HOUSTON
Volume 13 | Issue 6
Inside This Issue
June Edition 2023
Physicians and Private Equity-Owned Practices By Phillip Miller Debra Wood Merrit Hawkins
H The Brain has a Natural Way to Fight Dementia See pg. 9
INDEX Legal Matters........................ pg.3 Oncology Research......... pg.4 Mental Health...................... pg.8 Financial Forecast.............pg.11
Houston Methodist Awards $4.8 Million See pg. 12
ealthcare remains a dynamic and evolving field, with many physicians looking to the security of health system employment, while others are opting for private equity-owned practices. “There are a lot of benefits to private equity, depending on the specialty,” said Ericka L. Adler, shareholder, practice group manager for health care at the law firm Roetzel & Andress in Chicago. Adler also reported regional differences in private equity’s interest in practices. These companies often buy up physician practices in a certain geographic area. Then they enjoy economies of scale when purchasing supplies or malpractice coverage and possess greater power when negotiating with payors. When private equity invests in physician practices, it can relieve the physicians of administrative responsibilities and streamline operations, handle human resources and compliance issues, negotiate payor contracting, bill insurers and let physicians practice medicine. Additionally, most deals offer profit sharing, creating long-term financial benefits as the practices grow or the private equity firm sells. “In these situations, the physician may lose a little freedom but receives a solid paycheck and gets rid of the headaches of running a practice,” Adler said. However, she warned that private equity deals are not for everyone and physicians found earlier models controlling. “For physicians who ran their own practice, it was a culture shock,” Adler said. “Now they are loosening up and acting as partners. It’s increasingly attractive for physicians who never thought they could work for someone else.”
Additionally, many physicians are selling to private equity as a retirement strategy. “They sell to private equity and end up with a chunk of cash,” Adler said. “They continue to work three to five years and then retire. During that time while working, they receive a
The contributors indicated private equity can contribute to innovation, streamline expenses and may allow practices to offer expanded services and benefits to patients. AHIP, the health insurers association in Washington, D.C., reported in an issue brief on September 2022 that the COVID-19 pandemic drove a sharp rise in healthcare private equity investment, including for physician practices and other entities. A Healthcare Services Report: PE Trends and Investment Strategies by PitchBook of Seattle, released on February 2023, reported there has been significant merger and acquisition activity in primary care and multispecialty networks. However, looking forward, Pitchbook believes deal volumes may decline due to macroeconomic uncertainty and the increase in capital costs. The types of physician practices attracting private equity Common physician practices
In these situations, the physician may lose a little freedom but receives a solid paycheck and gets rid of the headaches of running a practice — Ericka L. Adler
compensation package.” Physicians who do not own a practice but are seeking a physician job can also find some benefits to working for a private-equity organization. The growth in private equity for physicians The Kenan Institute of Private Enterprise at the University of North Carolina at Chapel Hill published a blog in February 2022, reporting private equity healthcare deals remain strong.
see Practices ...page 14
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