Physicians have strong opinions about private equity investment in healthcare. Some see huge potential, while others are skeptical of outside investors.
Three CEOs of orthopedic and spine groups that took on private equity partners talked about their experiences at the Becker's 18th Annual Spine, Orthopedic and Pain Management-Driven ASC + The Future of Spine Virtual Event June 9.
The panelists were:
- Douglas Wisor, MD. CEO and President of National Spine & Pain Centers (Rockville, Md.)
- Andy Blankenmeyer. CEO of OrthoAlliance (Cincinnati)
- Glen Silverman. CEO of US Orthopedic Partners (Jackson, Miss.)
The panelists discussed three myths they hear about private equity investment.
1. PE firms don't care about physicians or patients.
Physicians may be reluctant to take on PE partners because they think the investors will only care about the bottom line. Physician owners are concerned the PE firms will take away from the practice or ASC instead of adding value. Dr. Wisor said that's not always the case if everyone is aligned on the mission of the organization.
"If you pick the right partner, and they understand that at the end of the day, the product is the physicians and their relationships with the community, it's in everyone's best interest to nurture that and grow together," said Dr. Wisor.
2. Surgeons can't be entrepreneurial if they join an established practice.
ASCs and practices are small businesses owned by physicians who are creative and innovative. Some fear joining an established private equity firm will quiet their entrepreneurial spirit because all the executive roles are filled. That isn't the case, said Dr. Wisor.
"When most people think of private equity-backed growth, they really think of mergers and acquisitions and running a business, but it's more than that," he said. "There are very few physicians who actually want to do the blocking and tackling of strategic development and building an infrastructure and platform. There is always room, even in the most established platforms, to bring on talent."
Mr. Blankenmeyer said one of the advantages of PE investment for entrepreneurial surgeons is the ability to bring the surgeons' ideas to life.
"Orthopedic surgeons are some of the most entrepreneurial people you'll ever meet in medicine," he said. "Sometimes they have all the right ideas, they just need help executing quickly, which is our expertise. The pairing of strong physician leadership with strong management, as well as a capital partner, can really help drive a lot of growth."
3. PE firms aren't good operators.
The traditional model of private equity investment has been to acquire practices or ASCs and apply the same growth strategies for everyone in the portfolio, which can be beneficial for some and disastrous for others. Times have changed, and new models of investment partnerships are emerging to develop a more curated business strategy.
"We are very good operators, and I would say that PE models are evolving. I think PE groups have become a lot better. They're not just acquiring anymore. They're true operators, taking business to the next level," said Mr. Silverman. "It's a myth that we take a cookie cutter approach to everyone. Instead, we align with the group and their strategy in their market."
He said some groups vertically integrate while others prefer not to, and both have a place within the same platform.
Mr. Blankenmeyer agreed, and said his practice was able to build a talented executive team that wouldn't have been possible without support from its PE partner.
Click here to view the entire presentation.