Patricelli sells benefits firm to Calif. investor

Editor's note: A previous version of this story incorrectly identified Greg Boyko's previous affiliation with Hartford Financial Services Group Inc.

Avon electronic health benefits vendor Evolution Benefits Inc.,  co-founded by veteran Connecticut health-services entrepreneur Robert Patricelli and drug giant Pfizer Corp., announced Thursday its sale to a San Francisco equity investor that will take Evolution's product international.

Financial terms of the deal with Genstar Capital LLC were not disclosed.

Evolution is the nation's second-largest provider of prepaid health benefit debit cards to more than 19,000 employers nationwide, with 3.5 million workers and their families enrolled in 1.7 million accounts, officials said.

Genstar's specialty is investing in choice segments of the healthcare, financial services, software and industrial technology industries.

Evolution's original investors include Pfizer Strategic Investments, a unit of the New York drug maker whose research and development operations are in Groton; and venture capital firms The Sprout Group and CCP Equity Partners.

Genstar Principal James Nadauld said Evolution's products will become more appealing amid the trend toward consumer-directed health care paid with debit cards rather than manually submitting health care claims.

Nadauld and Eli Weiss, also of Genstar, said more acquisitions and product development  will enable Evolution to fill gaps and "inefficiencies in the manual healthcare claims processing supply chain."   

In an interview with HBJ Today, Patricelli, who is Evolution's CEO, said the company will begin marketing its benefits accounts in Canada during the fourth quarter, and will enter several unnamed overseas markets within the coming 12 months. Former Hartford Financial Services Group senior vice president Greg Boyko is leading Evolution's international push.

Evolution's sale, Patricelli said, was prompted by its need for capital to grow and the other investors desire to "cash out.''

Financial adviser Raymond James & Associates shopped Evolution to a number of parties, but Patricelli declined to say whether any managed-care giants, such as Aetna, Cigna, UnitedHealth Group, were among the "tire kickers.''

Patricelli and the entire senior management team will remain with the company. Headquarters will stay in Avon, where about 70 people are employed; another 25 work in St. Louis.

Patricelli acknowledged the timing of the sale so soon after the recent adoption of federal health care and financial reforms. Both measures originally contained provisions that threatened the viability of consumer health payment accounts.

However, Evolution and Connecticut's congressional delegation, notably Sen. Chris Dodd and U.S. Rep. John Larsen, managed to prevent both reforms from closing the doors on those accounts, Patricelli said.

"Otherwise, it was a good time to sell,'' said Patricelli, 70, a former executive at Cigna and its predecessor, Connecticut General Insurance, who also spent a decade in Washington D.C. in the Johnson, Nixon and Ford administrations.

Evolution Benefits is Patricelli's third health care startup in more than two decades.  In 1987, he co-founded Value Health, which was sold 10 years later to what is now hospital operator HCA Corp.

Next came Women's Health USA in Avon that he and former Value Health managers co-founded. But in 2000, seeing opportunity in the health-payments arena, a Women's Health spinoff led to Evolution Benefits.