Latest / Becker’s Healthcare Podcast / The Evolving Landscape of Physician Practice Acquisitions with Holly Buckley

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The Evolving Landscape of Physician Practice Acquisitions with Holly Buckley · Becker’s Healthcare Podcast

• 0:02
  - Every health system executive right now is being
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  - asked to do something that has no useful
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  - precedent,
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  - make durable technology decisions in an environment that
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  - looks meaningfully different every six months.
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  - The pace isn't slowing,
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  - the vendor landscape isn't getting simpler, and the
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  - cost of missteps
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  - keeps rising.
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  - Becker's eleventh annual IT and Revenue Cycle Conference,
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  - The Future of AI and Digital Health, exists
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  - for exactly this challenge.
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  - Here, you'll find more than 2,500 executive level
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  - attendees,
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  - 600 plus speakers, and four days of sessions
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  - built around the questions leaders are actually wrestling
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  - with.
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  - How to scale AI responsibly,
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  - how to protect increasingly complex systems,
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  - how to wring more performance out of the
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  - revenue cycle, and how to make tech investments
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  - that hold up over time.
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  - Join us September fourteenth through the seventeenth at
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  - the Hilton Chicago.
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  - You can register on our events page at
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  - beckershospitalreview.com
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  - by clicking on the events tab in the
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  - upper right.
• 1:00
  - This is Scott Becker with a special combined
• 1:03
  - episode
• 1:04
  - of the Becker's Healthcare podcast and the Becker
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  - Business and Private Equity podcast,
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  - And I'm thrilled to date to feature Howie
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  - Buckley.
• 1:11
  - Howie is the chair of the McGuireWoods health
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  - care department and has spent a ton of
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  - time over the last decade at the intersection
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  - of health care systems, working with health care
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  - systems, and also working with physician practice transactions
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  - and with private equity funds and invest in
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  - health care.
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  - A a fascinating world. We're gonna talk today
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  - about the state sort of physician practice acquisitions
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  - and more.
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  - Holly, let let me tee us up by
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  - asking you,
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  - what's the current state of health care private
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  - equity funds
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  - investing in physician practice management companies? What what
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  - are you seeing out there?
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  - Yeah. So I would say the market is
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  - relatively busy. I wouldn't
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  - say it's back to where it was in
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  - kind of the 2020,
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  - 2021
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  - kind of peak.
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  - But it's really recalibrated
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  - and we're seeing
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  - good transaction
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  - volume for kind of good quality
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  - platforms, but we're also seeing
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  - kind of platforms that have really not done
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  - so well now trying to deal with,
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  - kind of what to do with those assets
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  - and and how to kind of move forward.
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  - So it's really a a mixed bag, but
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  - certainly seeing some good
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  - high quality deals in certain specialties.
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  - I think investors are being a lot more
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  - selective in terms of what they're buying.
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  - And I think there's big valuation
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  - disparity in terms of high quality versus less
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  - high quality assets.
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  - And are there specialties
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  - that private equity funds remain excited about? And
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  - on the flip side, specialties
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  - that private equity funds and investors are less
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  - excited about?
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  - I think for sure. I think that in
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  - terms of specialties
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  - that,
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  - investors are interested in, it's gotta be kind
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  - of a core thesis in terms of why.
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  - And some of those whys are around things
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  - like
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  - ancillary revenue potential,
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  - payer mix,
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  - potential for alignment. It's not just about having
• 3:10
  - a fragmented
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  - segment that could be consolidated. It really has
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  - to kind of have more of a why
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  - to it than that. And some of the
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  - specialties that fall into those categories
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  - are
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  - women's health, urology,
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  - MSK and Orthopedics,
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  - cardiology,
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  - GI,
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  - and even dental which is kind of the
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  - the original,
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  - PPM that just keeps on tracking.
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  - And I think, one of the area I
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  - think that
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  - kind of creates attractiveness is the whole side
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  - of service,
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  - differential. So where we can see,
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  - services moving from higher cost venues such as
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  - hospitals to outpatient or
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  - hospitals or outpatient even to patient's home, that's
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  - another big driver of of interest. I think
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  - in terms
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  - of sectors that haven't been doing as well,
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  - some of those could include
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  - primary care
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  - without a value based infrastructure
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  - or over consolidated
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  - platforms. We're not seeing as much activity, for
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  - example, in dermatology.
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  - And then also,
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  - platforms that is high Medicaid exposure,
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  - but not necessarily,
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  - super
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  - subspecialty specific.
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  - Thank you very, very much.
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  - What about,
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  - interest rates, reimbursement rates, the one big beautiful
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  - bill?
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  - How are these impacting people's thoughts on practice
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  - management acquisitions
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  - or not having a big impact?
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  - I I think certainly it has an impact.
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  - I mean, I think we're seeing a fair
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  - amount of reimbursement
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  - pressure.
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  - The fee schedule compression is accelerating.
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  - And so I think the and then similarly
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  - with interest rates, I mean, higher cost of
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  - capital
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  - is making it so just straight up acquisition
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  - strategies
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  - or platforms still on just an aggressive acquisition
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  - strategy
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  - just don't work as well as they used
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  - to when capital was much cheaper. I think
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  - now there's much more focus on what can
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  - we do organically,
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  - and how can we really
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  - improve
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  - the platform
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  - through
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  - robust operations
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  - rather than just kind of how can we
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  - add as much to it as possible. So
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  - I think
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  - it it
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  - those those factors have definitely
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  - fed into the trend of investors needing to
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  - be more selective
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  - and really focus on doing things very well
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  - as opposed to just let's buy something and
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  - add a lot more to it and make
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  - something much bigger and and have that pan
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  - out.
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  - Thank you. And and where do you see
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  - like, if you went back thirty years ago,
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  - the physician practice management
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  - business all but blew up. Now it seems
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  - like there's more sustainability at least in specialties
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  - where there's ancillaries, good reimbursement. They're not overleveraging
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  - them.
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  - Any thoughts on what you see sort of
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  - looking ahead for physician practice acquisitions?
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  - Will it blow up blow up or are
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  - you more bullish or cautious on health care
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  - private equity investing in physician practices
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  - going into 2027
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  - and going forward?
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  - I mean, I don't think they can blow
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  - up and kind of
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  - dissipate in the same way as I understand
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  - they did thirty years ago when I was
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  - not practicing law. But,
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  - I think that the reality is it's much
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  - too expensive
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  - to operate a high quality
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  - medical business
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  - today
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  - than it it was even adjusting for inflation.
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  - It's just so many more capital costs, AI
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  - costs.
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  - And so I think the the model of
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  - having well capitalized
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  - medical businesses is just
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  - is critically important such that private equity investment
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  - and PPM can't just go away.
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  - I think it's more a matter of
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  - with increasing regulatory headwinds,
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  - the businesses just need to be done
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  - well
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  - and done in a careful and prudent way.
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  - But I think,
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  - you know, I think of Oregon as kind
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  - of an experiment where Oregon has really now
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  - said,
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  - we really don't want private they haven't said
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  - directly, but through the
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  - the legislative environment,
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  - they've kind of, more or less made it
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  - very difficult for
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  - private equity back
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  - EPMs to really
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  - grow in the state at this point. And
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  - I think what that's gonna do is really,
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  - make
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  - it impactful from an access perspective for patients.
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  - And so I think if you take away
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  - PE backed PPM businesses, you know, on a
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  - on a broader basis,
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  - it's gonna have a very negative impact on
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  - patient's ability to receive high quality care, especially
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  - in in geographies that are maybe more rural
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  - where the distance to hospitals and health systems
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  - that are provided is much greater.
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  - And so I think, I don't expect the
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  - model to blow up. I expect the model
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  - to prevail,
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  - but I think that there's gonna be continued
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  - pressure on how these businesses are operated
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  - and the guardrails that you'd have in place
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  - to ensure that clinicians are already driving the
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  - clinical operations of the business
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  - and the incentives are appropriately aligned to kind
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  - of ensure that care is high quality and,
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  - and so forth. So, yeah, I I don't
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  - foresee a blow up. I just foresee continued
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  - scrutiny and and the need for businesses to
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  - be operated carefully and prudently.
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  - And and when you talk to practices, over
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  - the years,
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  - the firm has done a ton of work,
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  - both helping private equity sponsored platforms and private
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  - equity funds to buy big practices and mid
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  - sized practices.
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  - And then we've also worked a lot with
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  - large and small practices and medium size,
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  - selling into platforms and private equity funds.
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  - Is there interest currently from practices,
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  - and and where do you see that? And
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  - any advice for practices that are considering this
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  - type of effort?
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  - I mean, we definitely still see that and
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  - I I think my advice is always
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  - talk to the other physicians who have already
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  - joined the practice and not just the ones
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  - who
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  - the platform is giving you. I kind of
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  - seek out the the practices that have already
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  - gone down this pathway and see what they
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  - wish they knew before they entered into the
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  - transaction
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  - and see if it's gonna be a good
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  - cultural fit. Because I do think that
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  - in general, there's gonna be a big change.
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  - You're taking a an up front payment to
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  - become part of something much greater,
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  - from a size perspective and an operational perspective,
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  - and it needs to
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  - be the right thing for you. And if
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  - if independence
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  - and autonomy
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  - and control are really the most important things
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  - to you,
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  - you may not get all that when you
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  - join a a private equity backed,
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  - platform, but there are a number of other
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  - things that you will likely get. And those
• 9:55
  - that kind of access to resources
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  - and,
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  - potentially a broader network of clinicians to work
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  - with to deliver care for your patients and,
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  - a lot of administrative support and and so
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  - forth. And so I think it's just really
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  - important to do your diligence ideally before you
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  - get to the ladder of intent stage
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  - to make sure that this is actually gonna
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  - work for you and
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  - and fit with your your life goals and
• 10:18
  - the goals of others within your practice, especially
• 10:20
  - kind of the next generation that you've been
• 10:23
  - building and and
• 10:25
  - mentoring and make sure that they have a
• 10:27
  - pathway too, if that's important to you. So
• 10:29
  - really just kind of doing your diligence and,
• 10:32
  - as with all things, there are multiple different
• 10:35
  - flavors and, you wanna make sure you pick
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  - the right one.
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  - Thank you. I couldn't agree with that more,
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  - but about there being multiple different flavors and
• 10:42
  - really doing your care and and diligence upfront
• 10:45
  - is that this isn't something you really want.
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  - What are really your goals, your practice? Do
• 10:49
  - you really wanna partner with these people? Do
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  - you not wanna partner at all? And and
• 10:52
  - so forth and so on. And and what
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  - are you trying to get out of it?
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  - Is it just money to exit?
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  - Is it resources
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  - to get better? Is it something else that
• 11:02
  - you're trying to do, or you put yourself
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  - in a spot where you have to do
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  - a transaction?
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  - But but what are you really trying to
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  - do? And alignment internally in the branches is
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  - so important as well.
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  - Again, Holly Buckley is with us today, one
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  - of the most brilliant leaders I've had a
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  - chance to work with in my career, the
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  - leader of the McGuireWoods health care,
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  - practice, works a ton with large hospitals and
• 11:23
  - health systems as well as,
• 11:25
  - investors in health care. Holly, thank you so
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  - much for taking the time with us today.
• 11:29
  - Thank you so much.
• 11:31
  - Thank you so much, Scott. Really appreciate it.