New Enterprise Associates, the Silicon Valley venture firm with a massive $3 billion under management, has acquired DaVita’s chain of primary care clinics, Paladina Health, for around $100 million. The group currently operates its 53 clinics in 10 states.
Paladina operates a “direct primary care,” business, which means that its doctors don’t accept insurance. Rather it sells directly to employers, who pay a monthly fee on behalf of their workers. That fee varies depending on the size and health of the population it’s serving.
Such arrangements are particularly attractive at a time when policymakers are rewarding health care professionals for moving away from so-called “fee for service” arrangements, where they get paid for providing costly tests and procedures. The direct primary care model offers an alternative, known as “value based care,” which incentivizes doctors for keeping patients healthy.
“We are bullish on Paladina’s future and thrilled that New Enterprise Associates will be their new home,” said Kent Thiry, DaVita Chairman and chief executive, in a statement. Some of the NEA funds will be used to shore up its balance sheet, after a competitive bidding process that included other venture firms as well as a large retailer and pharmacy chain, said a person familiar.
NEA declined to comment on the financial terms of the deal.
NEA typically makes start-up investments but it will occasionally acquire majority positions, said its general partner Mohamad Makhzoumi. It bought another company from DaVita, DSI Renal, in 2011 and sold it to U.S. Renal Care for an undisclosed amount four years later.
The firm has a longstanding relationship with DaVita, which is best known for its kidney dialysis business, in large part through its former general partner, John M. Nehra, who has been on the DaVita board for almost two decades.
The care delivery space has been particularly attractive to corporate buyers lately.
DaVita sold off its physician group of 30,000 doctors to UnitedHealth in late 2017 for just shy of $5 billion. And in May, a palliative care provider called Aspire Health was scooped up by insurance giant Anthem.
Paladina CEO Chris Miller said he intends to expand the company to more states, which would make it more attractive to another buyer down the road or the public markets. But Miller said he is more focusing on expansion and building out the business at this time.
“Paladina is doing some remarkable things in primary care and there is an opportunity to further innovate and expand,” said Makhzoumi. “That’s what got us excited.”