Driven by regulatory efforts, market forces, and major structural changes, growth and consolidation has dominated U.S. health care for more than a decade.
From hospital systems and insurance providers to physician practices ranging from dermatology to dentistry, all corners of the health care market are experiencing investment and buyouts, with more and more large superregional and national platforms being established. Cardiology is one of the newest medical sectors to attract interest of this type.
Before 2019, cardiology groups experienced minimal private equity activity, but these practices offer organic and roll-up growth potential like other specialties. The cardiology market in the U.S. is highly fragmented, with 80% of the market dominated by local and regional practices of five physicians or less. The practice area offers multiple revenue sources from a variety of ancillary services including ambulatory surgery centers and in-office diagnostic procedures.
Despite some hospital-led consolidation activity, the first major cardiology transaction by private equity came in 2014 with the creation of National Cardiovascular Partners by Bain Capital. Activity was thin until 2019 when Comvest Partners and Athyrium Capital Management acquired Sunset Cardiology through IMC Health Medical. Since then, activity in this area has been slowly building with two more in 2019, two in 2020, four in 2021, and four more as of mid-2022.
Private equity buyers are eager to acquire the consistent cash flow and growth potential that specialty practices like cardiology can provide. During a time of uncertain investment returns all of us at Physician Growth Partners expect this interest to continue to increase.
Michael Kroin and Ezra Simons founded Physician Growth Partners (PGP) in 2017 to proactively advise and advocate for practice groups exploring a sale to PE investors. Cardiology practices that partner with private equity can scale their operations to effectively compete with large hospitals while unlocking new growth opportunities, maintaining clinical excellence, and ensuring that physicians retain ownership, which is the key to autonomy.
Our team has successfully guided several cardiology practices through the private equity process. There are several steps that we take to ensure successful outcomes for our clients, these include:
- Develop the appropriate financial modeling to position maximized cash flow and “credit” for ongoing initiatives that are driving growth
- Determine the right mix of potential buyers (including both strategic acquirers and private equity groups) and implement a strategy to reach them
- Managing buyer marketing, bid solicitation, and negotiation
- Position the client to meet relevant potential buyers with strong offers that address cultural fit, strategy, and alignment
- Manage the transaction process to maximize leverage with potential buyers
- Negotiate key economic and structural deal terms, leveraging PGP experience within the cardiology specialty
- Facilitate all due-diligence pre-closing to ensure a seamless process that does not take away from the day-to-day business while ensuring the highest probability for a successful close
- Maximize financial results for shareholders while maintaining clinical autonomy