Page 29 Bain Capital Helthcare
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Bain Capital
Healthcare
The 2006 take-private of HCA remains
one of the largest private equity
investments of all time and, for Bain
Capital’s investors, one of the most
profitable.
Bain Capital had a long relationship
with HCA’s founders, the Frist family,
which helped shape a nuanced view of
the hospital chain’s performance and
long-term prospects. These insights
led to the conclusion that HCA, which
was then a public company, was
undervalued.
Investors mispriced HCA for two main
reasons: too much focus on quarterly
revenue and admissions volatility,
and not enough appreciation for the
decades-long work the Frists had done
to make HCA’s hospitals critical, high-
quality components of the healthcare
delivery system in many urban markets.
Seeing the compelling value in HCA’s
network of leading hospitals and its
high-quality approach to care delivery,
we developed a plan to privatize HCA
and allow the company to focus on
growth and long-term value creation.
In 2006, Bain Capital, the Frists, and
two equity partners purchased the
company in a $33B take-private.
Under private ownership, company
leadership preserved the culture of
strong local hospital management, but
were also able to invest in system-wide
tools and technology to drive quality,
growth and operating efficiency.
These efforts allowed HCA to grow its
employee base and deliver high-quality
care to larger numbers of patients while on the public markets, raising $3.79
improving operating margins.
At the time, many healthcare
companies were also still struggling to
transition from paper to digital. With
help from Bain Capital Private Equity’s
Portfolio Group, HCA also made a
major investment in IT infrastructure.
“By 2011, the company really had
a focused strategy and a different
financial trajectory to articulate to the
public markets,” says Chris Gordon,
Co-Head of Bain Capital’s Private
Equity business and Global Head of
Healthcare. “It used to be perceived as
being in the wrong part of the market
with volatile statistics. Now it was
received as being in the right part of
the market with strong growth and
differential operating capabilities.”
That year, the company was re-listed
billion, representing the biggest private
equity-backed IPO in history.
Frist Fundamentals
In many ways, the Frist family’s decision to take HCA private
in 2006 was faithful to the origins of what has become
America’s most-respected for-profit hospital business.
HCA was founded in 1968 by two doctors, Thomas Frist Sr.
and Thomas Frist Jr., and prototypical U.S. venture capitalist
Jack Massey. The mission was to build a scalable healthcare
business that put patients first.
Fast forward 38 years, and the Frist family again sought to
pair medical expertise with cutting-edge business practices.
Since its re-IPO, the company has added roughly $100 to its
price per share while also doubling down on its commitment
to community support, including providing some $3.7 billion
in free care to uninsured patients in 2019.
Bain Capital
Healthcare
The 2006 take-private of HCA remains
one of the largest private equity
investments of all time and, for Bain
Capital’s investors, one of the most
profitable.
Bain Capital had a long relationship
with HCA’s founders, the Frist family,
which helped shape a nuanced view of
the hospital chain’s performance and
long-term prospects. These insights
led to the conclusion that HCA, which
was then a public company, was
undervalued.
Investors mispriced HCA for two main
reasons: too much focus on quarterly
revenue and admissions volatility,
and not enough appreciation for the
decades-long work the Frists had done
to make HCA’s hospitals critical, high-
quality components of the healthcare
delivery system in many urban markets.
Seeing the compelling value in HCA’s
network of leading hospitals and its
high-quality approach to care delivery,
we developed a plan to privatize HCA
and allow the company to focus on
growth and long-term value creation.
In 2006, Bain Capital, the Frists, and
two equity partners purchased the
company in a $33B take-private.
Under private ownership, company
leadership preserved the culture of
strong local hospital management, but
were also able to invest in system-wide
tools and technology to drive quality,
growth and operating efficiency.
These efforts allowed HCA to grow its
employee base and deliver high-quality
care to larger numbers of patients while on the public markets, raising $3.79
improving operating margins.
At the time, many healthcare
companies were also still struggling to
transition from paper to digital. With
help from Bain Capital Private Equity’s
Portfolio Group, HCA also made a
major investment in IT infrastructure.
“By 2011, the company really had
a focused strategy and a different
financial trajectory to articulate to the
public markets,” says Chris Gordon,
Co-Head of Bain Capital’s Private
Equity business and Global Head of
Healthcare. “It used to be perceived as
being in the wrong part of the market
with volatile statistics. Now it was
received as being in the right part of
the market with strong growth and
differential operating capabilities.”
That year, the company was re-listed
billion, representing the biggest private
equity-backed IPO in history.
Frist Fundamentals
In many ways, the Frist family’s decision to take HCA private
in 2006 was faithful to the origins of what has become
America’s most-respected for-profit hospital business.
HCA was founded in 1968 by two doctors, Thomas Frist Sr.
and Thomas Frist Jr., and prototypical U.S. venture capitalist
Jack Massey. The mission was to build a scalable healthcare
business that put patients first.
Fast forward 38 years, and the Frist family again sought to
pair medical expertise with cutting-edge business practices.
Since its re-IPO, the company has added roughly $100 to its
price per share while also doubling down on its commitment
to community support, including providing some $3.7 billion
in free care to uninsured patients in 2019.
