TA’s MedRisk considers sale

TA Associates’ MedRisk, which offers workers’ compensation cost-containment services in the physical and occupational therapy segment, is exploring a sale, according to three sources.

Centerview Partners has been engaged to advise on the process, two of the sources said.

TA Associates, a global growth-oriented private equity firm, invested in MedRisk, King of Prussia, Pennsylvania, in 2016. The transaction was revealed in a February 2016 Moody’s report.

MedRisk, founded in 1994, helps coordinate care and manage claims processes for injured workers receiving physical and occupational rehabilitation treatment, as well as chiropractic care and telerehabilitation services.

The specialized managed-care company generates some $85 million of EBITDA, according to two of the sources. Moody’s in a January credit report said MedRisk posts about $419 million in sales.

The credit-rating company added that MedRisk’s financial leverage will likely remain high over the next 12 to 18 months, but should improve amid continued earnings growth in the mid-teens range. Moody’s estimated its adjusted debt-to-EBITDA multiple at 5.5x over the 12 months ended Sept. 30, 2016.

MedRisk’s network includes about 72,000 physical clinics and 4,000 diagnostic imaging centers. The company contracts with workers’ compensation insurance carriers, third-party administrators, self-insured employers, state funds and case-management companies.

A lack of direct exposure to Medicare and Medicaid means MedRisk faces minimal direct reimbursement risk, Moody’s noted. Other tailwinds include a strong market presence in a largely unpenetrated market and good geographic diversification, the report said. Geographic diversification is important because workers’-comp rules and regulations vary by state, making some more attractive to operate within.

Moody’s in the January report also estimated that MedRisk’s top three payer customers account for 60 percent of its revenue, as opposed to two-thirds a year earlier. Despite the customer concentration, the analysts wrote, the company appears unlikely to lose any of these relationships.

Growth prospects are further contingent on MedRisk’s ability to fuel growth by adding new payer relationships and expanding relationships with current clients, the analyst wrote.

One Call/Align, a company once owned by TA, is MedRisk’s primary competitor, according to Moody’s.

TA in 2009 sold One Call to Odyssey Partners, which sold it to Apax Partners in November 2013. One Call’s workers’-comp services expand beyond physical therapy, helping coordinate care in the dental, diagnostics, equipment and devices, home-health and transport sectors.

Boston’s TA has a deep history of investing in payer services and specialty managed-care companies. The firm, alongside General Atlantic and Ridgemont Equity Partners, sold eviCore Healthcare to Express Scripts in October for $3.6 billion.

In other notable activity, TA recently exited BluePay Services through a sale to First Data Corp. News of the deal came after the buyer mistakenly revealed its deal for the payment processor on its website.

A TA Associates spokesperson declined to comment, while Centerview couldn’t be reached. Representatives of MedRisk did not return a request for comment.

Action Item: Check out TA’s healthcare portfolio: www.ta.com/portfolio/healthcare

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