Five orthopedic surgeons shared their thoughts on private equity with Becker's ASC Review:
David Jacofsky, MD. CEO and Founder of HOPCo and the CORE Institute (Phoenix):
"Private equity has already had a major impact on the orthopedic specialty, and the early consolidation of the field bears witness to that. It can help practices develop or acquire the resources needed to manage data, track outcomes and build relationships with other organizations. For us, private equity was attracted by the proven quality of the evidence-based care we deliver and the value of the proprietary IT platforms we have developed, which, in turn, has allowed us to apply our methods to a growing number of partners and affiliates across the country. It is critical to define your goals prior to entering into such a transaction, as dollars alone will definitely not prepare a group for the future. Rather, most groups need a plan to acquire the operational infrastructure, claims analytics platforms, data warehouses, quality systems and business teams to endow them with a strategic advantage for what lies ahead. Money may be helpful, but money alone will not provide solutions to the complex challenges of tomorrow."
Nikhil Verma, MD. Professor and Director, Division of Sports Medicine at Midwest Orthopedics at Rush (Chicago):
"In the short term, the obvious advantage to the physician is the ability to monetize the value of the practice with an upfront lump-sum patient. However, what is less clear is the value that PE may bring on the long-term health and function of the practice. Will they offer any strategic advantage? I think for smaller practices, a 'roll-up' type model which allows for consolidation of smaller practices into a larger entity, taking advantage of consolidation of overhead and management, and using larger numbers to improve efficiency with large investment practice requirements such as EMR, malpractice and negotiation with payers, along with establishment and growth of ancillary service lines.
For larger, more established practices, the long-term value is unclear, and the giving up a majority control position has unclear implications for future physician recruitment and the long-term stability of the practice."
Allston Stubbs, MD. Associate Professor of Orthopedic Surgery at Wake Forest School of Medicine and Orthopedic Surgeon at Wake Forest Baptist Health (Winston-Salem, N.C.):
"Yes, private equity will have a growing impact on the specialty of orthopedic surgery for the reasons of high growth, low risk and moderate regulation. The drivers of high growth will be the aging and activity of the population, as well as access to specialized technology. Over the last 30 years, the division of labor within orthopedic surgery has significantly increased, resulting in an expansion of targeted therapies that restore function and quality of life.
The risks of orthopedic surgery continue to decline based on this division of labor as well as the emergence of smart technology and artificial intelligence. As an orthopedic community, we are fortunate to be at the dawn of a period of human intuition coupled with machine learning. Finally, private equity investment into the orthopedic industry benefits from moderate regulation. Healthcare barriers to entry remain moderate to high, but access to capital is low to moderate. The low-risk, high-reward relationship for private equity remains intact for the next three years. The future challenge for private equity being exit strategies that protect principal and optimize return in a government-influenced market."
Marcus Rothermich, MD. Orthopedic and Sports Medicine Specialist at Andrews Sports Medicine & Orthopaedic Center (Birmingham, Ala.):
"The recent growth of private equity investment in ambulatory surgery centers has certainly had an impact on outpatient orthopedic surgery. The next few years will be very interesting to see that growth compared to the investment of hospital systems in these outpatient centers. In general, private equity ASCs make outpatient joint replacements more common, whereas hospital-owned ASCs prefer to keep joint replacements in the hospital setting. As more surgeons become interested in performing joint replacements in surgery centers, it will be very interesting to watch how those investment patterns evolve between private equity firms and hospital systems."
Vinod Dasa, MD. Vice Chairman of Academic Affairs, LSU Department of Orthopedics (New Orleans):
"I think there are large opportunities which center around risk and who is willing to capitalize on restructuring our fee-for-service model. Those who see and understand that opportunity will be successful because patients, employers, government and many others are expecting a new way of doing business and are willing to compensate appropriately for it."