Becker's ASC Review

14 Thought Leadership Vision Group Holdings filed for bankruptcy first — could more be next? By Eric Oliver W est Palm Beach, Fla.-based and pri- vate equity-backed Vision Group Holdings said the COVID-19 pandemic worsened its financial issues when it filed for Chapter 11 bankruptcy at the begin- ning of June. As the ramifications of the virus continue to make themselves known, will this be a one-time occurrence or the beginning of a chain of similar filings? Provident Healthcare Partners Director Eric Major and Associate Steven Grassa discussed the filing with Becker's and predicted how ophthalmology-based investments were going to be hit by COVID-19. While Chapter 11 bankruptcy is a common occurrence in the world of business, specifi- cally in retail, it's not as common in healthcare, because practices are more recession-proof than more cyclical businesses, Mr. Major said. Vision Group Holdings and its associated brands, Laser Vision Institute and TLC Laser Eye Centers, focus primarily on performing Lasik eye surgery. In the pandemic-recessed economy, the financials around elective Lasik surgery aren't as promising as a general oph- thalmology practice. "Lasik, cash-pay providers are more suscep- tible to downturns and reductions in dispos- able incomes than a general ophthalmology provider that's focused on reimbursable procedures would be," said Mr. Grassa. "[Lasik centers are] more cyclical than medically- focused ophthalmology providers that treat a wider spectrum of eye care disorders, includ- ing cataracts, retinal diseases and glaucoma." e filing will protect VGH from creditors as it seeks to reorganize its business operations and potentially find a buyer, Mr. Major said. However, now the company will have to get court approval to take out additional lines of credit or sell the business. As for potential buyers for VGH, the pool will likely pivot from growth-minded investors to firms that specialize in distressed assets. VGH appears to be operationally stable, but is in need of corporate and balance sheet restruc- turing to bring the financial figures back in line, said Mr. Grassa. He expects that there will be plenty of buyers, many focused on distressed investing, that will take a run at the deal, however. Ophthalmology's post-COV- ID-19 outlook While VGH was the first domino to fall, it's unclear whether more will follow. While most groups seemed to have weathered the first wave of the pandemic and its related shut- down, some practices currently crippled by the lack of cash flow need to make accommo- dations to recover. e worst-case scenario for ophthalmol- ogy and most other businesses is a second wave of COVID-19 cases coming in the fall. If the U.S. uses similar measures to fight the virus, it could have a disastrous effect on all types of businesses, including ophthalmology practices. "It's going to be tough for groups if a sec- ond wave hits and practices have to operate at drastically reduced volumes again," Mr. Grassa said. "It seems most groups have gotten through the first wave, but if practices have to go through this again, it's going to be detri- mental to a lot of businesses, and not just in eye care." As for potential investors, PE-backed plat- forms that didn't overextend their resources during the pandemic could continue to grow. However, key participants that will drive M&A actvity will be creditors who are currently reluctant to lend funding needed to close deals. If volumes return and businesses look like they're going to recover, M&A will likely follow suit. n Planned cuts to Medicare payments threaten private practice, surgical groups say By Angie Stewart L ooming cuts to Medicare reimbursement could be the final straw for private practice surgeons already in financial straits, according to the Surgical Care Coalition, a group of 12 industry organizations opposing the planned cuts. CMS' reduced payments for surgical care are set to take effect in January 2021. The Surgical Care Coalition is asking Congress to waive Medicare's budget- neutrality requirements to prevent the cuts, saying private practices may close as a result. One-third of private practice surgeons already fear they'll have to shut down, according to a survey of more than 5,000 surgeons commissioned by the Surgical Care Coalition. Nearly half of respondents are cutting their own pay or employee pay as revenues decline due to the pandemic. Reimbursement cuts would put those groups in even more distress, the coalition said, and ultimately limit access to care for older Americans. The coalition's founding members include the American Academy of Ophthal- mology, American Association of Neurological Surgeons, American College of Surgeons, American Society for Surgery of the Hand, American Society of Colon and Rectal Surgeons, and the Society of American Gastrointestinal and Endo- scopic Surgeons. "These cuts presented a difficult future for surgical patients, even before COVID-19 hit. If they go into effect while the country is dealing with the conse- quences of the pandemic, American patients will pay an even greater, devastat- ing cost," ACS Executive Director David Hoyt, MD, said in a press release. n

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