Driven by regulatory efforts, market forces, and major structural changes, growth and consolidation has dominated U.S. health care for many years.
From hospital systems and insurance providers to independent practices and specialty clinics, all corners of the health care market are experiencing investment and buyouts. Until 2020 most private equity attention was focused on specialty providers in areas like urology or dermatology. However, some superregional and national platforms focused on Primary Care and Multi-specialty clinics have been forming. Some private equity groups recognize the ability to create value through internal referrals, providing ancillary services, and keeping patients within a single network offering multiple specialties. Private equity is also attracted to the preservation of self-governance while achieving economies of scale that allow for stronger bargaining power from both payors and suppliers.
The pace of investment is only accelerating.
Money flowing into primary care groups amounted to approximately $16 billion in 2021. This is more than four times what was invested in 2020 and is a major leap from the $15 million invested in 2010, according to a Harvard research study cited by Advisory.com
Some of this activity is driven by traditional fee-for-service groups pursuing scale and efficiency through patient growth and administrative centralization. Some of the largest players are taking this course. Other buyers are focused on the trend towards value-based payment, which links doctors’ pay to patients’ health outcomes, rather than volume-based payment. This type of approach requires significant investment in technology to manage data. This is exactly the type of investment that private equity excels at, and we will very likely see more of.
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. Primary Care and Multi-specialty practices that partner with private equity can scale their operations to better 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 Primary Care 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 Primary Care sector
- 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