Issue link: https://beckershealthcare.uberflip.com/i/1058309
34 ORTHOPEDICS / TOTAL JOINTS RA: I do think we'll see similar results in the space of orthopedics and urology because that's how physicians will be able to remain inde- pendent in the future. Reimbursement cuts are coming for all specialties and there is a belief medicine won't be billed and collected for in the same way it is today. Independent practitioners are looking for ways to remain autonomous. Large practices have more cushion to withstand the changes in reimbursement while still being agile. Smaller groups with fewer than five to 10 physicians need to be more proactive about the changing space. Private equity can offer stability and the ability to grow through increased ancil- laries, acquisitions, and impowering physicians. It's about building a platform where they won't only survive but thrive. Q: How does the governance of phy- sician practices typically work after taking on private equity investors? RA: e private equity group partners with the physicians at the board level. ey are the first ones to tell you they aren't going to manage the day-to-day of the business — how things are billed and collected for. at [con- trol] really stays with the medical board, which is composed of the physicians. However, the private equity team can help with board-level decisions and fund growth; they can help find the right ways to expand and decide which ini- tiatives to fund and which to stay away from. Typical hourly employees don't see a lot of change in the practice; it's more about the high-level decision making and expansion to new geographies and service lines. Even that continues to be an open dialogue, but the conversation is between the two groups. Q: What are the most attractive types of groups for private equity investors? RA: Orthopedics is the hottest of the new wave spaces and the dynamics of that space include so many private practices that a small number of physicians can have a sizable amount of col- lections. You could be viewed as a PE platform with four to five physicians that could generate the same profits as 20 urologists. One of the other aspects setting groups apart is their ability to have ancillary services. Or- thopedics and urology can build out ancillary service lines and orthopedics can generate significant volume from ancillary services, including physical therapy, imaging, DME, pharmacy and walk-in centers. Building out those lines and diversifying the revenue streams makes the practice a strong candidate for a private equity investment. Finally, groups that invest in growth are attrac- tive. Whether it's investing in bringing billing and collections in-house, a new IT system to bring in different technology components or investing in management and not just having the physicians running the business; those are all things that show you are making invest- ment in professionalizing the practice. Q: Are you working with any ortho- pedic clients currently? RA: Of the three private equity investments into the orthopedic space, we have represented two of those practices (Mount Pleasant, S.C.-based e Southeastern Spine Institute and OrthoBethesda in Md.). Because of the increase in attention private equity is receiving in the orthopedic community, more and more practices are reach- ing out to us to learn about private equity and understand how these deals are structured. Prac- tices hire us to understand why deals are being done, what a deal could look like, and ultimately represent them in a transaction process. We are currently working with a number of orthopedic practices around the country as they educate their partner-base around private equity and pursue a private equity partner. n