PE-Firm Havencrest Enters Hospice Space with Paradigm Health Investment


Private equity firm Havencrest Capital Management has made an investment in hospice and palliative care provider Paradigm Health. This marks the health care-focused investment firm’s first hospice acquisition, driven by the industry’s movement towards value-based care and rising utilization. The amount of the investment was undisclosed.

Paradigm Health, founded in 2013, cares for more than 300 hospice patients daily in addition to close to 300 palliative care patients. The company serves the Indianapolis metropolitan area as well as rural communities in surrounding counties. Paradigm CEO and Founder Jeff Jarecki told Hospice News that the Havencrest investment will accelerate the hospice provider’s growth.

“We wanted to bring on a partner that would allow us to continue to expand and enhance our reach and growth,” Jarecki said. “We wanted to find a partner that would not simply come in and help us from a pure capital standpoint, but also someone who believed in what we are doing and would bring additional experience to the table.”

Havencrest is a lower middle market private equity investment firm focused on growing health care companies. The firm targets “unique, market-leading businesses with superior value propositions to health care providers, patients and payors,” according to Matt Shofner, partner at Havencrest.

Shofner told Hospice News that key considerations in the Paradigm deal were the rising demand for hospice care in the United States as well as the company’s strong track record on staff recruitment and retention in a time when many providers are struggling with workforce shortages.

“[Hospice] is a cost effective subsector of health care that provides convenient, high-quality care if administered correctly. This is something that Havencrest believes is much better for the health care system as a whole,” Shofner said. “Jeff [Jarecki] and his team have an extraordinarily strong value proposition to the patient’s themselves, having high quality of care and more touch points than industry average. They have an extremely unique culture of low turnover and the highest employee satisfaction.”

The hospice space took a leap towards value-based payment this year, most substantially through the Center for Medicare & Medicaid Innovation’s value-based insurance design (VBID) demonstration, often called the Medicare Advantage hospice carve-in, which launched Jan. 1.

Medicare Advantage plans are offered by private insurance companies approved by U.S. Centers for Medicare & Medicaid Services (CMS), and include HMO, PPO, and fee-for-service plans among other options. The program represents an integrated care model that promotes coordination of services and provides incentives for quality and patient satisfaction. Beginning in 2020, the program is available in all 50 states as well as U.S. territories.

All told, 53 health plans will offer hospice through the VBID demonstration in 2021. These plans cover 8% of the market, according to data from the U.S. Centers for Medicare & Medicaid Services (CMS).

“We believe the hospice market will continue to benefit from strong market tailwinds and realize compelling industry growth as the U.S. population ages, and improved adoption increases hospice utilization. Adoption from Medicare Advantage in the next three-to-five years could also supercharge growth for businesses like Paradigm.” Shofner told Hospice News. “We really liked the macro here, as it relates to value-based care. We thought Paradigm presented a really unique opportunity.”

Among the factors that made Paradigm unique was their rising patient volume, the organizational culture and technology capabilities that will allow them to scale an organization with the potential to become three-to-five times larger, according to Shofner.

The company’s low turnover was a strong selling point. More than 35% of hospice leaders surveyed by Hospice News earlier this year cited staffing shortages as a top concern for their organizations, along with regaining access to patients in facilities.

Many hospice providers have seen staff turnover rise during the pandemic, as have organizations in other health care settings. Slightly more than 20% of health care workers have considered leaving the field due to stress brought on by the pandemic, and 30% have considered reducing their hours, according to a recent study published in JAMA Network Open.

Paradigm has largely immunized itself against these concerns through an organizational culture designed to support employee satisfaction and well-being, according to Jarecki. The company has added between 20 and 25 new positions to date during 2021. 

“It’s really kind of at the forefront of who we are. My number one priority and vision for this company has been to be the employer of choice,” Jarecki told Hospice News. “That supersedes everything else, and we’ve maintained that kind of direction. We take care of our team.” 

Shofner and Jarecki got to know each other early this year through a mutual connection from the M&A advisory firm Stoneridge Partners. Based on those conversations, the two realized that a cultural alignment existed between the two companies, which led them to explore the potential of this investment. 

Havencrest launched its debut investment fund in 2018. Paradigm represents the fund’s fifth portfolio investment and the firm expects to continue hospice and home health investments in the coming years.

“Our collective strategy is to build upon Paradigm’s successes; to continue its growth trajectory through geographic expansion. Secondarily, we plan to pursue acquisitions in strategic locations in and around the corporate headquarters in Indianapolis,” Shofner said. “This will allow Paradigm to aggressively expand the reach and ultimately provide compassionate, high-quality care to more patients. Acquisitions will be a part of the strategy, but not the only strategy.”

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