Private equity in ophthalmology: lessons from other specialties

Brill, Daniel; Luo, Shiming; Sridhar, Jayanth; Williams, Basil K.

doi:10.1097/icu.0000000000000876

Cited by 7 publications

(4 citation statements)

References 22 publications

(43 reference statements)

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“…Initial findings in ophthalmology have been inconclusive, with some articles indicating minimal changes to patient care and others indicating a rising movement toward short-term profits, such as prescribing more expensive medications [ 25 ]. Recently, a difference-in-differences study of PE-acquired dermatology, gastroenterology, and ophthalmology physician practices and independent practices found the former was associated with differential increases in allowed amount and charges per claim, volume of encounters, and new patients were seen, as well as some changes in billing and coding [ 26 ].…”

Section: Discussionmentioning

confidence: 99%

Financial Health of Private Equity-Backed Groups: Perspectives From Eye Care

Desai¹,

Memon²,

Chen³

et al. 2023

Cureus

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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.

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Section: Discussionmentioning

confidence: 99%

Financial Health of Private Equity-Backed Groups: Perspectives From Eye Care

Desai¹,

Memon²,

Chen³

et al. 2023

Cureus

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“…[28][29][30] Initial findings in ophthalmology have been inconclusive, with some articles indicating minimal changes to patient care and others indicating a rising movement toward short-term profits, such as prescribing more expensive medications. 31 Recently, a difference-in-differences study of PE−acquired dermatology, gastroenterology, and ophthalmology physician practices and independent practices found the former was associated with differential increases in allowed amount and charges per claim, volume of encounters, and new patients seen, as well as some changes in billing and coding. 32 Further data is required to evaluate PE-backed investments in ophthalmology and optometry, such that quality of care does not decline.…”

Section: Discussionmentioning

confidence: 99%

Financial Health of Private Equity-Backed Ophthalmology and Optometry Groups: an Analysis of Debt Valuations

Desai

Memon

Chen

et al. 2022

Preprint

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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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“… 21 22 However, the relatively nascent body of literature on PE ownership in healthcare remains disjointed, with studies ranging across different medical settings and academic disciplines such as sociology, health services research, and economics. Although several overviews have been published about PE ownership in healthcare 23 24 25 as well as two research reviews that focused on the growth of PE ownership and its impacts on dermatology, 26 27 no systematic reviews have been published that comprehensively evaluated the impacts of PE ownership across healthcare settings globally. If PE ownership becomes increasingly prevalent within and across health systems, it is imperative to understand its influence on healthcare delivery and whether it differs from other institutional arrangements and management strategies.…”

Section: Introductionmentioning

confidence: 99%

Evaluating trends in private equity ownership and impacts on health outcomes, costs, and quality: systematic review

Borsa

Bejarano

Ellen

et al. 2023

BMJ

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Objective To review the evidence on trends and impacts of private equity (PE) ownership of healthcare operators. Design Systematic review. Data sources PubMed, Web of Science, Embase, Scopus, and SSRN. Eligibility criteria for study selection Empirical research studies of any design that evaluated PE owned healthcare operators. Main outcome measures The main outcome measures were impact of PE ownership on health outcomes, costs to patients or payers, costs to operators, and quality. The secondary outcome measures were trends and prevalence of PE ownership of healthcare operators. Data synthesis Studies were classified as finding either beneficial, harmful, mixed, or neutral impacts of PE ownership on main outcome measures. Results across studies were narratively synthesized and reported. Risk of bias was evaluated using ROBINS-I (Risk Of Bias In Non-randomised Studies of Interventions). Results The electronic search identified 1778 studies, with 55 meeting the inclusion criteria. Studies spanned eight countries, with most (n=47) analyzing PE ownership of healthcare operators in the US. Nursing homes were the most commonly studied healthcare setting (n=17), followed by hospitals and dermatology settings (n=9 each); ophthalmology (n=7); multiple specialties or general physician groups (n=5); urology (n=4); gastroenterology and orthopedics (n=3 each); surgical centers, fertility, and obstetrics and gynecology (n=2 each); and anesthesia, hospice care, oral or maxillofacial surgery, otolaryngology, and plastics (n=1 each). Across the outcome measures, PE ownership was most consistently associated with increases in costs to patients or payers. Additionally, PE ownership was associated with mixed to harmful impacts on quality. These outcomes held in sensitivity analyses in which only studies with moderate risk of bias were included. Health outcomes showed both beneficial and harmful results, as did costs to operators, but the volume of studies for these outcomes was too low for conclusive interpretation. In some instances, PE ownership was associated with reduced nurse staffing levels or a shift towards lower nursing skill mix. No consistently beneficial impacts of PE ownership were identified. Conclusions Trends in PE ownership rapidly increased across almost all healthcare settings studied. Such ownership is often associated with harmful impacts on costs to patients or payers and mixed to harmful impacts on quality. Owing to risk of bias and frequent geographic focus on the US, conclusions might not be generalizable internationally. Systematic review registration PROSPERO CRD42022329857.

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Private equity in ophthalmology: lessons from other specialties

Cited by 7 publications

References 22 publications

Financial Health of Private Equity-Backed Groups: Perspectives From Eye Care

Financial Health of Private Equity-Backed Groups: Perspectives From Eye Care

Financial Health of Private Equity-Backed Ophthalmology and Optometry Groups: an Analysis of Debt Valuations

Evaluating trends in private equity ownership and impacts on health outcomes, costs, and quality: systematic review

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