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Private equity groups and medical practices, a good or bad combo?

The acquisition of medical practices by private equity groups has increased in recent years. The reasons behind this recent trend vary depending on the details of each case, but a surface level discussion of the risks and benefits can provide some background into the jump in the rate of these deals.

What are the benefits of these deals?

Physician groups can enjoy many benefits from these relationships, including easing of administrative duties and the potential for stronger negotiation power to get a better reimbursement contract. Those in favor of deals with private equity groups argue these benefits allow the physicians to focus less on the burden of business dealings and more on patient care.

What about the risks?

However, it is important for physician owners to take the risks into consideration before agreeing to a deal with a private equity group. These risks can include the loss of physician autonomy. The ability to determine how the practice runs may be a big draw for partners within the practice. Discuss these concerns before moving forward with negotiations.

Other risks include the presence of non-physicians in the decision-making process and the potential for a profit-driven motivation to determine the future course of the practice.

Medical professionals have voiced concerns about these risks. One specific concern: a conflict of interests. Medical professionals generally enter the field out of a desire to help the patient while private equity groups are usually composed of investors motivated by financial gain. These investors generally expect at least a 20% return on their investment. As a result, another risk is present. Those who run the private equity group may be more focused on a short-term return as opposed to the long-term sustainability of the practice.

What is the right choice for my medical practice?

Whether looking to buy or sell a health care company, it is important to weigh the pros and cons of the decision carefully. An attorney experienced in navigating the purchase and sale of medical practices can help. This legal professional can aid with due diligence and review all contracts to mitigate the risk of any surprises once the deal is finalized.

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