Where the first wave is going — 4 experts shed light on ophthalmology investment

With more than two dozen different private equity-backed platforms, ophthalmology is in the midst of an investment boom that shows no signs of stopping, according to Provident. 

Here, Haley Beck, vice president at Alpine Investors; Michael Gaffney, managing director of the Bancroft Group; Michael Rivers, MD, director of ophthalmology at Modernizing Medicine; and Kelly McCrann, CEO of Eyecare Partners, shared their thoughts on investment to date and what the field could look like going forward with Becker's ASC Review. 

Note: Responses were edited for style and clarity.

Question: Why is ophthalmology such an attractive specialty for PE investment?

Haley Beck: At Alpine, we are excited about ophthalmology because as investors and business operators, we can make a significant positive impact on both doctors and patients by bringing complementary skills to an ophthalmology practice. By allowing [physicians] to focus on treating patients rather than running a business, we can increase patient accessibility to physicians. We are also able to allow physicians to invest more time learning about new technology and treatment options, which improves quality of care for patients.

From an investment standpoint, we are particularly drawn to ophthalmology because it is relatively recession-resistant and it is a specialty in which technology can be leveraged to improve the business — whether it's through new laser technology for treatment or backend patient management software to streamline operations.

Michael Gaffney: Ophthalmology is an attractive specialty for PE investment for three reasons:

No. 1, historical success — for example, Eyecare Services Partners and [Nashville, Tenn.-based] AmSurg have found success in adding ophthalmologic practices to their portfolios.

No. 2, fragmented market — because of this, there are lots of targets for firms to pursue.

No. 3, high-margin practices — combined with benefits of scale, this sets PE firms up for financial success.

Kelly McCrann: PE is attracted to the ophthalmology field primarily because of the strong growth in patient demand driven by aging demographics. In addition, fragmentation of the provider network contributes significantly to the profession's attractiveness.

Dr. Michael Rivers: There has definitely been an increase in PE firms backing private specialty practices in recent years. Why? It's based on economics. With an aging population and an increased prevalence of chronic diseases, demand from ophthalmology practices will continue to increase. It's a sound business investment. About 26 percent of ophthalmologists are still part of solo practices, making them very appealing to PE. The lack of dependence on large hospital systems often means lower costs, and ancillary operations like ASCs and retail optical stores many ophthalmology practices rely on are seen as additional revenue opportunities. The aging U.S. population means more patients are facing vision impairments and are in need of care. For example, the increasing diabetic population means more patients suffering from diabetic retinopathy, thus more office visits for expensive injections. There's also power in numbers. With more practices operating under one tax ID, it creates financial efficiencies and negotiating power when it comes to insurance reimbursement rates.

On the flipside, many ophthalmologists are open to investment from PE. It often comes down to an increase in resources for both money and management — leaving the business side of the practice out of the equation to focus on patient care. With changing regulations, shifting payment structures and new technologies, many ophthalmologists have decided looking to other resources [is] a viable means to grow their business. For this reason, PE is an attractive opportunity for providers who want to finish out their career by focusing on patients, rather than changing regulations, while also benefiting from the funds obtained through a buyout or investment.

Q: How will PE investment affect the field and change ophthalmology going forward?

HB: As regulations and requirements in healthcare become more complex, it is increasingly difficult for new physicians to start their own practice, particularly with medical school debt. We see PE-backed practices as an attractive option for both seasoned physicians and new [physicians]. The benefits of joining such a practice may include being part of a team that includes treating patients in an environment that has excellent infrastructure and support staff, building caseload quickly as a result of existing brand awareness among patients, and having more time and support to potentially focus on research.

MG: Well-run PE platforms that execute thoughtful acquisitions and integrations will succeed.
PE platforms that overpay will destroy value. PE platforms that do not integrate will destroy value.

KM: PE's involvement in ophthalmology will allow doctors to focus more on patient care and less on business management. PE provides business management support that not only relieves doctors of that burden, but also increases operating efficiencies, captures greater patient volume and leverages best practices between medical practices.

MR: Depending on what lens you look through, the involvement of PE in ophthalmology has both pros and cons.

One the one hand, there is a belief that the influx of PE and consolidation of ophthalmology practices could change the way care is delivered by impacting personalized patient care and reducing provider autonomy. In other words, some industry experts believe that aggregation will prevent physician autonomy, forcing ophthalmologists and their staff to conform to standards determined by an outside setting.

Additionally, the distribution of providers may suffer, as PE-backed groups are often most interested in profitable offices. Thus, areas with underserved populations may have difficulty attracting ophthalmologists.

On the other side, some physicians believe that selling their practice will help them increase efficiencies when it comes to lowering costs, enhancing technology and reducing administrative burden, helping to alleviate many of the causes of physician burnout. Also, the quality of care could increase with larger groups able to leverage internal evaluation of outcomes and institute improved clinical processes. For ophthalmologists just starting out, as well as those on the cusp of retiring, PE can make for a sensible financial decision.

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