In the midst of a tremendous financial turnaround following the ouster of its former executive managers, U.S. HealthWorks recently sealed its Series C deal, fortifying its venture capital war chest with an additional $45 million. In total, the Alpharetta, Ga.-based company has raised $90 million.
The new money is essentially meant to recapitalize the company, and the preferred stock from its first two rounds has been combined and the shares split one-to-10.
First-time backer Three Arch Partners co-led the transaction alongside former investor Richland Ventures, with each putting in apporximately $15 million. J.P. Morgan Partners and BankAmerica Ventures also re-upped in this round, with newcomers Salix Ventures and CIBC Oppenhiemer also participated. First Union Securities acted as a placement agent on the deal.
Wilf Jaeger, a partner with Three Arch Partners, and Jack Tyrrell, a partner with Richland Ventures, each received a board seats as part of the financing.
Approximately $30 million of the capital U.S. Healthworks raised in this round will go toward completing its acquisition of the occupational medicine division of HealthSouth Corp. The combined company, which will manage occupational medicine outpatient clinics for corporations, will employ 3,300 workers and serve more than 12,000 patients per day. U.S. HealthWorks estimates that the increased volume should generate $230 million in annual revenue.
“From a macroeconomic perspective, occupational medicine is an attractive industry,” said Mark Kaplan, a partner with Three Arch Partners, which focuses exclusively on health-care investments. “Not only does U.S. HealthWorks represent an interesting opportunity to invest in the space, now, with the acquisition of HealthSouth, it can become a dominant player in occupational medicine, particularly in certain states.”
Essentially, U.S. HealthWorks contracts with large employers such as Aramark to provide their staffers medical care in return for a blanket fee. As a manager of clinics that provide outpatient care for workers injured on the job, U.S. HealthWorks assists its client companies in getting employees back to work as soon as possible, cutting down on costs associated with lost productivity and workers? compensation. In addition, it also provides pre-employment physicals and drug screenings.
“About 60% to 70% of the total cost of an injury is lost time from work, and one out of every four injuries results in lost time on the job,” explained Ron Clark, chief financial officer with U.S. HealthWorks. “The real savings [we provide] is getting the employee back at work.”
The company?s chief competitors are hospital emergency rooms, but Clark contends that such operations are less valuable to corporations because they don?t focus on getting patients back to the workplace.
“A lot of companies want to be able to have protocols if their employees have injuries on the job,” Clark said. “For example, they can request that the employee have an immediate drug screen to make sure he wasn?t [impaired] while performing his job. That saves the company a liability. In a hospital that?s not occupational-specific, there?s no requirement for them to do [a drug test]. Companies have a lot of advantages with us.”
U.S. HealthWorks also competes with the likes of Concentra, a large occupational health-care provider based in Dallas that is ranked the No. 1 provider in the country, Clark said. HealthSouth was No. 2 prior to the acquisition, and U.S. HealthWorks was No. 3.
The five-year-old company has been turning a profit since last year and posting a positive EBITDA since 1999, so its next capital infusion is likely to come from the public markets, Clark said. If market conditions pick up, U.S. HealthWorks may look to do an initial public offering within the next 18 to 24 months, he added.
Contact Robyn Kurdek: Robyn Kurdek.