Becker's ASC Review

8 ASC MANAGEMENT The coming boom — private equity's impending impact in orthopedics By Eric Oliver P rivate equity investment in orthopedics to date has been sparse, but Jeff Swearingen, co-founder and managing director of the healthcare investment firm Edgemont Partners, predicts more investment over the next three years. Question: What point are we in the second wave of PE investment? Jeff Swearingen: I think we're still very much in that wave. e first wave with hospital-based specialties, like anesthesia and emergency medicine, lasted five to six years. e peak of that lasted about three years, in which each of those specialties experienced M&A activity was at a frenetic level. I think we're still in the frenetic period of the second wave for dermatology and vision care, and we're in the prefre- netic period in gastroenterology and orthopedics. Q: In this second wave, where has the majority of investment been? It seems there's been a wealth of ophthalmology-related days recently. JS: I think it depends on how you measure it. e statistics we track say there's actually been more PE-backed dermatology plays, but I wouldn't disagree [that ophthalmology investment has taken off ]. I get the sense that at the moment, in the last six to 12 months, ophthalmology and vision care have been the most active in terms of number of deals. ere are fewer PE-backed platforms in the space, and that may help overall deal volume. e other thing to keep in mind with vision care is you're thinking about three distinct subspecialties: optometrists, ophthalmologists and retina surgeons. We've seen activity across all three of those provider types. Q: Fast forward three years — how will analysts reflect on those first waves of PE investment? JS: You've had a tremendous level of consolidation through the first wave over the years. You've had several very large PE-backed players enter into those spaces. For example, U.S. Acute Care Solutions was backed by Welsh, Carson, Anderson & Stowe in the emergency medicine and hospital medi- cine space. Welsh has been in it for several years now and everyone anticipates they'll pursue some sort of exit strategy in the next 12 to 18 months. ey've established a bit of a playbook as to how they'll achieve li- quidity on their investment. ey also had a successful investment in the anesthesia space through U.S. Anesthesia Partners. ey built that business up to over 1,000 anesthesia providers and sold a significant stake to Berkshire Partners in a recapitalization. So that's what we think a potential outcome could be. We're seeing several groups with private equity backers pursuing secondary transactions. Q: What sort of activity is happening in orthopedics? JS: ere's been a lot of activity and a lot of interest from groups. Many groups have elected to talk to folks like us and get educated on the options available to them. ey are now in a little bit of a wait-and-see mode. I believe there will be several large groups that do transactions this year. I think when those happen it'll spur those prac- tices who are in a wait-and-see mode to act. We saw this in the other specialties too. It takes a few larger groups to move on a transaction to validate the opportunity for other physicians in the specialty. en they're more likely to move. Q: How does changing reimbursement affect PE investment? JS: at's a tremendous opportunity for a well-capitalized orthopedic group that can invest in their own ASC to capture a patient base. ere's no doubt that in orthopedics, the list of procedure codes ap- proved for outpatient will increase over time. e growth in ASC volume will provide an opportunity for ortho- pedic practices with their own ASC and sophisticated capabilities around all the ancillaries to take on episode-of-care type reimburse- ment arrangements. Well capitalized practices will have invested in the data infrastructure to utilize data tracking and outcomes measurement to ensure they're distinguishing themselves in a more outcomes-oriented marketplace. n 4 key steps to ensure long-term success at your ASC By Rachel Popa D eveloping a detailed strategic plan helps ensure an ASC's ongoing success, according to the Asso- ciation of periOperative Registered Nurses. Four tips from the association for developing a strategic plan: 1. Create a strategy. Developing a plan that covers what needs to be accomplished to meet goals is the first step to achieve long-term success. 2. Delegate responsibilities. Once a plan is created, as- signing responsibilities is essential to help the plan come to fruition. 3. Be flexible. Creating a strategic plan to be a living document ensures the ASC can adapt to any changes or roadblocks that come up. 4. Commit to meeting frequently. Making time to meet regularly helps keep staff accountable for their tasks and helps everyone get on the same page when executing a plan. n

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