Furthering its push into musculoskeletal care, Varsity Healthcare Partners through Orthopedic Care Partners invested in The Steadman Clinic, Vail, Colorado’s world-famous sports medicine practice.
The transaction brings OCP’s revenues to approximately $125 million, and on the basis of earnings makes it one of the largest PE-backed orthopedic companies in the country, a person close to the situation told Buyouts.
The Los Angeles healthcare firm invested additional equity in OCP in connection with the transaction, while Marc Philippon, managing partner of The Steadman Clinic, became a significant shareholder along with his partners.
Varsity made an additional investment through Fund II, through which it initially invested when it formed OCP, the person said.
Varsity, akin to earlier plays in dermatology and vision care, was among the first to deploy capital into musculoskeletal care via its November 2017 deal for The Orthopaedic Institute, the largest provider of orthopedic services and ancillary offerings in north-central Florida. Three additional Florida practices joined the group in May.
OCP, the holding company of affiliated clinics including The Orthopaedic Institute—and now The Steadman Clinic—is led by CEO Rich Gilbert.
The Steadman Clinic received financial advice from Cain Brothers on the transaction, while Twin Brook Capital Partners led financing on the deal, the person said. A broad sales process was not conducted; however, The Steadman Clinic entered discussions with a handful of parties, the person said.
Founded in 1990, The Steadman Clinic will continue to operate under its own brand as part of OCP, and will remain led by Philippon. The Steadman Clinic’s 16 orthopedic surgeons will bring OCP’s total number of surgeons to 61, excluding mid-level physicians, the person said.
The Vail, Colorado, physician group, which currently provides integrated orthopedic and sports medicine out of clinics in Vail, Frisco and Edwards, plans to open practices in two new counties, the person said.
The Steadman Clinic also offers ancillary services in the diagnostic imaging, durable medical equipment and regenerative medicine areas. The orthopedic group will maintain its exclusive partnership with The Steadman Philippon Research Institute, which was not involved in the transaction.
The muskuloskeletal niche continues to field significant private equity interest. Underlying secular trends include an aging population requiring more knee and hip replacements and an active young demographic contributing to more treatment needs for conditions likely to result from exercise and sports injuries.
In recent notable activity, Linden Capital and Audax Private Equity in September joined Frazier Healthcare Partners as investors in Healthcare Outcomes Performance Company, or HOPco. Financial terms weren’t disclosed, but the deal assigned the Phoenix, Arizona, group a total enterprise value north of $400 million, Buyouts reported.
Other new entrants in the space include Kohlberg & Co, which in July invested in Greenwich, Connecticut’s Orthopaedic & Neurosurgery Specialists.
Elsewhere, Denver’s Revelstoke Capital Partners in July launched a national management services organization with Ohio medical group Beacon Orthopaedics and Sports Medicine.
Varsity in October closed its third pool of capital at $417 million, exceeding the lower-middle-market firm’s fundraising target.
Action Item: Check out Varsity’s latest Form ADV: https://bit.ly/377hh2f