How to Look at Private Equity Investment in Physician Groups: Eye Care


Anjana D. Patel, a Member of the Firm in the Health Care and Life Sciences and Litigation practices, in firm’s the Newark and New York offices, co-authored an article in Healio, titled “How to Look at Private Equity Investment in Physician Groups: Eye Care.” (Read the full version - subscription required.)

Following is an excerpt:

The eye care sector saw a significant uptick in investment and consolidation activity in the first half of 2017. Private equity capital flowed into the sector to the tune of seven new platform investments in the first 180 days of 2017. The investment thesis in the sector is predicated on procedural volume tailwinds because of an aging population, cash-based premium eye care service offerings and a highly fragmented landscape ripe for consolidation.

In May 2014, Varsity Healthcare Partners, a health care-focused private equity firm with a demonstrated record of success in other outpatient specialties, recapitalized Katzen Eye Group to form Eyecare Service Partners (ESP) in a transaction that represented one of the first recapitalizations of an ophthalmology practice. With the capital and resources that Varsity provided, ESP expanded into four new states and grew its provider base from 30 to more than 115 in a 3-year span. ESP leveraged its first-mover advantage in implementing an aggressive add-on acquisition strategy to expand its geographic reach from Maryland to Delaware, Colorado, California and Illinois.

Private equity investment was quiet for a period after the Katzen transaction, until a number of other investor groups began to develop a similar thesis and enter the sector. Midway through 2015, FFL Partners recapitalized Clarkson Eyecare, a St. Louis-based optometry practice, to form EyeCare Partners (ECP). ECP, alongside ESP, has been an active consolidator in the eye care space, acquiring both optometry and ophthalmology practices nationwide.