In the next three years, private equity investment is expected to increase in orthopedics as many practices consider strategic partnerships to survive and thrive after the COVID-19 pandemic.
Here's how five spine surgeons see private equity playing out in orthopedics:
Note: Responses are lightly edited for style and clarity.
Frank Phillips, MD. Midwest Orthopaedics at Rush (Chicago): There's talk that [private equity] is going to expand with some groups that are struggling through the shutdown with no revenue for months. The decision we faced is: Do we take money out to grow our practice? Because we feel the need to grow our practice. For all practices, ancillaries are becoming a bigger piece of the business. We're getting less in professional fees, working harder for less money. We [need to] figure out ancillaries, which would include all the usual ancillaries — therapy, MRI, imaging, but also surgery centers. For our practice, it's really figuring out a way to do that on scale. For now, we've made the decision of doing that internally, investing in ourselves, rather than taking outside capital and giving away not only a financial piece [of the practice], but also our brand and what we are, which is inevitable if you bring in someone else who doesn't necessarily share the same clinical goals.
David Essig, MD. Northwell Health (Great Neck, N.Y.): Private equity can provide a much needed infusion of capital to practices. This can be particularly helpful to those recovering from the pandemic. However, it is important to remember that these are not altruistic grants. Depending on the horizon of the deal, potential savings and clinical benefits may not be realized by the physicians. Furthermore, such deals may strain relationships between senior partners and their junior counterparts. That being said, I do feel that PE will play an integral role in the future as far as providing helpful insights derived from their experience in other industries that will help us improve the delivery of high quality and cost-effective medical care to our patients.
Kornelis Poelstra, MD, PhD. The Robotic Spine Institute of Silicon Valley (Los Gatos, Calif.): I think private equity contribution to allow private practices to stay independent is something that is not to be discouraged. It is certainly something that will become more important as we move toward a need for greater efficiency and a more businesslike approach to sustain our practices in the ever-changing and more challenging healthcare environment of tomorrow. The upside will be the introduction of much greater business acumen and efficiencies that could allow us to stay away from hospital employment and possibly boost the bottom line for all.
The downside would be that decisions could be forced upon us by nonclinicians solely for monetary gain, which is in stark contrast with the way we have usually practiced and approached the people we care for. The philosophy in most practices is still very much: 'The patient comes first, monetary reimbursement is second,' and I am hopeful that that will not get turned upside down with the ever-increasing role private equity will play in our world.
Kern Singh, MD. Midwest Orthopaedics at Rush (Chicago): My hope is that spine practices learn that raising capital themselves and investing in their own group is the best path forward. Using private equity capital often comes with terms that result in a loss of physician autonomy, oversight and a general loss of decision-making. In general, while PE money is easier to obtain, the strings attached are prohibitive to autonomous physician practice. Furthermore, it is my belief that the physician is in the best position to understand the market and market forces leading to expansion. With that being said, many spine practices are looking to 'cash out' oftentimes at the expense of younger partners.
Usman Zahir, MD. ScopeSpine-The Orthopedic Group (Dulles, Va.): The effect of private equity on spine practices will be one factor among many changes. With companies like Amazon, Walmart, etc., entering into primary care/urgent care services, the normal boundaries that have existed in the past will continue to change. It is only a matter of time before companies expand into surgical services or continue to link their patients with high-quality health systems for surgical services. Size and scale do matter, and within this growth and interest, private equity is one way for spine surgeons to stay nimble in this dynamic environment by offering alternative cost-effective and efficient care. Over the next two to three years, this trend will continue.
Much of the incentive to sell out to private equity initially was from senior spine surgeons, who were four to five years away from retirement, who owned medium-sized groups that wanted to maintain some independence, but wanted to reduce some of the hassles with management. However, private equity is also attractive for smaller and newer practices that are looking for efficient ways for expansion while also managing costs and optimizing the patient care experience.
Spine surgeons are entrepreneurial, and partnering with private equity can be a win-win strategy in lowering costs, bringing billing and collections in-house, better use of IT in delivering efficient care, optimizing ancillary services in-house: PT, imaging/diagnostics, DME, walk-in clinics, pharmacy services and interventional procedures. I think over time, private equity partnerships will help spine practices that wish to expand in the delivery of consolidated care. The key is to balance the incentives of the private equity team and the goals of the surgeons. A patient-centered approach will remain key and central to any successful partnership.