic alliances with leading hospitals in order to operate long term acute care ‘hospital within a hospital’ units for the purpose serving acutely ill patients (SemperCare, Inc). It is a Plano based company and is founded in 1999. Currently, the organization owns and operates 17 long term acute care units across 11 states of the US. This type of operation greatly assists the concern to minimize establishment costs to a large extent as the organization is operated in already established hospital care facilities. 5. Candescent Healing, LLC. The Center for Wound Healing and Hyperbaric Medicine LLC and affiliated companies were recently acquired by the Candescent Partners. Currently, this acquired firm operates under the name Candescent Healing, LLC. The Candescent Healing offers comprehensive wound care services to patients with chronic wounds. For the wound treatment of chronic wounds, the firm uses a combination of traditional wound care and hyperbaric oxygen therapies (Candescent Healing). The company’s operations are mainly centered on hospitals in Northeast, Southeast, and Midwest. Market analysts indicate that the Candescent Healing, LLC shows a significant growth rate after its acquisition by the Candescent Partners. The buying of physician practices can have a significant impact on Candescent Partners’ business growth. In order to analyze how physician group practices can influence the organization, it is necessary to evaluate the scope of healthcare sector in today’s society. Current Scope of Healthcare in US The healthcare sector has increased scope in the modern societies, particularly in the US where diseases like diabetes, obesity, and heart stroke are highly endemic. Over the last few decades, healthcare outcomes of many developed and developing nations have improved notably. However, despite the industrially developed status and increasing spending on health care services, the US healthcare outcomes have been worsening since 1950s. In the first half of the 1950s, the US had achieved some of the world’s lowest mortality rates and eventually the country failed to maintain this competitiveness. Today, the US has a lower rank in terms of disease burdens as compared to other economically and industrially developed nations. Hence, the US is ranked very low in terms of life expectancy. The chart given indicates that the United States maintains 34th position in the world in terms of life expectancy. From the graph, it is clear that the US’ position is very poor relative to OECD countries. Some of the leading causes of deaths in US are heart diseases, stroke, and diabetes, which can be attributed to bad lifestyle practices mainly. As Bezruchka points out, the heterogeneity of the US population is another reason why the country lags behind others in terms of mortality indicators. Hence, the country has a poor health status and therefore US citizens are more likely to purchase more physician practices. Bezruchka further notes that the US health care budget for 2009 accounted for nearly 18% ($2.5 trillion) of the nation’s GDP while most of the healthier nations spend roughly 12% or less of their GDP. Simply, healthcare sector has growing scope in the United States. Financial Future of Candescent Partners As discussed above, US health care needs are increasingly growing due to the heterogeneity in the country’s population and their worse lifestyle habits. In this context, healthcare products and physician services are likely to be consumed at an increased rate in US. Therefore, the business approach of buying physician group practices would significantly benefit the Candescent Partners in the long run. The acquisition of Candescent Healing would promote the firm’s growth in the current healthcare context of the nation. Diabetes has been identified as the seventh leading cause of death in the United States. It is clear that diabetes is a chronic disease that can be uncontrollable after a particular stage. Another dreadful feature of diabetes is that wounds in diabetic patients are difficult to heal. Therefore, understanding the multiple contributing causes of wounds is necessary to treat those patients. The growing incidence of diabetes drives demand for developed therapies to treat chronic non-healing wounds. Sandy McGrath, one of the co-founders of Candescent Partners asserts that “by aggressively treating chronic wounds to reduce the number of amputations, the overall cost of treatment is greatly reduced and, of course, he patient’s quality of life is significantly improved” (as qtd in Candescent Healing). Since amputation will be the last remedy when the wounds in diabetic patients become severe, those patients are more likely to choose highly developed wound healing practices despite treatment costs. Therefore, the Candescent Healing can definitely attract a large number of diabetic patients having wounds if the company offers innovative and effective healing services. As diabetes is growing to be a challenging health issue in the US, the organization may obtain grants and funds from the Federal governments and other interest groups like World Health Organization. In short, the acquisition of Candescent Healing would add to the firm’s future growth potential. It is expected that the number of Americans with age related eye diseases would double over the next three decades. Similarly, the acquisition of Koch Eye Associates also strengthens the firm’s market position because demand for eye care services is rapidly growing today. Vision impairment is one of the most threatening eye disabilities in the United States. Although a notable percent of all blindness problems can be prevented, the number of Americans who suffer from vision loss continues to grow. It has been identified that diabetes can lead to vision problems and hence this situation raises potential challenges to the United States. Disturbingly, reports indicate that eye disabilities in children are dramatically increasing. Hyperopia and myopia are two common eye disabilities reported in the US. A study (as qtd in Vitale, Sperduto, and Ferris) reflected that the prevalence of myopia was nearly 41.6% in the country during the period 1999-2004. Since eyesight is the most significant sense for a human being, people would pay to any extent to treat poor eyesight or to prevent vision loss. The Koch Eye has advanced facilities and technical expertise to treat eye diseases effectively. Therefore, the Eye Koch has a high degree of expansion opportunity in the US. The firm’s other health sector investments also seem to be potential because the need for advanced healthcare services is greatly increasing today. It must be noted that Candescent Partners acquire physician practices that can have a great impact on the patient safety. Since the Candescent Partners acquires or invests in already established firms, the organization can minimize initial establishment costs and other difficulties to a great extent. Furthermore, the company can particularly focus on the fast expansion of its business territories and thereby achieve its long term goals. Conclusion From the above discussion, it is clear that the healthcare sector has a growing scope in the United States due to the increased prevalence of diseases like heart stroke, diabetes, and vision impairment. In this context, the Candescent Partners’ strategy of buying physician group services can greatly improve the firm’s financial status. Since high expertise and technological support are needed to heal wounds in diabetic patients, the company’s Candescent Healing division can take greater advantages of the emerging opportunities. Similarly, the Koch Eye acquisition would also assist the company to improve its financial status as eye disabilities like myopia, hyperopia is very high today. In sum, buying physician group practices would assist the company to enhance its expansion activities very easily. Works Cited Bezruchka, Stephen. “The Hurrider I Go the Behinder I Get: The Deteriorating International Ranking of U.S. Health Status”. Annual Review of Public Health (2012) 33: 157-173. Company Overview of Candescent Partners, LLC. Bloomberg Businessweek. Web 8 Nov 2012 Candescent Partners. Official website. 8 Nov 2012 Candescent Healing. Web 8 Nov 2012 Dynamic Imaging, Inc. Candescent Partners. Web 8 Nov 2012 Odyssey Hospice serves the patient and family. Odyssey Hospice. Web 8 Nov 2012 Vitale, Susan. Sperduto, Robert D and Ferris, Frederick L. “Increased Prevalence of Myopia in the United States Between 1971-1972 and 1999-2004”. Arch Ophthalmol. (2009). 127(12):1632-1639. Read More