Six months ago, BrightStar Care was acquired by an affiliate of the private equity firm Peak Rock Capital. Since then, both BrightStar and Peak Rock have had to work to define their relationship and new systems, a process that is not without its challenges. BrightStar has been able to invest in new technology – but […] The post Doing It ‘Faster, Better’: BrightStar Care’s CEO On 6 Months Under PE Ownership appeared first on Home Health Care News.
Six months ago, BrightStar Care was acquired by an affiliate of the private equity firm Peak Rock Capital. Since then, both BrightStar and Peak Rock have had to work to define their relationship and new systems, a process that is not without its challenges.
BrightStar has been able to invest in new technology – but its employees have to adjust to more structured procedures than existed under its founder and previous owner, Shelly Sun Berkowitz. Berkowitz had been in the process of buying locations to build a larger direct business – but Peak Rock decided to re-franchise those operations. The company’s mission is unchanged – but its new investors are pushing to accomplish goals faster while improving quality.
Under new ownership and led by CEO Andrew Ray, Chicago-based BrightStar Care plans to double in size within the next five years, and aims to establish a deep presence in every state in the country. The home care, senior living and supplemental staffing provider now has substantial resources to overcome any impediments previously slowing its growth, Ray told Home Health Care News.
HHCN caught up with Ray to discuss the company’s first six months as a PE-backed company, his plans for the next five years and how BrightStar and Peak Rock are defining their relationship.
The transcript below has been edited for length and clarity.
HHCN: How have the six months gone since the Peak Rock deal was announced?
Ray: The experience with them has been great. From a PE perspective, when they buy a company, they have what’s called the investment thesis. A lot of times, it’s a question of, ‘What is it really?’ You go through all the diligence and you talk and then after it’s transacted, you find out the reality. And the reality has been very, very positive. Their thesis was our thesis.
Normally, [private equity] comes to the table with 100 day plan. That plan really says, ‘We’re going to move something offshore. We’re going to do something differently.’ Here it was, ‘This is what we heard, this is what we wanted to do and this is what we can help you do.’ I really couldn’t ask for anything better, and nor could the team.
In terms of major initiatives in the first six months, what would you flag?
I would probably say investment.
PE can take one of a couple of different approaches. One way could be where they would see areas to lean a business down. Peak Rock has done the opposite. They listened to us very carefully and said, ‘Where would you like to accelerate your growth? What’s been holding you back?’ Technology is an example. You may or may not know we have our own proprietary system called ABS. The good news about that system is that it gives us a tremendous amount of flexibility in how we want to move forward. The bad news is, you own and run your own system. So we have a very large IT team, a large budget and so forth.
We had an opening for a new chief technology officer. Peak Rock used their reach, breadth and finanicals to get us a candidate. Under the old system, we may not have been able to afford that type of skill. We are very excited about that investment. In turn, the beauty of that is, he’s also brought in now three really, really strong people. We’re starting to rethink technology and the AI world. That’s probably the biggest initiative.
AI is not all things to all people, but I think the team is narrowing it down. That takes again, investment, intellect, skill and partnerships.
When Peak Rock bought us, our orientation was that we would like to be the very best franchise system in this space. The previous owner and founder had started to purchase some units and had started to build more of a direct business in certain areas of the country. Peak Rock has asked us to re-franchise that business, which we’re doing now. The principle around that is, ‘How can we be the very best at franchising in home health care?’ That then goes to, ‘How can we make an owner successful?’
What are your top strategic priorities for this year?
This year, we’re trying to stabilize and define our relationship with Peak Rock and our joint process forward. Success for me would be, as we end this year with our three-year plan, that we have a partner that’s aware, informed and engaged, that they feel respected for the investment they made in us, and they feel confident that we’re good stewards of the money they’ve given us to run the business.
On the opposite side, the team’s never worked for private equity before. Most of the team has worked for 20-plus years with an owner-founder. A lot of the team is going through the natural growth of understanding what it’s like to work with an institutional money group, as opposed to an owner-founder. There are very good parts and challenging parts.
The budget process changes a lot. It becomes clearer. With an owner-founder, if you want to spend a little extra in the middle of the year, it’s the owner-founder’s money. They go to the bank, and it’s yours. We now work in budgets and we go tighter. Moving the organization from that environment is also a personal goal. I want people to feel pride, see an opportunity to be successful and see growth opportunities, because of this great partnership we have. Then, as with any good partner, I want them to feel just as good about us as we do about them.
What we’re doing isn’t changing. I think what they would like to challenge us on is, can we do it faster and can we do it better? Can we sell more franchises? Can we make an owner successful faster? Can we deliver a higher standard of care? Can we get our quality metrics up higher? That’s where I feel that the challenge when they come is: It’s a great business. How do we make it greater?
What friction points, if any, emerge in this integration process?
With any private equity fund, they’re tremendously skilled at understanding whether they want to invest in the asset. It takes them a while to understand what they’ve invested in. So it’s a normal human dynamic where they spend four or five months trying to learn everything they can about the business. ‘Why did you have sales and marketing this way? Why not this way? Why this line of business?’ Then they come forward, they say, ‘This is great.’ They go to their investment committee, and they purchase the business. But then they start with a different type of conversation, where they’re really trying to seek to understand.
So there’s not been a friction point. They’ve never been in home health care. So while we have a vernacular and nomenclature, acronyms, and we immediately know what all these things mean, they’re learning. So oftentimes we have to slow down in order to help us go fast again. So it’s not a friction point, but it’s a normal human dynamic of each party trying to learn the other.
Any plans for service line expansion in the near to medium future?
We don’t know yet. There’s a lot of movement in home dialysis right now. The technology has become widespread enough and easy to use. That’s an indicator where it might be the right point.
We always want to add a little more value if we can. We’re just not exactly sure what that means right now.
What’s the biggest regulatory or policy challenge you’re facing or anticipating?
You have a variety of legislative opinions on Medicare and Medicaid. We don’t participate in Medicare, but we do in Medicaid. That system is funded by CMS through a state organization, generally split up based on pediatrics and adults. We do business on the pediatric side. When you hear cuts to Medicaid, well, where? Are they going to be on the adult side or the child side? I think there are a lot of regulatory questions.
Where would you like to see BrightStar in five years in terms of both size and capabilities?
Simplistically stated, double the size. That’s a mathematical doable based on our growth rate, and that is also what Peak Rock would like to see.
I would be very proud if BrightStar had an extended and deep reach in every community in the United States. What we do adds so much value and changes the way people live in a very positive way. If I were to go five years forward and we went from 400 units to 1,200 units and now we are deeply involved in every state, that would make me feel pretty proud of the team and the work that they did.
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