For many years the U.S. health care market has been under intense consolidation pressure. Private equity investment has been a key part of this process.
From hospital systems and insurance providers to medical practices and specialty clinics, all corners of the health care market are experiencing investment and buyouts, with more and more large superregional and national platforms being established. Pain management has received some attention as part of this movement, and that attention is growing but still much smaller than other specialties like orthopedics and dermatology.
From 2018 to the end of 2021 there were a total of 13 M&A transactions focused on pain management practices and driven by private equity investment. By contrast more than 60 deals have concluded since the start of 2021 in gastroenterology alone. Why the difference? We know that with the aging of the U.S. population and the corresponding prevalence of spine and joint problems that demand for pain management services is growing. However, pain management care remains one of the most fragmented sub-specialties in American healthcare. According to SK&A Healthcare, it is estimated that nearly 70% of pain management practices have fewer than 10 providers. This small, fragmented market has caused interest from private equity firms to start slow, but that is changing.
In recent years a growing number of pain management platforms have been established to focus private equity activity in U.S. metro markets and their surroundings. Currently, 15 platform organizations exist, serving cities in the Southwest, Southeast, Mid-Atlantic and Northeast. Private equity buyers are eager to acquire the consistent cash flow and growth potential that pain management practices can provide. During a time of uncertain investment returns, all of us at Physician Growth Partners expect this interest to continue to grow.
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. Pain management practices that partner with private equity can scale their operations to better compete with larger providers 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 pain management 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 pain management 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