Intermountain, Memorial Hermann, Trinity Take Stake in $300 Million Private Equity Fund

With the COVID-19 pandemic depressing core-business performance for providers, some systems are taking a more strategic role in finding alternative opportunities within health care to diversify their investment portfolios. Intermountain Healthcare, Memorial Hermann and Trinity Health are just a few of the provider organizations and payers who have taken a stake in a Nashville private-equity firm’s latest $300 million fund.

The Heritage Group recently closed its third fund, which invests in high-growth health care services and tech firms that address the field’s greatest challenges. About 70% of the $300 million already committed comes from health systems and insurers like Horizon Blue Cross Blue Shield of New Jersey.

Heritage’s investment model and approach is different from many private-equity and venture-capital funds. Strategic investors in its funds provide unique value and insights throughout all stages of health care deals, including helping to identify, evaluate and spur growth of portfolio companies. Heritage investors on the provider side of health care represent more than 550 hospitals with 90,000 beds and about 3 million discharges yearly.

Some of the fund’s investors, including Michigan-based nonprofit Spectrum Health, say that in addition to seeking a return, they want to widen their investment footprint and reduce portfolio volatility. Other investors in Heritage’s third fund include Advocate Aurora Health, Banner Health, Community Health Systems, Henry Ford Health System, Northwestern Medicine and UnityPoint Health. The average commitment is between $10 million and $20 million, Heritage leaders say.