[co-author: Bob Ridlen of RSM US]
Ophthalmology practices offer a significant opportunity for private equity investment, according to experts who spoke on a panel titled “Ophthalmology & Optometry Spotlight” at the 17th Annual Healthcare Private Equity & Finance Conference, held in Chicago on February 19 and 20, 2020.
Experts included Marc Aronstein, Management Affiliate at MidOcean Partners, David Friedman, Principal at Gauge Capital, Anthony Hayes, Principal at Revelstoke Capital Partners, and Greg Nodland, Chief Executive Officer at Sunvera Group. The panel was moderated by Bob Ridlen, Healthcare M&A Director at RSM.
Here are five key points from the panel discussion:
1. Ophthalmology is a large market with high demand. The demand for ophthalmology services is growing, and these services are largely non-deferrable. The number of ophthalmologists are not growing, however. Therefore, the amount of productivity is steadily increasing per physician as demand increases, making ophthalmology an attractive investment for private equity funds.
2. Identify practices with a growth mindset. Panelists emphasized the importance of identifying physicians that are thinking about growing their business. Factors to consider include whether the practice has demonstrated a willingness to invest in its infrastructure and management team, and whether the practice has invested in expensive equipment. Additionally, if a practice is focused on the quality of services and physician autonomy, this is likely a good opportunity for private equity investors.
3. Increase revenue by leveraging retail, optometrists, and premium services. Panelists noted that ophthalmology practices with robust use of optometrists who focus on routine (non-surgical) eye care allowing ophthalmologists to focus more on surgery remain attractive investments. Additionally, some investors value ophthalmology groups where a component of retail feeds into the ophthalmology practice. Panelists emphasized that investors can add value to a practice by developing a methodology for selling premium services, increasing operational efficiencies (such as optimizing scheduling), and managing referrals, among other things.
4. Investors are leveraging increased utilization of ASCs as a revenue stream. Panelists acknowledged that ophthalmologists are one of the largest groups of users of ambulatory surgery centers in the country. Private equity investors can assist practices that have the ability to bring additional procedures to the ASC. Private equity investors and practices with ASCs are also engaging in collaborative conversations on the payor contracting side. Ophthalmology groups that own ASC’s are increasingly more attractive investments for financial groups.
5. Opportunities for physician investments are important for retaining and recruiting physicians. Panelists identified the importance of demonstrating to physicians how their compensation will grow with their career. Private equity investors recommend describing to young physicians the path to partnership and the corresponding equity opportunities, as well as keeping the buy-ins flexible and affordable. Investors are putting young physicians into leadership positions early in their careers to align incentives and keep them engaged.
