WindRose Health Investors Backs Lab Testing Platform Avalon

The laboratory testing management sector is attracting fresh private equity capital as healthcare payers grapple with spiraling diagnostic costs. WindRose Health Investors, a New York-based healthcare private equity firm, announced Monday it has completed an investment in Avalon Healthcare Solutions, a Tampa-based platform that helps health insurers manage the appropriate use of routine and genetic laboratory tests.

The deal brings together two investors with complementary expertise: WindRose, which manages approximately $7 billion focused exclusively on healthcare services, and Francisco Partners, a technology-focused firm with over $50 billion in capital raised that has backed Avalon since 2016. Francisco Partners is making an additional investment alongside WindRose's entry, signaling continued confidence in the company's trajectory.

Financial terms were not disclosed, though the transaction structure—a growth equity investment rather than a full buyout—suggests Avalon's management team and existing investors retain significant ownership. CEO Bill Kerr will continue leading the company.

Avalon operates at the intersection of two powerful healthcare trends: the explosion of available diagnostic tests, particularly in genetic testing, and the relentless pressure on health insurers to control medical costs without compromising care quality.

The company's core business involves reviewing laboratory test orders against evidence-based clinical policies before insurers pay claims. Avalon's proprietary technology automatically reviews and enforces lab test claims against client-adopted, clinically-derived policies, helping payers avoid unnecessary or inappropriate testing while ensuring patients receive medically necessary diagnostics.

This "lab benefit management" approach has gained traction as genetic and molecular testing has proliferated. While these advanced diagnostics can provide crucial clinical insights, they also carry price tags that can reach thousands of dollars per test. Without proper utilization management, health plans face the risk of paying for tests that may not be medically necessary or that duplicate recently performed testing.

According to the company's 2023 performance update, Avalon helped clients achieve significant savings by using clinical and evidence-based guidelines coupled with automated policy adherence technology. The company also manages a national network of independent test providers, giving health plans access to high-quality laboratories at negotiated rates.

The investment fits squarely within WindRose's strategy of backing technology-enabled healthcare services companies that help reduce system costs. The firm has built its reputation on identifying businesses that deliver measurable value to payers—a particularly attractive profile in an era of heightened scrutiny on healthcare spending.

"Avalon has built a leadership position as a preferred partner to health plans that seek operational efficiencies while managing increasingly complex lab benefits," said David Pontius, Partner at WindRose, in a statement. "Avalon's purpose-built lab insights platform uniquely combines lab benefits management, clinical science, and analytics to deliver value to its clients."

WindRose's entry comes at a moment of significant momentum for the firm. In December 2025, WindRose closed its seventh fund at $2.6 billion, representing its largest healthcare-focused fund to date and nearly double the size of its predecessor fund.

The firm's fundraising trajectory illustrates the robust institutional appetite for healthcare services private equity. Fund VI closed at $1.4 billion, while Fund V raised $705 million. The consistent fund-over-fund growth—with each vehicle roughly doubling its predecessor—demonstrates WindRose's ability to generate returns that attract increasing LP commitments.

This capital deployment strategy focuses on companies with proven business models and demonstrated ability to deliver cost-effective solutions to healthcare stakeholders. Avalon's established client relationships with health plans and track record of generating savings make it a textbook WindRose investment.

Francisco Partners' decision to invest additional capital alongside WindRose's entry is noteworthy. The technology-focused investor initially backed Avalon in 2016 and has supported the company through its growth phase, helping build out its proprietary technology platform.

"Avalon has evolved into a differentiated, mission-critical partner for health plans by combining deep clinical expertise with a highly scalable technology platform," said Ezra Perlman, Co-President of Francisco Partners. "We are excited to continue supporting Bill and the Avalon team as they invest in new product capabilities and drive meaningful impact for payers navigating an increasingly complex diagnostics landscape."

The dual-investor structure creates an interesting dynamic. While Francisco Partners brings deep technology sector expertise and relationships across the broader software and data analytics landscape, WindRose contributes specific domain knowledge in healthcare payer services and operational scaling. This complementary skill set could prove valuable as Avalon seeks to expand its product offerings and client base.

The laboratory benefit management market sits at the convergence of several favorable trends. Healthcare spending on diagnostic testing continues to grow, driven by an aging population, increasing prevalence of chronic diseases, and rapid innovation in genetic and molecular diagnostics.

At the same time, payers face mounting pressure to control costs. Traditional prior authorization processes are labor-intensive and create friction for providers and patients. Avalon's automated approach—using a library of evidence-based policies encoded into software—offers a more efficient alternative that can process claims in real-time without manual review for most tests.

The company's focus on genetic testing is particularly strategic. This segment has experienced explosive growth as the cost of sequencing has plummeted and clinical applications have expanded. However, the appropriate use criteria for many genetic tests remain evolving, creating both clinical uncertainty and cost management challenges for payers. Avalon's team of scientists actively manages its policy library to reflect current evidence, positioning the company as a trusted advisor to health plans navigating this complexity.

Kerr emphasized the growth opportunity in his statement: "We believe WindRose is a perfect additional partner to support the Company's growth strategy of delivering an end-to-end lab benefit management platform. With the help of WindRose's investment and strategic involvement, Avalon will continue to drive meaningful efficiencies on behalf of its health plan clients while also focusing on investing in innovation and building out its suite of capabilities."

The capital infusion will support several strategic priorities. First, Avalon plans to accelerate product development, building out additional capabilities within its lab insights platform. This likely includes enhanced analytics tools that help health plans understand utilization patterns, identify opportunities for intervention, and measure outcomes.

Second, the company intends to invest in its technology infrastructure to support scale. As Avalon adds health plan clients and processes increasing claim volumes, its platform must maintain performance while handling growing data loads. WindRose's deep experience scaling tech-enabled payer services solutions should prove valuable in navigating these operational challenges.

Third, Avalon may pursue strategic acquisitions or partnerships to expand its capabilities or market reach. The lab benefit management space remains fragmented, with opportunities to consolidate point solutions or add complementary services.

The company's positioning as "the world's first Lab Insights company" suggests ambitions beyond traditional utilization management. By combining lab benefit management with clinical science expertise and proprietary analytics, Avalon aims to help payers move from reactive cost control to proactive care optimization—using lab data to identify patients who might benefit from early intervention or to flag potential quality issues.

The investment comes as healthcare regulators and policymakers focus increasing attention on prior authorization and utilization management practices. The Centers for Medicare & Medicaid Services has proposed rules aimed at streamlining prior authorization processes and reducing administrative burden on providers.

These regulatory developments could create both opportunities and challenges for Avalon. On one hand, pressure to reduce prior authorization friction may drive demand for automated, technology-enabled solutions that can make real-time determinations without manual review. On the other hand, increased regulatory scrutiny of utilization management practices could constrain how aggressively payers can manage lab testing utilization.

The competitive landscape includes other lab benefit management vendors, traditional pharmacy benefit managers that have expanded into lab management, and health plans' internal utilization management programs. Avalon's differentiation rests on its specialized focus, proprietary technology platform, and team of clinical scientists who maintain its evidence-based policy library.

The company also faces potential competition from laboratory companies themselves, some of which have developed their own utilization management tools. However, health plans may prefer working with an independent vendor that doesn't have financial incentives tied to specific laboratories.

The transaction was structured as a growth equity investment, with both WindRose and Francisco Partners taking equity stakes. The management team, led by Kerr, retains operational control and significant ownership. This structure is typical for profitable, growing companies that need capital for expansion but don't require a full buyout or operational overhaul.

William Blair served as financial advisor to Avalon. McDermott Will & Schulte LLP provided legal counsel to WindRose, Kirkland & Ellis advised Francisco Partners, and Davis Polk & Wardwell LLP represented Avalon. The involvement of top-tier advisory firms on all sides suggests a complex transaction with significant due diligence and negotiation.

The Avalon investment reflects several broader themes in healthcare private equity. First, investors continue to favor technology-enabled services businesses that generate measurable ROI for customers—particularly in an environment where healthcare stakeholders face intense pressure to demonstrate value.

Second, the laboratory benefit management sector appears poised for continued growth and potential consolidation. As genetic and molecular testing becomes increasingly central to clinical care, payers will need sophisticated tools to manage utilization and costs.

Third, the dual-investor structure—pairing a healthcare specialist with a technology generalist—may become more common as healthcare IT companies require both domain expertise and technical capabilities to scale effectively.

For WindRose, the deal represents an early deployment from its newly closed $2.6 billion fund and signals the types of investments LPs can expect: established, profitable healthcare services companies with strong management teams and clear value propositions to payers.

For Avalon, the partnership provides not just capital but also strategic resources to accelerate growth and product development. The company's ability to attract investment from two sophisticated firms with complementary expertise positions it well to capitalize on the growing demand for lab benefit management solutions.

As healthcare costs continue their upward trajectory and diagnostic testing becomes increasingly sophisticated and expensive, companies like Avalon that help payers navigate this complexity while maintaining care quality are likely to remain attractive investment targets. This transaction suggests the lab benefit management sector has reached a level of maturity and market validation that warrants significant private equity attention—and capital.

Type: investment

Firm Size: mid-market (WindRose with ~$7B AUM falls into upper mid-market category)

Industry: Healthcare Technology, Healthcare Services, Diagnostics

Strategy: growth, platform (growth equity investment in an established platform company)