'Private equity doesn't know the business better than you': Why 1 physician prefers practice independence

Carly Behm -  

While many spine and orthopedic practices have turned to consolidation or private equity investments to leverage their position in the market, Eric Freeman, DO, is remaining private.

Dr. Freeman, a spine and pain management specialist, is the medical director and founder of Union, N.J.-based Redefine Healthcare. He spoke with Becker's about why he isn't planning to consolidate anytime soon.

Note: This conversation was edited for length and clarity.

Question: What are the biggest challenges you're encountering with your practice today?

Dr. Eric Freeman: There are numerous challenges. First, I need to stay balanced. You need to roll up your sleeves, treat people clinically, but also treat people administratively. We don't have a huge corporate executive team. You must be involved with every aspect of the practice, whether you have to balance an administrative team or continuing clinical care, you must keep your finger on the pulse and make informed decisions.

Q: Why have you stayed away from consolidation and PE options?

EF: It's interesting because we've had numerous discussions with private equity groups. What we found is that private equity doesn't know the business better than you do. I have numerous examples of colleagues of mine that went into private equity, and some of their practices don't exist today. You have to be able to assess these opportunities with private equity and look at them closely. But overall, nobody knows the practice or runs the practice better than you do. You have to have your strong team in place, and that will allow you to make the best decision for you. We have found that currently our best decision has been to stay independent.

Q: What are common complaints you've heard from colleagues who have consolidated or taken PE investment?

EF: Well, I've seen it time and time again where a specific private equity group would come take a look, and maybe a smaller practice that wasn't as savvy, doesn't have an administrative suite such as a CEO or a CFO. But when it came down to it, some private equity groups didn't really understand the nuances of what it took to be successful. So the physicians may get lost in the structure of some type of financial enhancement to the practice, but it's either not used appropriately or they get bloated in administrative costs, and all the equity that was supposed to be infused back into the practice gets lost.

Q: What are some key tools spine practices need to remain independent?

EF: That's the secret sauce of a private practice. There are no key tools. It's whatever you have to stay true to what you do. You have to listen. You have to have strong, clear-cut decision making. The benefit of being in private practice without the administrative bureaucracies is you're able to cut through the red tape and be very efficient with your decisions. You want to make the right decisions, you have to have direct communication with your employees and colleagues. You have to be able to read the room and know who you're talking to and what you're dealing with. Everyone you do that with will appreciate it. Obviously, first and foremost is patient care. Keep doing that and provide great patient care with customer service and that's why you got there in the first place.

Q: What are your predictions for the spine and orthopedic practice landscape in the next five years?

EF: We're always fighting consolidation, but there is a lot of consolidation. I have seen large orthopedic consolidation attempts where they may try to consolidate, and what happens is they become a very inefficient practice. However, it will continue to push forward as long as interest rates and the financial landscape is good. Private equity is still going to be around. But you have to make the right decision. It doesn't mean you're going to be successful every time.

Q: Are there any factors that may push you to make the leap to consolidation or private equity?

EF: There's always a possibility. I found we have met with numerous people in the past and it just never has worked out. It's really finding the right partner and the right group. They're not always private equity. Sometimes there's other forms of orthopedic or spine-based groups that are out there that have different types of backing. So it's getting the right backing so you can grow.

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