Sector: Health Care IT Enabled Services
Investment Date: 2007
Description: Outsourced Medical Cost Management
Status: Acquired by a Financial Sponsor in 2015
Headquarters: Indianapolis, IN
The US health care system is highly complex and suffers from both escalating prices and numerous process inefficiencies. Russell Sherlock and John Ansay, two proven health care entrepreneurs, saw this as an opportunity. They founded Equian to provide a wide variety of solutions designed to assist payors in lowering the cost of medical care through utilization management, fraud and abuse detection, negotiation services, medical audit services, bill repricing, bill review services, and state-of-the-art information technology. The Company also eased the administrative burdens of its clients by serving as an outsourced solution for complex claims management and other back office functions.
The market for medical cost management services is highly fragmented and an opportunity existed for Equian to become a dominant provider and reap the benefits of a market leading position. “By early 2007 we were thinking about bringing in a strong capital partner with tuck-in acquisition expertise to help us take full advantage of the opportunities before us,” said Sherlock. “We needed help in sourcing, negotiating and structuring acquisitions and in obtaining non-dilutive acquisition debt financing from a cash-flow lender as we did not have a lot of hard assets on our balance sheet.”
How Great Point Partners Helped
Russ and John chose Great Point Partners for growth financing, to provide liquidity to non-management shareholders in 2007, and to establish an acquisition facility with a senior lender. Great Point led the growth recapitalization and arranged for $80 million in senior debt financing from a major financial institution for eleven future acquisitions. Of those eleven tuck-in acquisitions, GPP identified and led the negotiation of eight. After five years of torrid growth, GPP assisted in recruiting an operations-minded CEO, Scott Mingee, when the Company’s founders decided to assume Chairman and Vice Chairman roles in order to focus on acquisitions and strategy.
In the eight years Great Point partnered with Equian management, revenue grew at a 31% compound annual growth rate and EBITDA grew over ten-fold from $1.8 million in 2007. Equian is now one of the leading providers of payment integrity services to the health insurance marketplace.