At the Becker's 29th Annual ASC Meeting: The Business and Operations of ASCs, Dana Jacoby, president and CEO of Vector Medical Group, and Gary Herschman, partner and co-chair of the healthcare transactions group at Epstein Becker & Green, discussed the consolidation in the healthcare industry, particularly in ASCs and physician groups.
They highlighted the role of private equity in these transactions, noting that such deals are not one size fits all and should be carefully considered. They also discussed the process of exploring strategic options, including valuation assessment, market exploration, management meetings and negotiation of terms. They emphasized the importance of cultural fit and trust in choosing a partner for these transactions. They also touched on income repair, which aims to restore income levels after a reduction in compensation due to a transaction.
Key takeaways
1. There has been a significant increase in physician transactions and consolidation in recent years.
"Basically over the last seven, eight years, there has been an increase in the number of physician transactions year after year," Mr. Herschman said. "There was a huge spike in 2021 right after a little bit of a dip the COVID year, when people weren't doing much for three to six months. And then it's kind of picked up that trajectory from pre-COVID."
2. The COVID-19 pandemic created opportunities for evaluating options and opportunities for ASCs and physician practices.
"COVID afforded us the opportunity to be sitting on a ton of capital," Ms. Jacoby said. "... It's a really great time to look at what your options and opportunities are."
3. The pace of change and level of uncertainty in healthcare are major challenges for independent medical groups and ASCs.
"If you're not part of a large contingent, you better be able to critique your payor and infrastructure models. You would want to consider direct to employer models quickly, because that's the only way you're going to win in order to move forward," Ms. Jacoby said.
4. Strategic alliances and partnerships with private equity can provide benefits and help navigate the changing healthcare landscape.
"The number one reason you should do a deal is because you think it's beneficial and you like the partner," Mr. Herschman said. "There's a cultural fit with the partner you select, and nearly 50% of the time it's not the highest bidder who wins the deal, it's who has the best reputation and the people that you trust and their vision, what they've done elsewhere; it's called reverse diligence. You're really looking at these potential partners for a cultural fit as well as for financial benefit."