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United States securities and exchange commission logo
September 22, 2023
Jon Rousseau
President and Chief Executive Officer
BrightSpring Health Services, Inc.
805 N. Whittington Parkway
Louisville, Kentucky 40222
Re: BrightSpring Health
Services, Inc.
Draft Registration
Statement on Form S-1
Submitted August
28, 2023
CIK No. 0001865782
Dear Jon Rousseau:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by providing the requested
information and either submitting
an amended draft registration statement or publicly filing your
registration statement on
EDGAR. If you do not believe our comments apply to your facts and
circumstances or do not
believe an amendment is appropriate, please tell us why in your
response.
After reviewing the information you provide in response to these
comments and your
amended draft registration statement or filed registration statement, we
may have additional
comments.
Draft Registration Statement on Form S-1 submitted August 28, 2023
Cover Page
1. We note your statement
that you have applied to list your common stock on Nasdaq.
Please state whether
approval for listing on Nasdaq is a condition to closing of the
offering. Once
finalized, please ensure your disclosure is consistent with your
underwriting agreement.
Industry and Market Data, page ii
2. We note your statement
that "[w]hile we believe such information is reliable, we have not
independently verified
any third-party information. While we believe our internal
company research,
surveys, and estimates are reliable, such research, surveys, and
Jon Rousseau
FirstName LastNameJon Rousseau
BrightSpring Health Services, Inc.
Comapany 22,
September NameBrightSpring
2023 Health Services, Inc.
September
Page 2 22, 2023 Page 2
FirstName LastName
estimates have not been verified by any independent source." It is not
appropriate to
directly or indirectly disclaim liability for statements in your
registration statement. Please
revise or specifically state that you take liability for these
statements.
Summary Highlights of Our Business, page 1
3. We note your statement that you are "[a] leading, diversified,
independent provider of
home and community-based healthcare services in the United States."
Please revise to
provide support for your assertion that you are a leading provider and
explain what
independent provider means in this context.
4. We note your statement here regarding your "over $1.75 trillion
combined market
opportunity," your statement on page 7 that "[t]he Senior and
Specialty patients we serve
represent a market opportunity of over $1.75 trillion" and similar
statements on page 8
and throughout the prospectus. Please clarify how this $1.75 trillion
figure is calculated
and discuss any material assumptions underlying the estimate,
including your assumed
market penetration.
5. We note your reference to "numerous businesses growing organically
into the double-
digits." Please clarify what you mean by businesses in this context as
it appears to be
different than your two segments.
Summary, page 1
6. Your prospectus Summary should provide a balanced presentation of your
business. Please revise to discuss the challenges you face, including,
as examples only,
competitive conditions in the markets you serve, regulatory risk as a
result of your
substantial reliance on government healthcare programs such as
Medicare and Medicaid,
and your level of indebtedness.
7. We note various statements in your prospectus regarding expectations
or beliefs that do
not appear to be attributed to the Company or an outside source.
Please revise these
statements to state that they are your beliefs or expectations or
otherwise attribute the
statements. For example, we note without limitation your statements:
on page 2: "The chronic conditions and long-term health needs of
these patients not
only represent an outsized share of health care spend today, but
also are expected to
drive a disproportionate share of future expenditures;"
on page 8: "Healthcare expenditures in the United States totaled
$4.4 trillion in 2022
and are expected to reach $4.9 trillion in 2024;"
on page 12: "Over $40 billion in annual U.S. health care spending
is attributed to
hospital readmissions, and home health care can reduce 365-day
post-discharge costs
by more than $6,000 per patient;"
on page 19: "Seniors over the age of 65 are expected to grow at
three percent a year
by 2030, and the population size of people over age 85 is
expected to double by
2040;"
on page 19: "There is an estimated six percent growth rate in the
number of Seniors
Jon Rousseau
FirstName LastNameJon Rousseau
BrightSpring Health Services, Inc.
Comapany 22,
September NameBrightSpring
2023 Health Services, Inc.
September
Page 3 22, 2023 Page 3
FirstName LastName
needing supportive care services, and 70% of adults over the age
of 65 will need
assistance at some point;"
on page 19: "Hospice services are projected to grow at seven to
eight percent per
year, and neuro rehab services are estimated to grow at eight
percent per year;" and
on page 19: "Reimbursement rates for hospice services have
increased by 2.0% on
average per year since 2014, while home health spending in the
U.S. is projected to
increase by eight percent per year through at least 2028."
8. We note your reference to "excellent" and "world class" Net Promoter
Scores. Here or
elsewhere in the prospectus, please briefly explain what Net Promoter
Scores are and how
they are calculated. Please explain the criteria for "excellent" and
"world class" ratings.
Additionally, please explain why you have multiple different NPS
ratings and if these
reflect ratings at different times or for different aspects of your
business.
9. We refer to your statement that you "provide home-based primary care,
which is
associated with a 50% reduction in hospitalization rate and a 20%
reduction in emergency
room visits." Please expand on this statement to explain what the
baseline comparison is
for these percentage reductions and what the association is between
home-based primary
care and these reductions. Additionally, please revise to attribute or
otherwise explain the
basis for these statements.
10. We note your statement that you "reduce the cost of long-term care for
Behavioral patients
by over $100,000 per year." Please revise to explain the baseline used
for this
comparison.
11. We refer to your statement that "These pharmacy services optimally
manage medication
regimens and drug utilization and minimize adverse medical effects,
which reduce drug
spending and help to capture potentially up to $2,400 in savings from
increased
medication adherence." Please explain how the $2,400 in potential
savings is calculated, if
it is a maximum potential benefit and the applicable timeframe for the
savings (annual,
lifetime, etc.).
12. We note your statement that you have "six-month line of sight on
approximately 76% of
our service volume and 69% line of sight on our service volume over a
year." Please
explain what line of sight means in this context.
13. Please provide data concerning your peers or your industry for all
statements of
comparison. For example, we note without limitation your statements:
on page 3: "We manage one of the nation s largest independent
platforms of both
pharmacy and provider services offered on a daily basis in home
and community
settings;"
on page 3: "We are one of the largest independent providers of
home and community-
based health services in the United States;"
on page 5: "We achieve hospitalization rates that are 30% lower
than the national
average in home-based primary care;"
on page 6: "As a result, and for example, our client and patient
and associated family
Jon Rousseau
FirstName LastNameJon Rousseau
BrightSpring Health Services, Inc.
Comapany 22,
September NameBrightSpring
2023 Health Services, Inc.
September
Page 4 22, 2023 Page 4
FirstName LastName
satisfaction scores are 99% for outpatient rehab services, 95%
for home infusion
patients, 81% per Home Health CAHPS, which is higher than the
national average;"
on page 10: "Our best-in-class pharmacy support...;"
on page 11: "Our customer service and quality metrics are
best-in-class as compared
to peers, such as time-to-first-fill (4.2 day average turnaround
time), 96.9% overall
Medication Possession Ratio, or MPR, and 95% infusion patient
satisfaction scores;"
on page 13: "we believe that our nurse-to-patient visit
frequency and staffing ratio is
well above industry averages;"
on pages 18-19: "While we have leading share and scale in a
number of our patient
services settings...;" and
on page 141: "we drive sales and marketing best practices
across all geographies to
drive referral and volume growth rates that are generally and
consistently above
market growth rates."
14. We note that you mention various ratings and scores. Please revise to
further describe
what these are and how they are calculated. For example, we note your
statements:
on page 2: "We achieve 99% patient satisfaction in our outpatient
rehab services, an
84% overall rating of care in hospice...;"
on page 5: "We achieve an 84% overall rating of care in
hospice, and four stars
(out of five) in the Consumer Assessment of Healthcare Providers
and Systems, or
CAHPS, home health patient survey ratings;"
on page 6: "As a result, and for example, our client and patient
and associated family
satisfaction scores are 99% for outpatient rehab services, 95% for
home infusion
patients, 81% per Home Health CAHPS, which is higher than the
national average,
84% for Hospice CAHPS, and Seniors and Behavioral supportive care
clients and
families (or guardians) report an average satisfaction score of
over 4 (out of 5);"
on page 11: "Our customer service and quality metrics are
best-in-class as compared
to peers, such as 96.9% overall Medication Possession Ratio, or
MPR;" and
on page13: "We have an 8.8 Hospice Care Index, or HCI, score "
Our Value Proposition, page 5
15. We note your statement that your "pace of acquisitions has been
consistent, with 12, 12,
and 6 deals completed each year in 2020, 2021, and 2022, respectively,
and 2 deals
completed in the six months ended June 30, 2023." Please remove or
revise the reference
to a consistent pace of acquisitions, as it appears the number of
completed deals has
declined.
Pharmacy Solutions, page 10
16. We note your statement that "[i]n 2020, 2021, and 2022, as a testament
to our leading
quality and service, we achieved world-class NPS scores of over
90, which also
triggered quality incentive payments." Please explain what these
incentive payments are,
their general amount and by whom they were paid.
Jon Rousseau
FirstName LastNameJon Rousseau
BrightSpring Health Services, Inc.
Comapany 22,
September NameBrightSpring
2023 Health Services, Inc.
September
Page 5 22, 2023 Page 5
FirstName LastName
Provider Services, page 12
17. We note your statement here that the provider services you provide
"consist of clinical and
supportive care" and your statement on page 13 that "[y]our primary
care clinicians
optimize clinical and care decisions as they see and manage both
Seniors and Behavioral
(including I/DD) patients " Please revise the description of your
Provider Services
segment to clarify if you directly employ physicians who are providing
healthcare services
to your patients or are otherwise practicing medicine. Please discuss
applicable
government regulations and laws concerning the corporate practice of
medicine and fee-
splitting and how such regulations apply to your business model,
including any associated
risks and liabilities. Please also revise your Risk Factors and
Business sections
accordingly.
Operational Excellence, page 15
18. We refer to your statement that "[i]n 2022, the implementation of our
PMO-
led continuous improvement program over the past seven years at the
enterprise level has
resulted in approximately $41.5 million of savings (in addition to
annual efficiencies and
savings work throughout field operations)." Please explain how the
$41.5 million of
savings is calculated, what baseline is being used for the comparison,
and if this represents
an annual figure for 2022 or cumulative savings over a seven-year
period.
Risk Factors
Risks Related to Our Business, page 32
19. We note that on page 52 you state: "While we maintain liability
coverage that we believe
is appropriate given the nature and breadth of our operations, any
claims against us in
excess of insurance limits, or multiple claims requiring us to pay
deductibles, as well as
the potential impact on our brand or reputation as a result of being
involved in any legal
proceedings, could have a material adverse impact on our business,
results of operations
and financial condition" and on page 53 you state: "In addition, we
self-insure for various
risks, including employment class actions, False Claims Act actions,
adverse regulatory
actions, commercial contractual or commercial tort actions, and
intellectual property
actions." Please revise these risk factors to clarify, as you do
elsewhere, that you are self-
insured for a substantial portion of your general and professional
liability, automobile,
workers compensation, and health benefit risk.
Security breaches, loss of data, and other disruptions could compromise
sensitive business or
patient information..., page 50
20. We note your statement that "in March 2023, we experienced a
ransomware attack that
resulted in a breach of more than 6 million individuals personal
information (including
PHI); as a result of such incident, we notified the impacted
individuals and applicable
regulators and are currently subject to a HHS Office for Civil Rights
investigation, various
state regulatory investigations, and various lawsuits in connection
with this incident."
Jon Rousseau
FirstName LastNameJon Rousseau
BrightSpring Health Services, Inc.
Comapany 22,
September NameBrightSpring
2023 Health Services, Inc.
September
Page 6 22, 2023 Page 6
FirstName LastName
Please note whether you expect this ransomware attack and the
associated investigations
and lawsuits could have a material impact on your business.
Additionally, we note that in
general "you have been subject to HHS investigations with respect to
data privacy and
security incidents involving PHI in the past" and that your "systems
and those of [y]our
third-party service providers and business partners . . . have
experienced, data or security
breaches, cyberattacks (including ransomware), acts of vandalism,
computer viruses,
misplaced or lost data, human errors, or other similar events." Please
revise as necessary
to ensure all material investigations and events are described aside
from the March
2023 example.
Risk Factors
Risks Related to Our Regulatory Framework
Many states have CON laws or other regulatory provisions..., page 59
21. Please expand on this risk factor to discuss whether certificate of
need laws or other
similar regulatory provisions have materially impacted your business
to date and if you
expect them to have a material impact on your business going forward.
For example,
please note if you have applied for, and, if so, whether you have been
granted or denied, a
certificate of need in any of the states in which you currently
operate or states into which
you have attempted to expand. If material, please quantify the
percentage of your business
that relies upon certificates of need or other such state regulatory
approvals.
Risks Related to Our Indebtedness
Our variable rate indebtedness subjects us to interest rate risk..., page 67
22. Please expand on this risk factor to discuss your interest rate swap
agreements. In this
regard, we note your statement on page 129 that as of June 30, 2023,
your debt
outstanding was $3.5 billion, of which $2.0 billion is fixed through
interest rate swap
agreements.
Use of Proceeds, page 82
23. Please revise the Use of Proceeds section to note that, pursuant to
the terms of the
Monitoring Agreement, you expect to pay a termination fee to the
Managers in connection
with the offering. Once known, please specify the expected amount of
the termination fee.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Stable Reimbursement Environment Across our Portfolio of Businesses, page 96
24. We note your statement that "[d]ue to the medical necessity of our
services, which are
lower cost than healthcare services provided in other settings and
reduce ER, hospital and
institutional facility utilization, we have a history of reimbursement
stability characterized
by low-to-mid single digit rate increases across our lines of business
over the past 10
years." Please also note the average reimbursement rate increase over
the previous 10 year
period.
Jon Rousseau
FirstName LastNameJon Rousseau
BrightSpring Health Services, Inc.
Comapany 22,
September NameBrightSpring
2023 Health Services, Inc.
September
Page 7 22, 2023 Page 7
FirstName LastName
Factors Affecting Results of Operations and Comparability, page 99
25. We note your disclosure that on November 1, 2022 you completed the
sale of Workforce
Solutions for a base purchase price of $155.8 million, net of cash
divested of $2.7 million.
Please expand on this disclosure to note the use of proceeds from the
sale.
Impact of COVID-19 and CARES Act, page 100
26. We note your statement that "[d]uring 2020 and 2021, we experienced an
annual script
reduction of approximately 2.7 million scripts when compared with our
pre-
pandemic levels in January and February 2020." Please also note the
level of annual
scripts during 2022 as compared to your pre-pandemic levels.
Non-GAAP Financial Measures, page 114
27. With reference to Question 100.01 Non-GAAP Financial Measures
Compliance
& Disclosure Interpretations, as updated December 13, 2022, please
address the following
comments related to certain of your adjustments made in the
determination of Adjusted
EBITDA:
We note that the startup costs, as more fully discussed in your
response dated
September 7, 2021, appear to be normal recurring cash operating
expenses necessary
to operate your business. It therefore appears that these costs
should not be excluded
from your non-GAAP performance measure. Please advise or revise to
remove such
adjustment;
We note that the management fees, as more fully discussed on page
197, appear to be
normal recurring cash operating expenses necessary to operate your
business. It
therefore appears that these costs should not be excluded from
your non-GAAP
performance measure. Please advise or revise to remove such
adjustment;
We note you have adjusted for significant project costs in each
period since fiscal
year 2020. We also note your response letter dated September 7,
2021 indicated that
the project was not expected to recur within the next two years.
Please more fully
explain why you continue to incur costs for the migration of the
Company s financial
general ledger system and related reporting systems to an updated
platform. Fully
explain the nature of these costs and how you concluded that they
were not normal
recurring cash operating expenses; and
We note that your legal costs and settlements, as disclosed in
adjustment 5 and in
your response dated September 7, 2021, represent potential
settlement accruals and
defense costs associated with certain PharMerica litigation
matters associated with
three historical cases. Please separately quantify the settlement
accruals and defense
costs. Please note that, notwithstanding the timing of these
cases, your defense
costs appear to be normal recurring cash operating expenses
necessary to operate
your business. It therefore appears that these costs should not be
excluded from your
non-GAAP performance measure. Please advise or revise to remove
such
adjustment.
Jon Rousseau
FirstName LastNameJon Rousseau
BrightSpring Health Services, Inc.
Comapany 22,
September NameBrightSpring
2023 Health Services, Inc.
September
Page 8 22, 2023 Page 8
FirstName LastName
Business, page 130
28. Please revise to describe interactions with regulators that led to
measures being taken
against the company or requiring material changes from the company as
a result of non-
compliance with applicable laws or regulations. This discussion should
include, but not be
limited to, the State of West Virginia, who we understand issued an
Administrative Order
in July of 2020 ordering an immediate admissions ban for all licensed,
West Virginia
locations and services of your subsidiary. Ensure appropriate risk
factor disclosure is
included as well. For example, we note some of these risks are
disclosed on page 46, but
there is no acknowledgment of prior issues.
Our Value Proposition, page 133
29. On page 134 you state: "Integrating our pharmacy and provider services
to measure
effectiveness across quality, costs, and patient experience provides
potential opportunities
to pursue additional per member per month, shared savings, and
risk-taking (capitated)
payment models and contracts, subsequent to current quality and shared
savings based
incentives in multiple payor and ACO contracts today." Please revise
to explain capitated
payment models, further explain your involvement with capitated
payment contracts and
disclose the risks associated with such models.
Competitive Advantages
Track Record of Strategic and Accretive M&A Across Our Platform with Proven
Ability to
Execute, page 148
30. Please balance this disclosure here concerning your successful M&A
track record with
disclosure concerning the debt incurred as part of these acquisitions.
Legal Proceedings, page 167
31. We note your description of a complaint filed in the United States
District Court for the
District of New Jersey against PharMerica on March 4, 2011. Please
revise to note the
relief sought in the case.
Certain Relationships and Related Party Transactions, page 198
32. Please revise to state the underwriting fees expected to be earned by
KKR Capital Markets
LLC from this offering.
33. Page F-64 states that you have a Prime Vendor Agreement with
AmerisourceBergen Drug
Corporation, an affiliate of WBA, under which you purchase "a
significant volume of
inventory." Please tell us why this contract is not described here.
Certain U.S. Federal Income Tax Consequences to Non-U.S. Holders, page 218
34. We note the heading here and your statement that this section is a
summary of "certain"
U.S. federal income tax consequences. Please revise your disclosure
here to clarify that
Jon Rousseau
BrightSpring Health Services, Inc.
September 22, 2023
Page 9
this section addresses the material U.S. federal income tax
considerations as opposed to
certain material U.S. federal income tax considerations. Revise to
provide similar
changes to the disclosures starting on page A-56.
General
35. Please supplementally provide us with copies of all written
communications, as defined in
Rule 405 under the Securities Act, that you, or anyone authorized to do
so on your behalf,
present to potential investors in reliance on Section 5(d) of the
Securities Act, whether or
not they retain copies of the communications.
You may contact Kristin Lochhead at 202-551-3664 or Jeanne Baker at
202-551-3691 if
you have questions regarding comments on the financial statements and related
matters. Please
contact Conlon Danberg at 202-551-4466 or Margaret Schwartz at 202-551-7153
with any other
questions.
Sincerely,
FirstName LastNameJon Rousseau Division of
Corporation Finance
Office of
Industrial Applications and
Comapany NameBrightSpring Health Services, Inc.
Services
September 22, 2023 Page 9
cc: Sunny Cheong, Esq.
FirstName LastName