2017 Physician practice consolidation: A mid-year review

The first half of 2017 continues the 2016 trend of consolidation among physician practices, with practices merging with other practices or entering into acquisition deals with other practices, hospitals and health systems or private equity groups.

The fragmented nature of the physician practice industry and the challenges faced by small practices continues to drive this consolidation movement. Factors such as the changing reimbursement and regulatory landscape, the appeal of economies of scale for activities like billing, and greater access to Information Technology and general technology infrastructure provide strong motivation to consolidate. The number of physician medical group mergers and acquisitions rose to 48 in the first quarter of 2017, which is a 78% jump from the fourth quarter of 2016.1

This article acts as a snapshot of some of the notable deals that closed or announced in the first half of 2017. However, there is one slow down we have seen, an apparent decrease in certain markets in the acquisition of independent physician practices by hospitals and health systems, as it appears there are fewer independent practices for hospitals to acquire where consolidation efforts started early. On the other hand, we have seen large medical companies be very active. Finally, the specific markets involving dermatology and optometry and ophthalmology practices continues to show robust activity.

I. Large Medical Company Purchases

Two of the more active purchasers in 2017 are MEDNAX and Envision Healthcare Corporation.

  1. MEDNAX is a national health solutions partner present in all 50 states and Puerto Rico that focuses on neonatal, anesthesia, maternal-fetal, and pediatric sub specialties. On January 30, 2017, MEDNAX announced its acquisition of Radiology Alliance, PC and Infinity Management LLC, based in Nashville. According to reports, Radiology Alliance is the largest private practice radiology group in Tennessee, comprised of 64 physicians and 6 clinical support staff.2 On February 6, 2017, MEDNAX announced the acquisition of Newborn Intensive Care Specialists, P.A., a private practice employing 27 full-time clinicians practicing in the Houston and Dallas markets.3 On March 23, 2017, MEDNAX announced the acquisition of Bruce E. Snyder, M.D., PLLC, a private pediatric ophthalmology practice based in Henderson, Nevada employing one physician and three full-time non-clinical associates.4
  2. Envision Healthcare Corporation is a company focusing on physician led services, post-acute care, and ambulatory surgery services. On March 22, 2017, Envision acquired Gwionnett Emergency Specialists, P.C., an emergency medicine physician group located in Lawrenceville, GA consisting of more than 40 physicians and 30 advanced practice practitioners.5 In January 2017, Envision also acquired Emergency Professional Services group, a 50 physician group out of Phoenix, AZ.6

II. Dermatology

Dermatology is a practice area that has been particularly active to start 2017. Dermatology is a field that has also seen significant private equity involvement.

  1. Sheridan Capital Partners, a Chicago-based private equity firm, announced its investment in Dermatologists of Central States ("DOCS"), a dermatology practice management company. DOCS has over 30 affiliated dermatologists across its partner practice, Dermatologists of Southwest Ohio.7
  2. Epiphany Dermatology, a private dermatology company centered in Austin, TX acquired three new practices in 2017. In March of 2017, Epiphany acquired Dallas Dermatology, LLC, a practice with five locations around the Dallas-Fort Worth area.8 Also in March of 2017, Epiphany acquired Dermatology Center, PC based in Las Cruces, NM.9 In April of 2017, Epiphany expanded its physician network in Albuquerque, New Mexico through the acquisition of Medical Arts Dermatology, PC, a practice with one location in Albuquerque.10
  3. Schweiger Dermatology Group LLC acquired Great Neck Dermatology on January 5, 2017. According to reports, Doctors John Garofalo, Louise E. Kaufmann, Joann Salvemini, Samara Churgin and Wendy Lou who all will also be joining the new Schweiger Dermatology Group office in Great Neck.11
  4. Dermatology Associates is a dermatology focused physician services and management organization back by private equity firm ABRY Partners. Dermatology Associates acquired Advanced Dermatologic Surgery in Houston, TX, Dr. Bryan Townsend in Austin, TX, and Dermatology and Laser Center of Fort Worth, TX.12

III. Optometry and Ophthalmology

  1. Optometry and Ophthalmology have also seen an abundance of consolidation and acquisitions, with deals being driven by sources ranging from small and mid-size practices to private equity firms.
  2. Vision Group Holdings LLC, according to reports, the largest provider of LASIK vision correction in North America, acquired New York Eye Specialists on January 4, 2017. New York Eye Specialists is a practice of four doctors in New York, NY with a track record of over 100,000 LASIK procedures including some involving professional athletes.13
  3. On February 21, 2017, three physician-owned practices in the Minneapolis/St. Paul area - Edina Eye Physicians & Surgeons, North Suburban Eye Specialist, and Northwest Eye Clinic announced a merger to form Twin Cities Eye Consultants. This group now has 19 locations across the Twin Cities area. Each practice remains physician-owned and will act as a division within the larger organization, which will be governed by a single board14
  4. As mentioned above, in March of 2017, the large medical company MEDNAX acquired Bruce E. Snyder, M.D., PLLC, a private pediatric ophthalmology practice based in Henderson, Nevada employing one physician and three full-time non-clinical associates.15
  5. Albemarle Eye Center of North Carolina announced on May 25, 2017 that it has merged with two other Eye Care Practices, Edenton Eye Care and Outer Banks Eye Care, with the merger now creating a total of six locations throughout northeastern North Carolina. Albemarle provides LenSx surgery for the treatment of cataracts, lens replacement, glaucoma, and other eye conditions, and also will now provide optometry services at all of its locations.16
  6. On April 17, 2017 H.I.G. Capital, a global private equity investment firm with $21 billion capital under management invested in Phoenix-based Barnet Dulaney Perkins and Mesa, Arizona-based Southwestern Eye Center, eye care practices that provide surgical and clinical ophthalmology care. These practices have over 40 locations throughout Arizona and New Mexico.17

IV. Hospital/Health System Acquisitions

As we have noted earlier, there appears to be a decrease in the number of physician practice acquisitions by Hospital/Health Systems in certain geographic areas that led the consolidation process. One of the hospital-based acquisitions that did occur involved Indiana University Health. On May 1, 2017, Indiana University Health acquired Premier Healthcare, one of Indiana's largest independent physician groups that employs 40 primary care and specialty doctors. Premiere Healthcare offers many specialty services including cardiology, gastroenterology, gynecology, oncology, orthopedics, and more. Premier Healthcare was run as an autonomous physician group for 45 years before the acquisition.18

V. Multi-Specialty Practices

On February 10, 2017, Community Care Physicians, P.C. in Latham, New York and CapitalCare Medical Group in Colonie, NewYork announced plans to consolidate the two large, multi-specialty physician practices. As reported, Community Care is the largest independent multi-specialty medical group in the region, with more than 270 practitioners in 20 specialties and 1,200 employees. Capital care employs 79 physicians and 113 nurses. The merger is estimated to take up to 18 months to fully complete.
VI. Orthopedics19

On May 22, 2017, Commonwealth Orthopaedic Centers and Reconstructive Orthopaedics & Sports Medicine announced they will be combining to become Cincinnati, Ohio's largest independent orthopedic practice. The new organization, called "OrthoCincy" will be served by 27 physicians, 23 physician assistants and nurse practitioners, and 350 employees with 10 total locations.20

VII. Cardiology

Trinity Medical WNY P.C., the physician practice network for Catholic Health, announced on January 20, 2017 that it acquired Buffalo Heart Group, LLP. Buffalo Heart Group is a practice with a dozen physicians providing services including clinical cardiology, invasive and interventional procedures, electrophysiology and noninvasive diagnostic testing.21

VIII. Radiology

On January 1, 2017, TRA and Medical Imaging Northwest announced they had merged to form TRA-MINW. These two separate practices were originally TRA Medical Imaging, founded in 1943, before splitting into two separate practices in the early 2000's. The two practices decided to recombine the two groups to provide expanded subspecialty services to a larger population of patients.22

1 Beth Jones Sanborn, Medical practice merger activity surges in first quarter 2017, report says, HEALTHCARE FINANCE (April 12, 2017), http://www.healthcarefinancenews.com/news/medical-practice-merger-activity-surges-first-quarter-2017-report-says.
2 Dave, Barkholz, MEDNAX diversifies by acquiring its first hospital based radiologist practice, MODERN HEALTHCARE (Feb. 7, 2017), http://www.modernhealthcare.com/article/20170207/NEWS/170209934.
3 MEDNAX Announces Acquisition of Multi-Specialty Practice in Texas, BUSINESS WIRE (Jan. 6, 2017), http://www.businesswire.com/news/home/20170206005341/en/MEDNAX-Announces-Acquisition-Multi-Specialty-Practice-Texas.
4 MEDNAX Announces Acquisition of Ophthalmology Practice in Nevada, BUSINESS WIRE (Mar. 23, 2017), http://www.businesswire.com/news/home/20170323005185/en/MEDNAX-Announces-Acquisition-Ophthalmology-Practice-Nevada.
5 Envision Physician Services Acquires Emergency Medicine Group Practice in Georgia, BUSINESS WIRE (May 22, 2017), http://www.businesswire.com/news/home/20170522006288/en/Envision-Physician-Services-Acquires-Emergency-Medicine-Group.
6 Envision Healthcare Enters Definitive Agreement to Acquire Imaging Advantage, BUSINESS WIRE (Mar. 7, 2017), http://www.businesswire.com/news/home/20170307005790/en/Envision-Healthcare-Enters-Definitive-Agreement-Acquire-Imaging.
7 Sheridan Capital Partners Invests in Dermatologists of Central States, BUSINESS WIRE (Mar. 24, 2017), http://www.businesswire.com/news/home/20170524005020/en/Sheridan-Capital-Partners-Invests-Dermatologists-Central-States.
8 Epiphany Dermatology Acquires Dallas Dermatology, PR NEWSWIRE (Mar. 3, 2017), http://www.prnewswire.com/news-releases/epiphany-dermatology-acquires-dallas-dermatology-300417734.html.
9 Epiphany Dermatology Partners with Dermatology Center, PC, PR NEWSWIRE (Mar. 14, 2017), http://www.prnewswire.com/news-releases/epiphany-dermatology-partners-with-dermatology-center-pc-300423473.html.
10 Epiphany Dermatology Acquires Medical Arts Dermatology, PR NEWSWIRE (Apr. 6, 2017), http://www.prnewswire.com/news-releases/epiphany-dermatology-acquires-medical-arts-dermatology-300435922.html.
11 Schweiger Dermatology Group Opens New Office in Great Neck, New York, YAHOO FINANCE (Jan. 18, 2017), https://finance.yahoo.com/news/schweiger-dermatology-group-opens-office-143000242.html.
12 Dermatology Associates Announces the Acquisition of 3 Texas Practices, PR WEB (Jan. 9, 2017), http://www.prweb.com/releases/2016/12/prweb13950564.htm.
13 Vision Group Holdings Acquires New York Eye Specialists, PR WEB (Jan. 4, 2017), http://www.prweb.com/releases/2016/12/prweb13949800.htm
14 More dealmaking in ophthalmology as three Twin Cities practices merge, MINNEAPOLIS ST. PAUL BUSINESS JOURNAL (Feb. 21, 2017), http://www.bizjournals.com/twincities/news/2017/02/21/more-dealmaking-in-ophthalmology-as-three-twin.html.
15 MEDNAX Announces Acquisition of Ophthalmology Practice in Nevada, supra note 4.
16 Albemarle Eye Center Merges with Two Practices in East, PR NEWSWIRE (May 25, 2017), http://www.prnewswire.com/news-releases/albemarle-eye-center-merges-with-two-practices-in-the-east-300464059.html.
17 H.I.G. Capital Makes a Strategic Investment in Barnet Dulaney Perkins and Southwestern Eye Center, BUSINESS WIRE (Apr. 17, 2017), http://www.businesswire.com/news/home/20170417005124/en/H.I.G.-Capital-Strategic-Investment-Barnet-Dulaney-Perkins.
18 John Russell, IU Health making big push on two fronts in Bloomington, INDIANAPOLIS BUSINESS JOURNAL (May 1, 2017), https://www.ibj.com/blogs/17-the-dose/post/63641-iu-health-making-big-push-on-two-fronts-in-bloomington?v=preview?v=preview.
19 Capital Region medical groups announce merger, WNYT-TV (Feb. 11, 2017), http://wnyt.com/health/capital-region-medical-groups-announce-merger-capital-care-community-care-physicians-capital-community-physicians/4397059/.
20 Biloine W. Young, Two Ortho Practices Join to Form Cincinnati’s Largest, RYORTHO.COM (May 22, 2017), https://ryortho.com/breaking/two-ortho-practices-join-to-form-cincinnatis-largest/.
21 Buffalo Heart Group merges into Catholic Health, BUFFALO BUSINESS FIRST (Jan. 20, 2017), http://www.bizjournals.com/buffalo/news/2017/01/20/buffalo-heart-group-merges-into-catholic-health.html.
22 Heidi Smith, TRA-Medical Imaging Northwest Merger Creates Greater Resources for Thurston Patients, THURSTONTALK.COM (last visited Jun. 22, 2017 5:00 PM), http://www.thurstontalk.com/2017/05/18/tra-medical-imaging-northwest-merger/.

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