The most notable deals for ASCs, physician practice management in 2019 + why transactions were down

The number of transactions in the ASC and physician practice management sector dipped from 182 in 2018 to 172 in 2019, Hammond Hanlon Camp reported in late January.

Becker's ASC Review asked H2C Director Mike Tierney to share his thoughts on why the sector saw fewer mergers and acquisitions in 2019, which transactions were most notable, and what kind of activity to expect going forward.

Note: Responses were lightly edited for style and length.

Question: What do you believe caused the dip in ASC and physician practice management transactions from 2018 to 2019?

Mike Tierney: H2C believes that the dip in PPM/ASC transactions is a normal variation. The sector continues to be a favorable area for investment as the volume of procedures performed in outpatient settings continues to climb. The shift will be driven by cost pressure from insurers, Medicare approval to reimburse a growing number of procedures for ASCs, and physician and patient preference. H2C expects these factors to serve as a catalyst for further investment and M&A activity in 2020.

Q: What were the most notable transactions in the ASC and PPM space in 2019?

MT: Among the most notable transactions were the acquisitions of [Vienna, Va.-based] MyEyeDr by Goldman Sachs/West Street Capital Partners and [St. Louis-based] EyeCare Partners by Partners Group. Combined, these transactions have a total value of $4.8 billion and encompass hundreds of locations. Both companies were already growing rapidly. They showcase the strong private equity demand in the ophthalmology space and the desirability of large platforms.

Denver-based direct primary care services provider organization Paladina Health acquired Indianapolis-based Activate Healthcare. Together, the organizations form one of the nation's largest providers of value-based primary care, serving more than 170,000 healthcare consumers throughout 18 states. Paladina Health is a physician-access model of healthcare that improves consumer care and satisfaction by providing convenient and unhurried consumer-centered care and a broad scope of services. Activate Healthcare is a provider organization that offers customized services to employers and unions for preventive and primary medical care.

Another notable transaction occurred when Revelstoke Capital Partners and [Cincinnati-based] Beacon Orthopaedics & Sports Medicine, one of the largest medical groups in the Ohio tri-state region and a national leader in providing advanced orthopedic care, announced the launch of a national management services organization to support Beacon's growth and pursue additional partnerships with other leading orthopedic providers.

Q: What do you predict ASC and PPM transaction activity will look like in the first quarter of 2020 and the rest of the year?

MT: 2020 is already off to a strong start, and H2C expects M&A activity to be similar to 2019 volume. With a robust national economy, access to capital and continued political uncertainty, H2C expects many individual practices and centers will feel the time is right to explore opportunities with larger platforms and financial sponsors.

Want to participate in future Becker's Q&As? Email Angie Stewart: astewart@beckershealthcare.com.

More articles on transactions/valuation:
PE-backed Prism Vision snags Maryland eye group — 4 insights
Florida ASC buyer projects $18M profit in 1st year: 5 details
Physician-owned eye group acquires California practice

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