The coming beat — Why cardiology is the next specialty to attract PE investment

The heartbeat of the cardiovascular physician practice market is increasing as more procedure volume shifts to independent practices with ASCs, and as patient volumes and revenues grow, so does investor interest.

The ins and outs of the cardiovascular specialty were examined in a webinar, hosted by law firm McGuireWoods. The webinar was moderated by Bart Walker, a partner with McGuireWoods, and featured:

  • Matt Searles, a partner with Merritt Healthcare Advisors
  • Naya Kehayes, a principal at ECG Management Consultants
  • Jim Melton, DO, a vascular surgeon at Cardiovascular Health Clinic in Oklahoma City

Cardiovascular physician practice management models are attracting interest from investors and could be the next specialty in line for an investment boom.

1. Demographic trends project increased demand for healthcare services including in both the cardiology and vascular surgery spaces. Some 46 percent of the U.S. population is expected to contract cardiovascular diseases by 2030, and while the majority of cardiovascular diseases are concentrated in the Southern U.S., by 2030 the diseases will expand to cover half of the country, Mr. Searles said.

"The reality is the U.S. isn't really healthy," Dr. Melton said. "At the end of the day we've seen diabetes, severe peripheral artery disease and coronary disease accelerate tremendously. With techniques and technology that's been invented, we've really been able to extend lives significantly."

2. The cardiovascular practice market is a strong candidate for investment because the specialty is highly fragmented, can accommodate many money-making ancillaries, like ASCs, and allows for clinicians to convert to private practice as hospital employment becomes less attractive, Mr. Searles said.

3. Cardiovascular practices are also candidates for alternative payment models. Dr. Melton said his practice has had great success through bundled payments. Cardiovascular Health Clinic negotiated bundles that saved the payer up to 50 percent, and have been met with high marks of patient satisfaction and outcomes equal to or exceeding hospital-based procedures.

"Cardiology and vascular surgery are particularly well-suited to this environment of consolidation," Mr. Searles said. "Cardiovascular can bend the cost curve just like orthopedics can."

4. The cardiovascular specialty underwent significant change recently, which has made it more investment-worthy. Starting in 2018, CMS began making changes to its reimbursement models to allow select cardiovascular procedures to migrate to the ASC setting. Twenty-three codes were now allowed in the ASC setting, which represents 566,000 outpatient Medicare procedures. If those procedures were performed in a hospital outpatient department, they'd cost around $3.7 billion, but if those same procedures were performed in an ASC, it would only cost $2.5 billion. And while the government sees the potential ASCs hold, the centers, too, would immensely benefit. If 30 percent of those procedures were shifted, ASCs could capitalize on anywhere between $247 million and $740 million in new revenue.

"This shows you the magnitude of potential savings if Medicare was to shift," Ms. Kehayes said. "In many situations, [the potential savings] can be 70 or 100 percent."

View a copy of this webinar here.

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