Healthcare Corner: Millennials’ needs drive big deal, dentists find love from new sponsor

Everyone seems to hate millennials. As a proud member of that demographic, I consider the walk-in clinics around the corner from my apartment or office as my primary care. Medical needs are addressed on an episodic basis.

CityMD, in the New York metro area, is one that fits the bill for me. With some 120 locations expected by year-end, I’m told, the Warburg Pincus-backed chain of consumer-facing urgent care clinics has strong brand recognition, particularly in the NYC metro area.

CityMD has captured and helped redefine the traditional primary care market among certain patient populations. However, the retail health operator has historically not been able to meet all the needs of those ultimately requiring more comprehensive and specialized care.

That may soon change. Summit Medical Group — one of the country’s largest independent multi-specialty providers — on June 20 agreed to merge with CityMD. Financial terms weren’t disclosed, but the combined company will approach $200 million in Ebitda on a pro forma basis, a source familiar with the matter said.

Strategically speaking, the creation of an integrated delivery network of care offers a means to develop a more seamless method of managing all medical needs among all populations.

While integrated care delivery is a theme we’re seeing across the healthcare landscape — consistent with mega deals like CVS-Aetna’s recent $69B tie-up — the CityMD-Summit marriage is arguably the first of its kind.

The PE community is very interested in specialty and multi-specialty medical groups. Do you remember Dupage Medical? The Chicago area multi-specialty physician group scored a $1.45 billion cash infusion from Ares Management in 2017. This provided an exit for Summit Partners.

DuPage commanded a mid-teen multiple of Ebitda, sources said. This is notably higher than the 8x to 9x Ebitda multiples that primary care groups have tended to trade. Assuming Summit commanded a similar multiple from Warburg, we’re talking about a pretty hefty valuation.

Urgency in urgent care

Urgent care companies have also seen a significant level of PE investment. 

Some, like TPG-backed GoHealth Urgent Care, have sought out joint-venture partnership strategies with health systems and hospitals. In fact, GoHealth’s whole business model has kind of premised around that notion. 

But CityMD is the first to team up with a multi-specialty group. By doing so, it can manage all the medical needs of its varying patient populations, while also addressing referral inefficiencies. Summit, meanwhile, benefits from better access to care. 

CityMD, which expects to see some 2.7 million patients this year (including approximately 1.7 million unique patient visits), will likely make some 400,000 referrals during the year, I was told.

More JVs ahead

I recently caught up with Wyatt Ritchie of Cain Brothers, who said that from an urgent care perspective, the joint-venture model is one thing financial sponsors are gravitating to as they seek opportunities to invest.

Ritchie said the industry is growing more mature yet there aren’t huge barriers to entry, so everyone is asking: How does one distinguish oneself as an urgent care partner? What ensures success over the long term? How do you grow? How do you translate your model in multiple markets?

Health systems in many cities have great brand value, certainly better than the “Tom’s Urgent Cares” of the world, Ritchie said. But it’s urgent care that consumers are demanding, he said, noting that this contributes to the trend around JVs.

Technology is also top of mind among urgent-care clinics as consumers demand transparency and convenience around things like availability and scheduling, he said. He pointed to companies like Seattle’s ZOOM+Care and Carlyle-backed One Medical.

In other words, besides a blurring of the lines between primary care and urgent care, the acquiescence that old-line providers aren’t great at innovation is fueling a transformation of the industry, he said. 

How else are urgent-care clinics looking to win? What other notable players are seeking investment? Reach me at

Dental attraction

We have yet another new sponsor competing for healthcare deals. Emerging manager Peloton Capital Management, founded by a pair of Ontario Teachers’ Pension Plan alumni, raised an initial C$330 million ($250 million) for its first long-term mid-market fund. The Toronto-based firm is seeking control stakes in North America’s healthcare, financial services and consumer ops.

It recently wrapped up its first deal, investing C$75 million in 123Dentist, a network of dental practices. The Vancouver-based company provides back-office support to dental clinics. It currently services more than 70 practices, after launching a pan-Canadian expansion two years ago.

Peloton Managing Partner Steve Faraone told my colleague Kirk Falconer that the firm made the investment because 123Dentist is pursuing a buy-and-build strategy in an “attractive, recession-proof space.”

With an economic downturn long overdue south of the 49th Parallel, perhaps all healthcare-focused sponsors should give that some thought before they ink their next deal.