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Roundtable Discussion: How to View the Private Equity Trend in Ophthalmology
Wednesday, September 13, 2017 9:00 AM
Cataract & Refractive Surgery Today magazine recently held a roundtable discussion on private equity in ophthalmology, with participants reflecting on a past consolidation effort that failed and what others should takeaway from that outcome when considering today's private equity trend. Participating in the conversation was our own Bruce Maller, BSM president and CEO, along with industry experts Dan Chambers, executive director of Key-Whitman Eye Center; Jeffrey Whitman, president and chief surgeon of Key-Whitman Eye Center; and Trent Roark, CEO of Specialty Eye Institute.
Participants in this lengthy, lively discussion shared their insight and expertise on this topic, which likely is causing significant confusion — and possible angst — in the eye care community. The hope is that proactive eye care providers can use this information to analyze their own unique situation to make the best business decision possible moving forward.
Below are excerpts of what Bruce had to say on this important subject.
Bruce on what went wrong with the physician practice management company phenomenon in the 1990s:
"As I reflect upon that time, there was a big gap between the “promise” and the ability to execute a sound business plan and to operate the companies in a disciplined and effective manner. This ultimately comes back to the failure of the leadership. In addition, I also think that most of the companies lacked a strong capital structure. Many of these companies struggled to invest in the proper infrastructure to be able to deliver on the promise."
Bruce on how practices should assess private equity firms:
"The principle advice I would give is that you’re looking for a partner that is interested in working with you to build a great business. In the end, that will trump everything. If you have a great organization that you’ve developed, and you’re using the financial partner to help to fuel and develop your infrastructure as a platform to grow and, in turn, build and create efficiencies, that’s what you should be looking for."
Bruce on who is a candidate for private equity:
" ... The larger trend that we’re addressing here is one of consolidation. A private equity firm is a vehicle to assist in facilitating market consolidation. Not everyone is interested in that. ... What a practice or a group of physicians needs to do is look inward, do their own strategic assessment, understand their market, understand their practice, understand their goals, [and] see if they can’t gain consensus on vision. That’s step one.
"To the extent that they have consensus on who they want to be when they grow up, a financial partner may or may not make sense, or it may or may not even be necessary. Many large practices are perfectly capable of financing their own growth through debt and/or equity. ... In my opinion, it’s a relatively small number of practices across the country that meet the criteria and would be a viable target for private equity."
Bruce on a key takeaway for those considering private equity:
" ... It’s important not to be too reactive or to feel as though you need to do something tomorrow. ... Go through the typical strategic exercise of identifying your strengths and weaknesses, your opportunities, [and] your threats. Understand your market, understand your practice, and make a decision, ultimately, because it’s the right thing to do for the business."
MORE ONLINE: To read what else Bruce and his colleagues had to say on private equity, click here.