Private Equity Acquisition of Physician Practices

Trends in Debt Valuations of Private Equity–Backed Dermatology Groups Before and During the COVID-19 Pandemic

“…uring the past decade, private equity (PE) firms have fueled the consolidation of dermatology practices, with more than 30 dermatology PE-backed groups (DPEGs). 1 Dermatology is an attractive target and has been recessionresistant during past economic downturns. 2,3 Dermatology PE-backed groups state there is safety and security in economies of scale; however, dermatologists are concerned about PE's effect on their profession and patients.…”

“…2,3 Dermatology PE-backed groups state there is safety and security in economies of scale; however, dermatologists are concerned about PE's effect on their profession and patients. 1,[4][5][6][7][8] The evolution of DPEGs and their investment objectives, including acquiring or opening practices, leveraging physician assistants and nurse practitioners, maximizing profitability, and ultimately selling to another entity in 3 to 7 years, has been detailed previously. 1,4,9,10 Some DPEGs may merge with each other, as seen recently with Water's Edge and Riverchase Dermatology, and the next buyer may be another PE firm, a health care conglomerate, the public via an initial public offering, or an insurance company.…”

“…1,[4][5][6][7][8] The evolution of DPEGs and their investment objectives, including acquiring or opening practices, leveraging physician assistants and nurse practitioners, maximizing profitability, and ultimately selling to another entity in 3 to 7 years, has been detailed previously. 1,4,9,10 Some DPEGs may merge with each other, as seen recently with Water's Edge and Riverchase Dermatology, and the next buyer may be another PE firm, a health care conglomerate, the public via an initial public offering, or an insurance company. 1,11 Private equity firms typically operate by conducting leveraged buyouts, which occur when target companies are acquired with (1) capital from the PE firms' limited and general partners and (2) a combination of debt.…”

Private Equity Investments In Health Care: An Overview Of Hospital And Health System Leveraged Buyouts, 2003–17

“…During this period, private equity firms often introduce structural changes to the operational and business model of acquired companies to enhance or extract value, increase revenue growth potential, and engineer a higher sale price. 10 Despite the growing recognition of private equity involvement in health care, 3,[11][12][13] there has been little systematic examination of its scope, impact on access and spending, and unintended consequences. Furthermore, the bulk of the extant literature has been limited to nursing homes 9,14,15 and physician practices.…”

“…Furthermore, the bulk of the extant literature has been limited to nursing homes 9,14,15 and physician practices. [10][11][12][13]16 Recently, Joseph Bruch and colleagues published the first examination of changes in process measures and aggregated clinical outcomes for private equity-acquired short-term acute care hospitals. 17 These hospitals' large size, stable cashflow environment, and prevalence of valuable fixed assets (that is, properties) make them highly desirable targets for acquisition.…”