DC Discusses: Outsourced Clinical Services providing Long Term Care with a new lease of life

 The US is experiencing a rapid rise in the aging population, with the number of people aged over 85 projected to nearly double to 14.4 million by 2040 ^[1]. With this comes increasing chronic conditions, driving more people into LTC facilities, extending long-term stay eligibility, and requiring more intensive care. As more geriatric patients become residents at LTC settings, the need for complex onsite care grows and develops. 

LTC facilities are fragile and straining under the pressure of this increasing demand. Labor shortages plague the healthcare system generally, but in nursing homes specifically, 92% have reported staffing shortages due to wages and workloads ^[2], while 70% of assisted living facilities experience staffing shortages ^[3]. Adding to this, an inconsistent adoption of technology means that employees are further burdened with administrative difficulties on top of their workload. A 2022 study found that only 48% of resident care communities use electronic health records ^[4], suggesting that only half of facilities in the sector are in a good position to efficiently access medical results and integrate effectively with future AI developments. In our view, these pressures are worsening medical outcomes and contributing to rising costs across the sector. 

Why Outsourced Clinical Services (OCS) matter

Against this backdrop, LTC operators are increasingly turning to OCS partners to deliver consistent care within facilities. This can not only plug the gaps in specialized care left by staffing shortages but also reduce administrative burden. By partnering with third party clinical service providers, these facilities can ultimately provide more coordinated and higher quality patient care.

OCS providers typically focus on primary care, therapy, rehabilitation, behavioral health, as well as various ancillary services including audiology, podiatry, and dentistry. These services not only support daily clinical needs but also help LTC facilities participate more effectively in value-based care arrangements. 

M&A momentum

The OCS market has attracted substantial investor interest, with notable private equity exits including: Bain’s sale of HealthDrive, a leading multi-specialty clinical services organization to patients residing in LTC facilities, to Cressey ^[5]; and Enhanced Healthcare Partners’ sale of Eventus, an on-site primary care provider of integrated care for residents of post-acute care facilities, to General Atlantic ^[6]. In addition, several founder-owned partnerships with private equity include Amulet Capital Partners’ platform investment in Theoria Management ^[7], a tech-enabled organization providing primary care services to senior living communities in the US; and Martis Capital’s acquisition of MedCap Health, a provider of post-acute care for patients in LTC settings across the US ^[8].

Investor interest has spanned a variety of clinical specialties including primary care, physiatry, behavioral health, and other ancillary services aimed at providing enhanced patient care and improved clinical outcomes. We have also seen attractive transaction multiples for scaled companies supported by:

• Regional density and ability to scale
• Differentiated clinical delivery models
• Organic growth performance
• Operational infrastructure maturity
• Expansion potential across adjacent specialties 

As more founder owned companies seek capital partners and private equity backed platforms pursue add ons, we expect consolidation to continue. 

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