The Healthcare Editorial team at LevinPro HC spoke with Eric Kim, a Principal at VSS Capital Partners. He is responsible for sourcing and evaluating investment opportunities, as well as providing strategic and operational support to portfolio companies. Mr. Kim recently worked on establishing a new partnership with Center for Rheumatology, a Los Angeles-based physician group led by Dr. Arash Horizon, who is a well-known board-certified rheumatologist
Q: How was this deal initiated and what was your role in it? Did VSS reach out to Dr. Arash Horizon or vice versa? What was the process like?
Mr. Kim: Stout, an investment bank, brought the opportunity to us and we worked on the deal together. I helped lead the due diligence process, along with Jeff Stevenson, the Managing Partner at VSS.
Q: What is this investment and partnership going to look like?
Mr. Kim: We’re going to be working with Dr. Horizon to expand the practice and add more locations, partnering with other physicians. There are natural benefits to focusing in California, so we’ll be looking there, but also actively looking across the country. Additionally, VSS will be helping with administrative services, such as billing. This will allow Dr. Horizon to focus more on his patients and providing care.
Q: Based on the activity we’ve been tracking, private equity firms are investing heavily in the physician market. From your perspective, why is there so much interest?
Mr. Kim: Much of it varies by specialty, but I would say a big draw is that the physician market is still heavily fragmented, so there’s a lot of opportunity for scale and building up practices. That scale is important because it also provides a better way to work with other partners, like suppliers and payers. A lot of revenue in a rheumatology practice comes from administering medication, and that works out better if you have leverage negotiation with suppliers and distributors.
Q: How does this market compare with last year’s?
Mr. Kim: I would say last year’s market was more expensive, especially on the valuation side. But we’re still negotiating a lot of deals this year.
Q: Are some of the issues surrounding inflation and high-interest rates changing how you approach deals? Is VSS slowing down, so to speak?
Mr. Kim: We won’t be slowing down. The lower and middle market is relatively more isolated from those macro factors, and we’re not reliant on third-party debt. We’re already in the process of finding more physician groups to partner with Center for Rheumatology.
