Sponsored by VMG Health | info@vmghealth.com | 214.369.4888

How private equity investment can impact physician practices

As the healthcare landscape changes at a rapid rate, physician practices are seeking ways to remain clinically independent while growing and remaining competitive.

For some practices, partnering with private equity investment firms may provide funding and expertise to make that possible.

During Becker's ASC Review's 27th annual The Business & Operations of ASCs, in a session sponsored by William Blair, three panelists from William Blair's physician practice management group discussed why private equity partnerships can benefit a physician practice, how to evaluate and select the right partner and what can be expected:

  • Ed Nakayama, Managing Director and Co-Head of PPM
  • Andrew Hranka, Director
  • Peter Sebrechts, Vice President

Four key insights were: 

  1. Private equity partnerships can help transform a broken healthcare system. "The status quo in healthcare is not working," Mr. Nakayama said. "There's tremendous opportunity to boost outcomes, lower costs and improve both the provider and patient experiences. At their best, private equity investments can be a catalyst for physician practice growth, a tool for succession planning and a significant wealth creation event. At the end of the day, they can help you change more patients' lives for the better and make a positive impact on the healthcare ecosystem."
  2. Relationships between investors and physician practices have benefits for both parties. It's clear that healthcare is an enormously large market, providing significant opportunities for investors. Private equity investors "are looking for innovators, those practices and people who are doing things better clinically, improving the patient experience, expanding access and generating better outcomes at lower costs," Mr. Nakayama said. "On the provider side, they [providers] are looking for someone who can help in an increasingly challenging landscape to remain independent, manage operational challenges and create lasting competitive differentiation."
  3. When a practice partners with a private equity firm, there is a balance between what will and will not change. According to Mr. Sebrechts, clinical autonomy, day-to-day operations and current leadership should remain the same. "No private equity firm should impact how you practice medicine," he said. "They are investing [in a practice] because they know that you do these things very well. And, while they'd welcome the opportunity to augment operations and bring in business leaders from their network, private equity investors want current practice leaders to continue because they have been instrumental to its success." Private equity firms will be focused on ways to drive growth, which may include expanding services, recruiting more providers, adding operational expertise and optimizing compensation structures. "The idea is that if the private equity fund makes money, all of the existing shareholders make money," he added.
  4. Proper alignment and thorough preparation will result in a successful partnership. "Getting strategic alignment early on with your private equity investor is going to be one of the most predictive factors of success for your business," Mr. Hranka said. Physician practices should spend substantial time to prepare and elaborate their goals. This is followed by a marketing phase where practices will explore many options, before moving toward a due diligence step where deeper discussions take place with a few top contenders. The final step is full negotiations and creating legally binding documents.

To learn more about Becker's live events, click here

Copyright © 2024 Becker's Healthcare. All Rights Reserved. Privacy Policy. Cookie Policy. Linking and Reprinting Policy.

 

Featured Whitepapers

Featured Webinars