Some years ago, I was co-managing a chain of Urgent Care centers in Denver. Urgent care was a young industry started by emergency and family practice physicians that sought a different working environment. For most practitioners there was no discussion of exit strategies.

That was until Humana started buying up Urgent Care centers. (they now own the largest Urgent Care chain, Concentra) At the next industry conference, a class titled “How to value your Urgent Care center” was being taught by Humana’s VP of Acquisitions.

I thought I would stop by to hear what they were saying and could not believe the size of the crowd. Almost overnight, the mentality in the industry had gone from “this is how I am going to practice medicine” to “how much is my practice worth, and can I sell if I want to?”

What changed? The answer is that once hard-working people see other people like themselves sell for significant amounts of money, the natural inclination is to consider this option.

It takes two to tango. Who is buying medical practices and why?

In 2000 we had a client that ran a large neonatology practice at Presbyterian Hospital in Dallas. We had been advising their group on and off for 10 years. Up until this time there were no buyers for practices such as this. That’s when we noticed a change. Specialty funds had appeared that were buying out doctors. They were called Private Equity funds. They bought mature businesses as compared to Venture Capital funds that were investing in new technologies. We helped this group of doctors sell their practice to a top Private Equity fund named Welsh Carson and within 3 years this was part of a New York Stock Exchange company named Mednax with the stock symbol MD.

Why? Healthcare companies are resilient. With an aging population and new technologies coming online daily, the industry is ripe for growth and consolidation. Management of Private Equity owned companies know how to take advantage of these factors. According to a report by Bain & Company, the average private equity fund generated an annualized return of 13.5% from 2006 to 2016, compared to an annualized return of 9.5% for the S&P 500 over the same period. Healthcare private equity funds raised over $50 billion globally in 2020, which was up substantially from the previous year. Market corrections like the one in 2023 when Silicon Bank collapsed have had a limited impact on investments in healthcare companies. Healthcare industry focused funds appear to have enough earmarked capital to fuel healthy levels of buy-out activity in 2023.

The post Physician Exit Strategies and Private Equity appeared first on Healthwatch Partners.

The post Why Doctors Are Selling Their Practice White Paper appeared first on Healthwatch Partners.

The post Selling to a Hospital as An Option for Doctors appeared first on Healthwatch Partners.

The healthcare sector has seen steady growth in both the number of medical practices being bought and sold and the amount of money that has been dedicated for this purpose. Medical practice investors continue to see the potential from the $4 trillion spent annually on healthcare which represents over 17% of the US GDP.

While some physicians are skeptical about selling their medical practice to investor-backed companies, others are clearly receptive especially as they see an improvement in purchase terms in many subspecialties.

Several factors have contributed to this highly active market. A slowdown occurred around March 2020 which along with pandemic-induced stress resulted in more physicians seeking exit strategies once business resumed. The pandemic increased demand for digital health solutions and opened doors for new technologies to improve remote care delivery and decentralized efficiency. There was also a dramatic increase in the value of clinical research and health data to improve patient care and pharmaceutical development.

What’s Being Acquired?

We look at the subspecialties that are tending towards more consolidation.

Until 2017 acquisitions were mostly in emergency medicine, anesthesiology, family practice, pediatrics, and dermatology. Since then, there has been an increase in consolidation in ophthalmology, cardiology, radiology, obstetrics, gastroenterology women’s health, and clinical research.

Key trends to watch when selling a medical practice

For most corporate health practices, hiring providers and support staff will remain a significant challenge for the foreseeable future.  As they encounter staff burnout, and an aging physician population, recruitment will be extremely difficult. Strong leadership and proper incentives remain critical to retain the right staff and, more importantly, build and enhance a positive and inclusive culture, which can underpin the success of an organization.

As healthcare investors evaluate medical companies, they should keep environmental, social, and governance (ESG) issues in mind. In recent years, ESG topics have attracted increasing public attention and investors are putting more pressure on fund managers to make this a higher priority. As part of due diligence, healthcare investors should examine a target’s sustainability practices. What are their recycling and reuse policies? How environmentally responsible are they when it comes to energy use?

The post Medical Trends 2022 – Medical Practice Acquisitions on the Rise appeared first on Healthwatch Partners.