Becker's ASC Review

35 TRANSACTIONS Physician practices' swinging pendulum of investment By Francesca Mathewes Healthcare has been a focus of private-equity investment for years, driving consolidation throughout the industry. However, PE activity in healthcare has shown some signs of slowing in recent years. According to a recent market analysis report from Pitchbook, healthcare specialist funds have not seen the peak returns they experienced from 2012 to 2014, and exit activity in the industry has slowed. PE firms also recorded notably fewer acquisitions in 2023 compared to recent years, with 788 recorded transactions, compared to 940 in 2022 and 1,114 in 2021. Physician groups were also a major target of PE investment in 2021 when buying boomed at 317 recorded acquisitions. But some predict that the relative slowdown of PE activity in the healthcare space could signify a shi in power away from private equity and toward large physician group practices. "I believe the swing for the equity money over the last seven or eight years will start to swing back due to group consolidation," Mitch Schwarzbach, a Denver-based healthcare consultant, told Becker's. "e larger groups have the resources to do everything that the equity folks can, but they are able to not have to share the cash with outsiders." Private equity deals appeal to physician groups for a number of reasons, according to Mr. Schwarzbach. Practices led by older physicians oen find financial comfort in the exit planning provided by PE and many physicians are relieved at the thought of being able to come to work and focus solely on patients while PE firms fund and manage the day-to-day operations. e problem with these deals, as Mr. Schwarzbach points out, is that members of physician groups and those who carry on at the practice are le to deal with the lack of physician autonomy post-acquisition. "[About] four or five months later, they realize that they are not what they were, and cannot be perceived how they were," Mr. Schwarzbach said. "ey are just a number. And they realize that if they quit, they will just hire another urologist to come in, and that's deflating to no level, because they're the ones who built that practice. ey're the ones who feel, you know, that self gratification. ey're the ones who threw their heart and soul into doing this kind of stuff." As more physicians open up about the realities and trade offs of PE deals, he predicts that more physician group leaders will look to build and maintain financial structures that are designed with physician autonomy in mind. He also predicts that other consolidators in the physician group and ASC space — such as Optum's SCA Health and Tenet's United Surgical Partners International — may meet physician realizations about PE investment with more carefully structured acquisition deals. "I think they're going to turn around and they're going to have some kind of a package out there to be able to bring to these physician groups that's going to be up and up, versus an equity-and-sell," he said. Tenet has already begun refocusing its strategies by selling off hospitals and investing more heavily in its ASC line through USPI. In addition, SCA Health acquired at least two cardiovascular groups and received approval to bypass a state review of its planned purchase of physician- owned Cornvallis, Ore., clinic. Per Mr. Schwarzbach's predictions, consolidators could see major physician acquisition success if they can figure out a way to make deals that offer all of the perks of acquisition, such as an exit strategy and retirement benefits, without plans to sell practices to other PE groups and leaving physicians effectively independent. n HCA to add 100 outpatient facilities in 2024: 5 things to know By Patsy Newitt N ashville, Tenn.-based HCA Healthcare plans to add 100 outpatient facilities by the end of 2024, bringing total sites of care to more than 2,600, according to a third quarter earnings report transcribed by the Motley Fool. Here are four more notes on the health system's outpatient strategy, according to the report: 1. Same facility outpatient surgeries declined 2% in the third quarter of 2024, while revenue per surgical case was up 7%. The decline in outpatient surgery is rooted in a decline of Medicaid and uninsured patients, CEO Sam Hazen said. 2. Although HCA's outpatient volume has declined, services have become more profitable. "The profitability of our outpatient surgery service is better as a result," he said. "Volume is down, but on the bottom line, profits are up with respect to outpatient surgery. We're comfortable with that outcome." 3. HCA is advancing the number of ASCs they have in their company through "greenfield developments," new facility constructions, along with some targeted acquisitions, Mr. Hazen said. 4. "We continue to improve operations of our hospital- based outpatient surgery centers, providing better environments for our physicians and better care environments for our patients," Dr. Hazen added. n

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