For how often we talk about private equity or health systems acquiring Physician Medical Groups (PMG), we wanted to get physician’s perspectives on the acquisition process. And what the transaction means for the doctors and their patients.
As of December 9, there have been 564 Physician Medical Groups (PMG) transactions throughout the entire year. Private equity represents the largest type of buyer in the PMG space, accounting for 70% of the buyers. Firms such as Charlesbank Capital Partners (33 deals), Quad-C Management (16 deals) and Harvest Partners (11 deals) have been incredibly active this year. In addition to PE groups making a splash in the PMG industry, other PMG groups represent 13% of the acquisitions, YTD. Health systems, in contrast, represent 3% of PMG buyers with eight transactions.
The benefits to physicians selling their practices, whether it’s to a health system or private equity firm, can be summed up in three key points: access to resources, help with workload and increasing patient trust.
In September 2022, Smile Brands, Inc., a portfolio company of private equity group Gryphon Investors, acquired San Antonio, Texas-based Aria Dental, which is run by Dr. Mustafa. We spoke with Carmen Cosme, the office manager, about the acquisition process and the impact Smile Brands has had on Aria Dental.
“They [Smile Brands] are providing a great service from HR resources to marketing…The practice has been seeing more patients,” she said. With more resources supporting the practice, the office can be run more efficiently and take on more patients. The marketing resources have also added to Aria Dental’s growth, all which is possible because of Smile Brands and Gryphon Investors’ funds.
Ms. Cosme even addressed the benefit of Smile Brands remodeling the facility and adding more up-to-date dental machines, both which will entice more patients and benefit the practice.
We interviewed an ophthalmologist whose practice was recently purchased by a North Platte, Nebraska-based hospital and he addressed patients’ perspectives. He said that many patients feel a sense of trust and confidence going to his practice because they can be sure that his business will be around for the long run. The longevity offered by health systems only increases the benefits of not being privately owned.
Yet, while there are strong benefits, we would be amiss to not address some of the downsides that doctor’s offices experience.
In the ophthalmologist’s perspective the main downsides were “getting used to new workflows, using new systems and trying to navigate the hospital systems/policies.” Even with the learning curve that comes with introducing new systems and policies into any workplace those are, in the long run, minor inconveniences that the practice will overcome. And the new systems and workflows are aimed to benefit any practice with more efficient protocols and available tools so any learning curve isn’t that great of a downside.
Another concern, from a physician’s perspective, is the potential increase in costs for the patient. A JAMA Internal Medicine study from August 2022 reported that the average doctor’s office visit price rose 26% when backed by a PE group. This increase can be attributed to the added resources (such as marketing campaigns, new equipment and introducing new systems) PE groups introduce to practices.
Interwoven with the increase in costs, is the physician’s loss of complete autonomy and control over their own practice. Although there is some concern that relinquishing control can prevent physicians from acting in the patients’ best interests, Ms. Cosme said that the quality of care at Aria Dental has not and will not change. She said, “[the patients] don’t have that different of an experience just because we partnered with [Smile Brands]. We provide the same services so in their eyes maybe the changes are just helping the practice run more smoothly.”
While there may be some drawbacks to no longer owning their own practices, it certainly seems that the pros outweigh the cons and many physicians are eager to sell their practice.
