Formed in 2004 through a series of mergers of long-standing and
established companies, Orion HealthCorp is a healthcare services
organization providing outsourced revenue cycle management (RCM)
services and financial management services to hospital-based physician
groups, physician clinics and laboratories. With its investment in
Orion, ABRY reaffirmed its strong interest and fortified its experience
in the healthcare business services sector while adding to our existing
healthcare portfolio that includes Executive Health Resources, Gould
& Lamb, and HealthPort.
Similar to ABRY’s earlier
investments in the sector, Orion stands to benefit greatly from the
large, fragmented and growing healthcare industry. Orion’s
opportunities are further enhanced by the strengthening trend towards
outsourcing of business services in the healthcare marketplace. Orion’s
primary customers include pathologists, anesthesiologists and
radiologists, for whom it provides RCM services – performing the
essential and critical function of collecting revenue on behalf of
these physicians for medical procedures performed, among various other
billing and collections services. Orion’s services allow physicians to
focus their efforts on their core competency, patient care, while
ensuring that they are appropriately compensated for the services they
provide.
Given the highly fragmented market in which it
operates, a significant part of Orion’s growth strategy is the pursuit
of accretive acquisitions, coupled with its efforts to grow organically
through the addition of new clients and the up-selling of existing
clients. As such, in 2008, Orion identified two highly attractive
acquisition targets that supported its expansion strategy into
contiguous geographic regions. Faced with a difficult bank lending
environment, Orion turned its focus to alternative sources of
financing. After a brief meeting at an industry conference, ABRY and
Orion quickly commenced discussions around ABRY providing mezzanine
capital to support the proposed transactions. Orion found ABRY to be an
ideal partner not only due to our ability to provide capital to both
the current and future deals, but also because of our experience in the
healthcare business services sector and previous experiences working
with companies executing industry consolidation strategies. Meanwhile,
we found Orion to be a compelling investment opportunity possessing the
same characteristics as our typical investments – a recurring and
highly predictable cash flow stream, significant operating leverage,
high switching costs for customers, an impressive and highly
experienced management team, and considerable future growth
opportunities.
Soon after closing the transaction, we introduced two of our existing
portfolio companies, CyrusOne and HealthPort, to Orion. These
introductions established key vendor relationships for Orion and are
expected to improve operational efficiency in the business and enhance
operating margins.