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Welsh, Carson buys $196 million stake in Innovage, helps convert senior care firm to for-profit

Sale of assets will be used to fund The NextFifty Initiative, a Colorado elder care foundation.

Jeff Lagasse, Associate Editor

New York-based private equity firm Welsh, Carson, Anderson and Stowe has signed on to provide financing to senior care company Innovage, which will allow them to expand their services and pivot from a nonprofit to a for-profit entity.

Funding will be achieved through the sale of Innovage assets, totaling $196 million, plus a potential $8 million earn out in 2018 --  which is a contractual provision stating that Innovage will obtain additional future compensation based on the business achieving certain future financial goals. The sale of assets will be used to fund The NextFifty Initiative, a Colorado elder care foundation.

Innovage and its current management team will continue to lead the day-to-day management of the organization. The agreement was approved by Colorado's State Attorney General.

The investment from Welsh, Carson, Anderson and Stowe is expected to promote significant growth of the company's Program of All-Inclusive Care for the Elderly.. That lets Innovage become the first for-profit organization to offer the extensive day services and transportation that allow seniors to receive full care while still living in their homes.

[Also: Elderly care program could save $6B in healthcare costs]

Colorado's largest provider of PACE programs, Innovage is the second-largest PACE provider in the United States, also offering in-home care services, memory-loss programs and affordable senior housing.

"During my tenure at the Centers for Medicare and Medicaid Services and in the private healthcare sector, I've become a huge advocate of the PACE model," said Tom Scully, General Partner at WCAS, in a statement. "It is the best way to care for frail seniors but it has received little attention and grown very slowly due to limited access to new capital."

The announcement marks the second time in a little over a year that WCAS has been involved in a large-scale deal. In March 2015, it sold a majority stake in United Surgical Partners International to Tenet Healthcare, establishing a joint venture that, according to Tenet, ranks the Dallas for-profit healthcare giant as the top provider of ambulatory surgery operations in the United States.

The joint venture was reportedly worth $2.6 billion, and gave Tenet control over a total over 244 ambulatory surgery centers, 16 short-stay surgical hospitals and 20 imaging centers in 29 states.

Twitter: @JELagasse