Background: In private equity (PE) buyouts of medical practices, it is common for the PE firm to raise significant levels of debt in order to finance the purchase. This debt is subsequently shouldered by the acquired practice(s). There remains a scarcity of literature quantifying the effect of PE acquisition on the subsequent financial performance of eye care practices. We aim to identify and characterize debt valuations of ophthalmology and optometry private equity-backed group (OPEG) practices, which serve as an indicator of practice financial performance. Methods: A cross-sectional study from March 2017 to March 2022 was conducted using business development company (BDC) quarterly/annual filings to the Securities and Exchange Commission (SEC). The 2021 BDC Report was used to identify all BDCs actively filing annual reports (Form 10-Ks) and quarterly reports (Form 10-Qs) in the United States in 2021. The public filings of BDCs lending to OPEGs were searched from the inception of the OPEG’s debt instrument in a BDC’s portfolio and the amortized cost and fair value of each debt instrument were tabulated. A panel linear regression was used to evaluate temporal changes in OPEG valuations. Results: A total of 2,997 practice locations affiliated with 14 unique OPEGs and 17 BDCs were identified over the study period. Debt valuations of OPEGs decreased by 0.46% per quarter over the study period (95% CI: -0.88 to -0.03, P = 0.036). In the COVID-19 pre-vaccine period (March 2020 to December 2020), there was an excess (additional) 4.93% decrease in debt valuations (95% CI: -8.63 to -1.24, P = 0.010) when compared to pre-pandemic debt valuations (March 2017 to December 2019). Effects of COVID-19 on valuations stabilized during the pandemic post-vaccine period (February 2021 to March 2022), with no change in excess debt valuation compared to pre-pandemic baseline (0.60, 95% CI: -4.59 to 5.78, P = 0.822). There was an increase in practices that reported average discounted debt valuations from 20 practices (1.6%) associated with one OPEG to 1,213 practices (40.5%) associated with nine OPEGs (including 100% of newly acquired practices), despite the stabilization of COVID-19-related excess (additional) debt. Conclusions: Debt valuations of eye care practices have declined significantly post-PE investment from March 2017 to March 2022, suggesting that the financial health of these groups is volatile and vulnerable to economic contractions such as the COVID-19 pandemic. Eye care practice owners must consider long-term financial risks and impacts of subsequent patient care when selling their practice to a private equity group. Future research should assess the impact of secondary transactions of OPEGs on the financial health of practices, practitioner lifestyle, and patient outcomes.
Purpose: To identify debt valuations of ophthalmology and optometry private equity –backed group (OPEG) practices, which are a proxy for financial performance. Design: Retrospective cohort study using the 2021 Business Development Company (BDC) Report and BDC quarterly/annual filings. Participants: BDCs holding one or more ophthalmology/optometry group debt instruments. Methods: The 2021 BDC Report was used to identify all BDCs actively filing annual reports (Form 10-Ks) and quarterly reports (Form 10–Qs) in 2021. The public filings of BDCs lending to OPEGs were searched from inception of a debt instrument in a BDC portfolio, and the amortized cost and fair value of each debt instrument were tabulated. A panel linear regression was used to evaluate temporal changes in debt valuations. Main Outcome Measures: Trends in total debt held by OPEGs, trends in valuation (premium or discount) of OPEGs. Results: A total of 2997 practice locations affiliated with 14 unique OPEGs and 17 BDCs were identified in 2021. Debt valuations of OPEGs decreased 0.46% per quarter over the study period (95% CI: –0.88 to –0.03, P = 0.036). In the COVID-19 pre-vaccine period (March 2020 – December 2020), there was an excess (additional) 4.93% decrease in debt valuations (95% CI: –8.63 to [ndash]1.24, P = 0.010) when compared to prepandemic debt valuations (March 2017 – December 2019). Effects of COVID–19 on valuations stabilized during the pandemic post-vaccine period (February 2021 – March 2022), with no change in excess debt valuation compared to pre-pandemic baseline (0.60, 95% CI: –4.59 to 5.78, P = 0.822). There was an increase in practices that reported average discounted debt valuations from 20 practices (1.6%) associated with 1 OPEG to 1213 practices (40.5%) (including 100% of newly acquired practices) associated with 9 OPEGs, despite stabilization of COVID–19 related excess (additional) debt. Conclusions: Valuations of OPEG debt have declined significantly post–PE investment from March 2017 to March 2022. An excess (additional) decline in valuations was observed during the COVID pre –vaccine period, with trends in excess debt valuations returning to baseline pre –pandemic levels by December 2021. Declining and discounted valuations of debt raise concerns about the financial viability of many PE–backed practices.
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