How to prepare for and cope with PE partnerships
If your practice is considering a PE partnership, it’s important to explore the terms and conditions and carefully weigh the pros and cons, said Gary Herschman, a Newark, N.J.–based attorney who advises PE-owned physician groups.
“My recommendation is that physicians at a minimum conduct due diligence on all potential strategic options for their groups, and then make an informed decision regarding whether a partnership transaction is right for their group, as it’s not right for every group,” he said.
When Texas cardiologist Rick Snyder, MD, was considering PE partnerships, he spoke with physicians who made similar deals to determine whether they were satisfied years later, he said. In April, Snyder’s practice, HeartPlace, the largest physician-owned cardiology practice in Texas, was acquired by US Heart & Vascular, a practice management platform backed by PE firm Ares Management.
“I called every group that I knew that had done private equity for any meaningful amount of time,” Dr. Snyder said. “For the first year or two, everybody is in the honeymoon period. If the model is going to succeed or break down, it’s not going to be in the first year or two. So I wanted to talk to groups that had done this for a longer amount of time and find out what their pitfalls were. What would they have done differently? Has it been a productive relationship? Did they grow?”
Dr. Snyder, president of the Texas Medical Association, said his practice met with seven or eight firms before choosing one that best met their needs. His group wanted a platform that preserved their clinical autonomy, governance, and culture, he said. They also wanted to ensure they were not entering into a “buy and flip” scenario, but rather a “buy and build” plan.
“Thus, financial capital was not sufficient, they also had to have intellectual capital and relationship capital on their bench,” he said. “When we found the partner that embraced all of these factors as well as a history of buying and long-term building, we pulled the trigger and partnered with Ares and US Heart & Vascular Management. The partner we chose did not offer us the most money. We put a premium on these other criteria.”
“I always tell docs, know the culture of your group and your vision,” he said. “Before you go down that route, ask yourself what you want to accomplish and if it makes sense having a private equity partner to accomplish that vision with.”
For younger physicians or those with little control over buyouts, experts recommend they review their contracts and consider consulting with an attorney to better understand how the deal may affect their earnings and career prospects.
Those who have a much longer career runway need to weigh whether they want to work for a PE-linked practice, Mr. Strode said. For some, it’s time to check when their noncompete agreements end and find a position elsewhere.
Also, physicians should know their rights and the laws in their states regarding the corporate practice of medicine. Statutes vary by state, and knowing the provisions in your state helps doctors recognize their legal rights, learn possible exceptions to the requirements, and know the penalties for violations.
In Michigan, a group of physicians and other health professionals at Ascension St. John has voted to unionize. Doctors hope that the union, which includes advanced practice clinicians, nurse practitioners, and physician assistants, will help improve patient care and protect working conditions for staff, Dr. Wiener said.
She advises physicians who are unhappy after acquisitions to speak up and stick together.
“That’s the biggest thing I think physicians should start doing,” she said. “Support each other and stand up. You are stronger together.”