CalPERS launches health initiative

The California Public Employees’ Retirement System last month unveiled a $700 million investment program to invest in U.S. health care companies and to seek ways to improve the health care system, which CalPERS’ CIO Russell Read called “fragmented and inefficient.”

CalPERS intends to initially commit up to $500 million for direct investments and co-investments in health care companies. It also will earmark up to $200 million for health care-focused private equity funds and strategic joint ventures.

San Francisco-based Health Evolution Partners, a private equity firm formed last month by Dr. David Brailer, will serve as the exclusive advisor for the fund. Bailer previously founded CareScience, a health care data analysis company that was sold in 2003 to Quovadx. President Bush tapped Brailer to head the newly created Office of the National Coordinator for Health Information Technology in May 2004. Brailer stepped down from that post last summer, but continued to provide consulting services for the U.S. Department of Health and Human Services.

Our first goal is, obviously, to make money for CalPERS, but we also want to find new and innovative ways to improve health care for our 1.2 million enrollees.

Fred Buenrostro, CEO, CalPERS

Brailer says he expects Health Evolution to employ about two dozen professionals, including three to five seasoned “senior investment partners.” The firm also plans to raise its own fund, in which CalPERS is expected to be the sole investor for the first fund.

“Our first goal is, obviously, to make money for CalPERS,” says CalPERS CEO Fred Buenrostro, “but we also want to find new and innovative ways to improve health care for our 1.2 million enrollees.”

CalPERS is the nation’s largest pension fund and third-largest purchaser of health benefits. —Dan Primack and Alastair Goldfisher