Episode Summary
Executive Summary: Ted Seides interviews Ravi Sachdev and Ron Williams of CD&R about Agilon Health, a healthcare platform built from two acquisitions and a partnership with a major physician group to shift primary care from fee-for-service to value-based care. The episode traces the investment thesis, operational buildout, compliance cleanup, scaling, IPO preparation, and how the model may extend into other healthcare markets.
Main Topics: CD&R’s operating-partner private equity model (Priority: 5/5): Ravi and Ron explain CD&R’s origin, sector focus, global footprint, and emphasis on operational value creation through partnership with businesses, families, and entrepreneurs. Agilon’s value-based care thesis (Priority: 5/5): Agilon was designed to improve care for Medicare seniors by aligning incentives among doctors, patients, and payers through a subscription-like, full-risk model. Building the platform through acquisitions and partnerships (Priority: 5/5): CD&R combined a Medicaid platform in California, a Medicare platform in Hawaii, and a foundational joint venture with Central Ohio Primary Care to create the initial business. Change management and operational transformation (Priority: 4/5): Scaling required analytics, process redesign, payer education, compliance remediation, hiring the right talent, and helping physicians adapt to a new care and economics model. Scaling, network effects, and pandemic tailwinds (Priority: 4/5): As more physician groups joined, success spread through peer networks; COVID also highlighted the resilience of the subscription model versus fee-for-service. IPO preparation and capital structuring (Priority: 4/5): The company was intentionally built for a public-market exit, with governance, investor base, and capital structure curated to support an IPO in a favorable market window. Broader strategic implications for CD&R (Priority: 3/5): Agilon’s success informed CD&R’s willingness to pursue scaled growth capital and new healthcare partnerships beyond traditional buyouts.
Key Arguments: CD&R’s edge is combining operating expertise and financial capital to create value through hands-on partnership rather than passive ownership. Agilon addresses a broken physician reimbursement model by shifting incentives from volume of visits to outcomes and total cost of care. The economics are compelling: doctors can earn materially more when they share in savings from better care management. CD&R did not invent the model, but identified a way to scale it outside California by assembling complementary assets and a flagship physician partner. Taking 100% of downside risk early was necessary because physician groups lacked capital and infrastructure to absorb it themselves. Operational credibility required fixing compliance problems in the acquired Medicaid business before scaling further. The model gained momentum through physician-to-physician referrals and broader market pressure from burnout and payment reform. The pandemic reinforced the value of subscription-like revenue because it preserved resources when office visits fell. Building a public company was deliberate from the start: governance, investors, and capital were curated to support an eventual IPO. Agilon’s success expands CD&R’s playbook in healthcare, enabling similar partnerships in other segments such as commercial insurance and provider groups.
Data Points: CD&R AUM: $57 billion - Firm size mentioned in the opening description of CD&R. CD&R founded: 1978 - History of the firm. Employees: 260+ - CD&R workforce across the U.S. and Europe. Healthcare share of CD&R activity: about 25% - Sector mix described by Ravi. Industrials share of CD&R activity: nearing 40% - Sector mix described by Ravi. Financial services and technology share: close to 15% - Sector mix described by Ravi. North America share of investing activity: a little over 70% - Geographic split of CD&R activity. Europe share of investing activity: almost 30% - Geographic split of CD&R activity. UK share of Europe activity: 50% - Ravi described CD&R’s European concentration. Agilon geographies: almost 30 geographies - Scale of the business across the U.S. Physicians in Agilon model: 2,000+ doctors - Primary care doctors participating in the value-based model. Traditional fee-for-service doctor revenue per visit: about $80 - Unit economics example for a primary care visit. Traditional fee-for-service annual profit per patient: about $120 - Based on three visits annually and roughly 50% operating cost. Medicare Advantage revenue per member per month: $900 to $1,000 - Payer revenue associated with the same patient in the risk model. Illustrative annual spend per patient: about $12,000 - Annualized spend represented by $1,000 PMPM. Potential gross profit per member per month in risk model: around $200 - Ravi’s round-number illustration of economics under full risk. Potential gross profit per patient annually: $2,400 - Equivalent annualized figure from the PMPM example. Partnership model term: 20 years - Length of the agreement with Central Ohio Primary Care. Downside risk assumed by Agilon/CD&R in the JV: 100% - CD&R said it funded and absorbed all downside risk in the new risk-bearing entity. Economics split with physician group: 50/50 - Economics from the joint venture with Central Ohio Primary Care. Exclusive transactions since 2009: 75% - CD&R’s transaction style emphasizing negotiated deals. Partnership-element transactions since 2009: 60% - Share of transactions that involved a partnership component. Initial public investors added in 2019: Morgan Stanley Investment Management and Capital Group - Capital base curated before the IPO.
Pivotal Quotes: "We were going to use our capital really two ways." — Ravi Sachdev: Explaining CD&R’s investment approach: acquiring capability-building businesses and funding the downside risk in the partnership model. "We didn't take any fees, but we believed in the unit economics of that $1,200 I was talking about over the long term, which is a very powerful subscription model." — Ravi Sachdev: Describing why CD&R accepted risk in the joint venture and how economics aligned with physicians. "In the model that we created, every time that the practice changes in a way that they can provide better care and service to those patients, they, in fact, increase their bottom line." — Ron Williams: Summarizing how value-based care aligns patient outcomes with physician economics.
Implications: The episode shows how private equity can build new healthcare categories by combining capital, operations, and partnerships. It also suggests value-based care models may scale beyond Medicare into broader insurance markets and become a durable investment theme.
About Private Equity Deals
Allocator and asset management expert, Ted Seides, conducts in-depth interviews with interviews with top institutional money managers across private markets. Guests include principals and senior leaders from private equity, private credit, real assets, and other alternatives. We dive deep into individual deals to learn about deal dynamics, companies, and ownership that make private equity a force in institutional portfolios and the global economy. Learn more and join our community at capitalallocators.com.