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Kinderhook's rural health care ambitions

May 10, 2022
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Illustration: Brendan Lynch/Axios

Kinderhook Industries is teaming up with ex-NaviHealth executive Benson Sloan to launch a new primary care platform focused on expanding access to care in rural markets.

Why it matters: Rural Americans are vastly underserved, facing a number of health inequities that translate to poorer health outcomes, including a higher mortality rate, versus their urban counterparts.

  • Rural communities have more patients per physician (with an especially large shortage of specialty care), and a high rate of hospital closures has further reduced access to efficient, quality care.
  • "It's been a challenge to deliver care in rural areas [and] it's been a challenge to keep rural hospitals open," but that lends to an opportunity, particularly given the government's high prioritization around rural health care, managing director Chris Michalik tells Sarah. "Everyone is trying to lure doctors to these rural areas."
  • "I don't think we're going to need to be huge to be relevant. We need to be meaningful in regions, and it will begin to take care of itself."

Details: The new platform includes an initial partnership and the recapitalization of Smoky Mountain Urgent Care, plus growth capital to further invest in similar providers.

  • Financial terms weren't disclosed, but Kinderhook is committing $50 million to the new platform, Michalik says.

How it works: While you can't build density in rural markets, Michalik says you can build a standard of care model in multiple communities, and that becomes a "stepping stone" to partner with payors.

  • The initial focus will be buying and adding primary care clinics to create a regional, multistate platform in rural communities across the Southeast.
  • As Smoky Mountain builds a regional presence, Michalik believes value-based care can work over time. "Driving quality of care up starts with improving health outcomes and HEDIS measurements."

Context: New York's Kinderhook is a repeat investor in and around primary care and VBC.

  • Kinderhook earlier this year took a minority stake in value-based primary care and managed service organization Physician Partners. The deal carried a near $2.5 billion valuation, sources told Sarah, and Kinderhook said it invested $500 million with the deal.
  • In January 2021, Kinderhook invested $105 million in AbsoluteCARE, a Baltimore-based value-based primary care provider focused on vulnerable, chronically ill patients.
  • The Michalik household knows firsthand the market's challenges, as the investor's wife is a primary care doctor.

State of play: With COVID calling attention to America's massive health equity problem, investors and entrepreneurs have woken up to the fact that more innovation needs to be applied around underserved communities. Recent new ventures include:

  • Homeward, which is creating an in-network, value-based care platform that will partner with PC and specialty providers and Medicare Advantage plans.
  • Launched by ex-Livongo exec Jennifer Schneider, Homeward emerged from stealth in March with an initial $20 million investment from General Catalyst.
  • Last summer, Russell Street Venture's Brad Smith launched rural health care navigator Main Street Health, with backing from Oak HC/FT.
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