Private equity investment in physician practices continues to become more and more pervasive, and the nephrology sector is one of the latest in a perpetually growing list of specialties receiving attention from investors. While several key market tailwinds are driving this trend, at the top of the list is the shift towards value-based care reimbursement which was accelerated by CMS’ launch of the Kidney Care Choices model (KCC) in 2022, in supplement to 2015’s Comprehensive ESRD Care Model. The program rewards providers’ ability to slow disease progression leading to kidney failure, promotes home based renal care, has created an environment that will accelerate the movement of dialysis services into the outpatient setting, and is, overall, a much more comprehensive position on the need for outcome driven reimbursement in the space. Private equity has emerged as a solution for private practices to this expansive and rapid shift in reimbursement dynamics.
Thus far, two PE-backed consolidators have emerged as first movers – Audax Group backed Panoramic Health, and Pharos backed Renal Care 360. Both groups are focused on driving go-forward success in the outcome-based environment, with Panoramic taking a scale driven approach, and 360 Renal focusing on underserved, rural populations that are at much higher risk due to a lack of access to quality care. Additionally, Evergreen Nephrology, formed by Rubicon Founders, is pursuing a joint-venture model focused on partnering with groups to implement value-based care and help them navigate it successfully. While their model is different from the model traditionally seen with private equity backed consolidators in the physician space, they are a relevant player with a similar aim and a differentiated value-proposition. While there are only two acquirers and a JV partner active in the market today, we anticipate a number of new groups coming to the market in 2024 and for the next 12-24 months. Alongside continued activity from the existing platforms, independent practices continue to navigate a uniquely transformative environment that requires scale, expertise, and capital to succeed.
For groups looking to explore these partnerships, it is critical to consider the key factors such as maintaining clinical autonomy, integration, management fees, and establishing a local governance structure to ensure a strong go-forward partnership.
Physician Growth Partners (PGP) Physician Growth Partners (PGP) is an advisory firm working exclusively with independent physician groups in transactions with private equity.
PGP has completed 15+ transactions in the last 12 months. Our firm is differentiated by:
Senior partner involvement at every stage of the process
Extensive physician practice transaction experience
Unmatched relationships with all key private equity and strategic buyers interested in Nephrology
Educational approach focused on partnership and cultural fit + achieving a market-clearing valuation
