• Insights

Introduction

Vascular surgery plays a crucial role in modern healthcare. From peripheral artery disease to aneurysms, vascular surgeons are at the forefront of diagnosing and treating conditions that affect blood vessels throughout the body.  In recent years, the landscape of healthcare has seen a significant influx of private equity investment, leading to questions about its impact on medical specialties like vascular surgery.

Opportunities

1. **Monetization**: As physicians continue to realize the opportunity of monetizing the investment in their practice, vascular surgeons are finally getting into the game.  Following the path of the hot market for cardiology over the past 2 years, new private equity platforms interested in the vascular space are coming into being.  In addition, most of the cardiology platforms are looking hard at the space.  As a result, vascular surgeons are being offered the opportunity to monetize (i.e. “take some chips off the table at an attractive capital gains tax rate”). Similar to other specialties, the monetization includes both a cash and equity component and an MSO structure.

2.  **Capital Infusion**: Private equity firms bring substantial financial resources to the table, which can be instrumental in expanding vascular surgery practices. This capital infusion can support investments in new or expanding OBLs/ASCs, entry into new geographic markets, expanded ancillary capture, enhanced recruiting for new young physicians, state-of-the-art equipment and technology upgrades, all ultimately enhancing patient care and outcomes.

3. **Operational Efficiency**: Private equity involvement often introduces operational expertise and management efficiencies. Many smaller groups (and even some larger groups) are not able to keep up with increasing operational changes needed for their practice.  These private equity firms have streamlined and improved this process in other specialties and can now bring them to the vascular field.  Streamlining administrative processes, optimizing workflow, and implementing best practices can improve the overall efficiency of vascular surgery practices, allowing surgeons to focus more on patient care.

4. **Access to Resources**: Private equity partnerships can provide access to a broader network of resources, including strategic partnerships with other healthcare providers, access to specialized training programs, and opportunities for collaborative research. These resources can facilitate knowledge-sharing and innovation within the field of vascular surgery.

Challenges

1. **Financial Pressures**: While private equity investment can inject capital into the vascular surgery practice and provide physician monetization, it also introduces financial pressures to generate returns on investment. This may lead to increased focus on profitability metrics, potentially compromising clinical autonomy and decision-making.

2. **Emphasis on Short-Term Results**: Private equity firms typically operate on shorter investment horizons, often aiming for an exit within a specified timeframe (typically 5 years). This focus on short-term results may conflict with the long-term nature of healthcare delivery, where investments in research, education, and infrastructure may take years to yield tangible outcomes.

3. **Concerns about Patient Care**: Critics of private equity involvement in healthcare express concerns about potential impacts on patient care. Rapid changes in management, cost-cutting measures, or prioritization of profits over patient outcomes could undermine the quality and continuity of care provided by vascular surgery practices.

4. **Regulatory Scrutiny**: The intersection of healthcare and finance brings regulatory complexities. Recent developments at the FTC regarding physician non-compete agreements along with the Justice Department investigations into private equity physician platforms have raised the level of scrutiny from regulatory bodies.  While this is a problem for some of the poorly developed and operated platforms (and yes there are many of those), the MSO model is still a better “mouse trap” and thus workarounds will be developed to counter those threats.

Navigating the Intersection

Since every physician group and geographic market is different, making the determination of whether these opportunities are advantageous requires an individualized analysis done on a practice-by-practice basis.  The transactions are very complicated and a thorough understanding of each element is essential for making the decision of whether to do a deal and which deal is best for the group.

Conclusion

The convergence of vascular surgery and private equity presents both opportunities and challenges for healthcare providers, investors, and patients alike. While private equity investment can inject much-needed capital and expertise into vascular surgery practices, it also raises concerns about financial pressures and potential impacts on patient care. Some private equity platforms will be successful and others will not. The key to success is taking it slow, being methodical, and looking at it as a step-by-step process all intended to give you all the pertinent information to make the decisions that are in the best interest of your practice.

For more information or to discuss potential monetization opportunities, please contact Bob Goettling at (305) 974-0700 or rgoettling@bloomllc.com. Bob has thirty years of experience in the healthcare industry. He primarily focuses on the transactional aspects of physician practices, ambulatory surgery centers (ASCs), physician joint venture projects with health systems, private equity firms, and strategic buyers throughout the United States. Since 2007, Mr. Goettling has led The Bloom Organization’s transaction services team. He is a licensed investment banker and securities principal.

About The Bloom Organization

The Bloom Organization has 30+ years of experience working exclusively on healthcare services transactions assisting physicians, health systems, home health companies and private equity firms in market consolidation strategies and strategic partnerships.  We have successfully advised our clients through over $10 billion of transactions across multiple physician specialties.