Last week, Jonah Schutzman, of Cain Brothers, provided banker commentary on the current state of physician specialty consolidation in the company’s weekly Industry Insights report. In short, the pandemic ignited an acceleration of consolidation among physicians with non-IDN (integrated delivery network) corporations that included insurers, private equity groups and non-provider umbrella organizations at the forefront.
The report referenced data from an Avalere and Physicians Advocacy Institute report showing that three out of four physicians are employed by a non-physician-owned company, which represents a 19% increase from the previous three years. In contrast, hospitals employ more than 50% of physicians, which is up from 42% in 2019.
When it comes to specialties, hospitals largely employ physicians within fields like cardiology (61% in 2019 to 67% in 2022), hematology (82% to 89%) and general surgery (60% to 65%). This compares to other types of corporations that tend to employ more outpatient specialties such as nephrology (53%), ophthalmology (42%) and orthopedics (33%).
Some specialties that jumped significantly in corporation employment include allergy-immunology (25% in 2019 to 46% in 2022), oral surgery (12% to 36%) and OB/GYN (17% to 28%). This jump is driven by “recurring and profitable pharmaceutical revenues to these entities.” This trend is expected to continue despite growth rates slowing.
Even though hospitals remain a considerable employer of physicians, non-hospital employment is growing at a steady rate as investors offer premium prices to practices, relative to hospital and health system environments. Currently, corporate entities are not in direct competition with hospitals in terms of growth, but that will change once acquiring independent physician groups begins to ebb and competition increases for specialties that are typically dominated by hospitals. For example, this will likely happen to cardiology as PE and ASC-focused entities begin to consolidate independent groups and compete with hospitals to hire new medical school graduates.
Whether an investment firm, payor or hospital, companies must be able to improve upon coordination of care for physicians, improve access to technology, become more efficient, decrease costs and provide opportunities for physicians, and they can also benefit from more partnerships with providers.
According to data captured in the LevinPro HC database, Cain Brothers has engaged in five acquisitions in 2023, so far. It acted as an exclusive financial advisor to Starling Physicians during its acquisition by VillageMD; advised TPG Inc. as TPG bought MedQuest Associates; provided financial advising to Blue Cross and Blue Shield of Louisiana in its sale to Elevance Health; acted as an advisor to AvMed when it was bought by Sentara Healthcare; and worked with Trend Health Partners on its sale to Lone View Capital.
More information on Cain Brothers’ transaction activity can be found here.
