Hedging Future Risk in Light of Increasing Uncertainty in the Health Care Industry: Critical Consideration #2

A private equity (PE) transaction can help physicians “hedge” the uncertain future of private medical practices in an ever-changing and regulated industry. Uncertainty in the industry includes changing reimbursement models, the prospect of “Medicare for All,” increasing regulation/compliance, and the need for advanced IT and other infrastructure investments.

With a PE investment, some of this risk is mitigated because PE brings in an experienced and sophisticated management and “C-suite” team and the ability to be part of a large platform with hundreds of other physicians in the same specialty, experience in value-based care, and significant economies of scale for expensive EMR and other infrastructure. But not all uncertainty can be eliminated. For example, when the PE partner eventually “exits” its investment who will the new buyer be? How will it impact the practice? However, stability can be its own hedge. Any new buyer will likely be wary of changing a well-run and managed enterprise without the continued support of its physicians.

Event Date: Tuesday, April 21, 2020

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Category(s): Physician Groups / Providers

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