Page 45 Bain Capital Healthcare
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Bain Capital Healthcare Healthcare Services
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
improving operating margins.
At the time, many healthcare
companies were also still struggling
to transition from paper to digital.
With help from Bain Capital'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
Global 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 on the public markets, raising
$3.79 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 Healthcare Services
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
improving operating margins.
At the time, many healthcare
companies were also still struggling
to transition from paper to digital.
With help from Bain Capital'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
Global 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 on the public markets, raising
$3.79 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.
