Gary W. Herschman, Health Care Mergers and Acquisitions attorney, in the firm’s Newark office, was quoted in Healio | Orthopedics Today, in “Consolidation Continues Despite Hurdles in Private Equity,” by Casey Tingle.
Following is an excerpt:
Private equity firms have continuously invested in, acquired and consolidated health care facilities and medical groups during the past decade.
A report from the Physicians Advocacy Institute and Avalere Health showed the percentage of physicians employed by corporate entities, including insurers, private equity firms and other corporate entities with a controlling interest in the medical practice, increased from 15.3% in January 2019 to 22.5% in January 2024. The report also showed practices owned by corporate entities increased from 14.6% in January 2019 to 30.1% in January 2024, which surpassed practices owned by hospitals (28.4%).
While private equity deals in dermatology, ophthalmology and dental have been prevalent for 10 to 20 years, Gary W. Herschman, Esq., said private equity has begun to invest in other areas of medicine, including orthopedics, spine and pain practices.
“Private equity interest in orthopedics started around 7 years ago and has increased each year. An even newer specialty area of focus for private equity investors has been cardiology groups,” Herschman, co-chair of the health care transactions group of Epstein Becker & Green, told Healio | Orthopedics Today. “With regard to cardiology, around 2 years ago, Medicare changed its rules to allow cardiac catheterization and other advanced procedures ... to be done in an ASC. That has accelerated the cardiology deals.”
He added plastic surgery and medical spas are also “new hot areas in the last 2 to 3 years.”
“A lot of plastic surgery practices and med spas are small, and they are coming together in platforms,” Herschman said. “Further, a wide variety of behavioral health companies — physicians and facilities — are also active and have been for 5 to 8 years now.” …
More capital
With yearly decreases in reimbursement and increases in expenses, Herschman said that “bigger is better from the perspective of trying to compete with larger, well-capitalized players.”
“Some people might think that there is an advantage to being small but, in the end, in medicine I think that is not the case unless it is the most prestigious surgeon where people come and pay out of pocket,” Herschman said. …
‘Keep an open mind’ …
When it comes to partnering with private equity, Herschman said it cannot be about the money, but about a combination of strategic positioning for the future and cultural fit. …
Be educated …
Herschman said practices can also benefit with seasoned advisers, including investment bankers, lawyers and accountants who have extensive experience in private equity deals.
“Some groups do [private equity deals] without an investment banker. It may not make sense for smaller groups to hire an investment banker, but private equity platforms could take advantage of groups that do not have financial advisors, investment bankers and seasoned legal counsel,” Herschman said.
