Private equity may bring capital, scale and infrastructure to physician groups, but it can’t replace physician control. Without buy-in from physicians, even the most well-funded deal can unravel.
During the session “What Physicians Should Know Before Selling to Private Equity” at the 22nd Annual Spine, Orthopedic and Pain Management-Driven ASC + The Future of Spine Conference, leaders in orthopedic MSOs and ASC real estate discussed the nuanced dynamics of physician involvement in PE-backed transactions, especially once the deal is done.
Andrew Carlson, director of growth and strategy at Growth Orthopedics, put it bluntly: physicians are the most critical asset in any healthcare transaction, and if they aren’t on board, the deal won’t work.
“When we talk about healthcare private equity partnerships, the value has shoes and they can walk out the door anytime.” he said during the panel “They may have to move down the street, but they can walk out the door.”
In other words, private equity firms must invest not just in operations, but in relationships. That means understanding physician goals, values and pain points early in the process.
“Despite what maybe is written down, the reality is the physicians have a heck of a lot more control,” he said. “They need to walk alongside the group.”
The loss of even a few key physicians can destabilize a practice’s operations and culture. Eric Wieser, MD, a spine surgeon at AOA Orthopedic Specialists and board member of a private equity-backed MSO, spoke from firsthand experience.
“We lost a couple people and it really affected my personal group… having them aligned and having them have skin in the game is very important,” Dr. Wiesser said.
His takeaway: alignment needs to be baked into the structure of the deal and include clear incentives and defined roles for all physician stakeholders.
Jason Winker, vice president at ASC Realty Advisors, emphasized the importance of trust and cultural compatibility in choosing the right financial partner. The best outcomes, he said, happen when private equity groups take the time to understand the physicians they’re investing in.
“Get to know who your potential partners are and have a really clear understanding of what changes may happen post-transaction… if they’re aligned with your goals,” he said.
Additionally, control shouldn’t be top-down. For private equity partnerships to work, the clinical and operational decisions must reflect physicians’ voices.
“You want them to come to the physician saying, what do you need to do what you do better? How can I help you? You want that relationship,” Mr. Carlson continued.
Panelists also warned against overlooking younger physicians in ownership and compensation structures. Ensuring these emerging leaders have opportunities for equity and decision-making keeps the partnership viable in the long term.
“You want skin in the game, you want physicians to be aligned with this… but newer doctors, you want to make sure they have that too,” Mr. Carlson said.
Not considering the younger partners “causes resentment,” Dr. Wiesser echoed.
The post ‘The value has shoes, and they can walk out the door anytime’: Why physician control matters in PE deals appeared first on Becker’s ASC.
