Should You Sell Your Practice to Private Equity?

By Andrew Graham
CEO, Clinic Service

It’s hard to deny that it is becoming increasingly challenging to be an independent practice. Increasing regulation and decreasing reimbursements are putting a financial strain on independent practices. Enter private equity.

Private equity has entered the healthcare field in a big way. In 2014, for instance, Bain & Co. found that private equity funds invested $29.6 billion in healthcare company buyout deals globally, nearly doubling the $16 billion invested in 2013 (Medical Economics).

While the mass buy-up of practices by private equity might pose a disruption to the healthcare industry, it could also represent an opportunity for you and your practice. But before you jump on the bandwagon, a recent article from Medical Economics recommends a few questions you should ask yourself.

What are your goals?

Do you want to retain control of your practice? Do you want to simplify your life? Selling to a hospital might come with less complication, but it also comes with less control. A private equity deal will give you more flexibility in structure, but comes with more administrative burden. There’s also the option, of course, of continuing to remain independent. It all comes down to what you seek to gain.

How in demand is your specialty?

The more in demand your specialty, the more likely you are to be an attractive target of private equity. This doesn’t mean you’ll get a price exorbitantly higher than market value, however; offers that are too high will draw the attention of the Department of Justice.

Are you looking for economies of scale?

Some private equity firms have deep expertise in a given specialty, driving greater revenue for the practices they buy and improving patient experiences. This isn’t all PE firms, though – do your homework to ensure that the PE partner you choose (if you choose one) can bring more to the partnership than just money.

Do you fully understand the risks?

Selling your practice to private equity – or to anyone –  can come with risks of compliance issues, declines in patient experience, issues with your medical billing, and even risks for your own employment. The importance of fully understanding and doing what you can to mitigate these risks cannot be understated.

Still have questions? Give me a call. I’m ready to talk with you about your situation. I’ve had this conversation with many docs and practice managers and am happy to pass on what I’ve learned about this important career decision. You can reach me at 303-755-2900.

2 Responses

  1. Dr. Teles
    | Reply

    Are private equity firms interested in podiatry practices? I have a thriving practice in the South Bay and would entertain talking to someone.

    • Andrew Graham
      | Reply

      We have seen focus toward the higher end practices like dermatology and anesthesiology. We have also seen some movement in the primary care space. I think podiatry is ripe for a national player. It would take big initial pockets to get that going.

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