Private Equity Investment in Physician Practices – Is it the Right Fit?

Private Equity Investment in Physician Practices – Is it the Right Fit?

We are in a changing environment surrounded by mergers/acquisitions, joint ventures, and consolidations, necessary to keep up with rising costs coupled with flat reimbursements and new  government mandated programs.  As a result, physician practices have begun looking for alternative options to provide sustainability and growth.  The influx of private equity investment in physician practices could be that alternative….but is it the right fit for you and your practice?

Some benefits to consider:

  • Centralizing “back office” roles like billing and accounting can provide significant savings.
  • Capital contributions up front to offset costs of updating the practice’s infrastructure.
  • Potential for profit down the road when the investment is sold.
  • Maintaining control of your practice while gaining long-term stability.
  • More clout on your managed care contracts, higher reimbursements.

Hot Specialties to Private Equity Investors

The healthcare sector remains a viable area for investment and future growth but certain specialties are more enticing than others to private equity investors. These hot specialties within physician services include:

  • Dermatology – Historically, an investment in dermatology has been a win for investors, which is why it continues to grow. As it grows, so does the competition among investors to secure these deals.
  • Gastroenterology – Gastroenterology is experiencing substantial growth driven by increasing outpatient procedure numbers, demographic trends, and market changes.
  • Ophthalmology – As the age of the population increases so does the demand for eyecare. We are also seeing an increase in ophthalmologists looking for an exit strategy.  A number of transactions have already occurred this year and we anticipate this industry to continue experiencing investment and consolidation.
  • Orthopedics – While not one of the specialties that has historically seen private equity investment, orthopedics is expected to see a good amount of outside investment due to similarities with other specialties that have been successful investments as well as a favorable economic outlook in the field.
  • Urology – Urology is expected to see increased private equity investment activity. While there are a significant number of “super groups”, this area is still considered fragmented and could see more consolidation.

While private equity investment can be a very good choice for your practice, be sure to consider what your goals are; immediate compensation vs long-term returns or managing your practice vs taking a step back.  If it is the right for you and your practice, it is a fast track method to gain size and scale in the increasingly competitive marketplace….and the private equity community is aggressively seeking the “right” deals.



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