Seaside Healthcare Inc., a behavioral health services provider with locations in the Baton Rouge and New Orleans areas, has been acquired by Pharos Capital Group LLC.
Seaside was established in 2009 in Shreveport to own, develop and operate health care facilities. Seaside’s facilities include a 30-bed inpatient facility in Baton Rouge, a 24-bed hospital in Gonzales and a 24-bed inpatient facility in New Orleans, and outpatient services locations in New Orleans, Gretna and Mandeville. The company also manages a 16-bed acute adult psychiatric unit at West Jefferson Medical Center. Seaside has about 400 employees.
Pharos, a private equity firm based in Dallas and Nashville, Tenn., did not disclose terms of the deal. However, Pharos’ website says the firm mainly invests $10 million to $30 million in companies looking for later-stage funding, focusing on health care and business services. Companies have usually been in business for three years before they seek later-stage funding, according to Investopedia.com.
Jim Phillips, a partner with Pharos Capital, said Seaside’s management team — Chief Executive Officer Franklin Roemer II, a nephew of former Gov. Buddy Roemer; President Daniel Aguilard and Chief Operating Officer Johnny Patout — drove most of the investment decision for Pharos.
“They’ve grown the business fairly quickly over the last three years, so with some additional capital, we thought they could grow it even at a faster clip than they had historically,” Phillips said.
Pharos won’t disclose the additional investment it plans to make in Seaside.
Phillips said Pharos likes the behavioral health business and considers the Southeast and Louisiana as underserved markets for Seaside’s services.
In November, the federal government issued rules to implement the Mental Health Parity and Addiction Equity Act of 2008. The law requires that health insurance coverage for mental health be comparable to coverage for physical illnesses. That means the deductibles and co-pays have to be the same.
“That’s kind of giving a governmental mandate, and we consider it a tailwind, making mental health an area of potential candidates of investing for us,” Phillips said.
Although most of Seaside’s patients are covered by governmental programs, and those programs face pressure to limit costs, Phillips said Pharos does not believe mental health cuts will be too punitive.
The Affordable Care Act is expected to increase the number of people with mental health coverage, and Seaside is a good operator, Phillips said. The Parity Act means that mental health payments won’t be attacked as strongly for a while.