Downsides of working for PE backed groups

[osprey099]

For those who are employed by private equity backed groups such as US Oncology, OneOncology or AON, what are the downsides of working for them, from your experience? Besides your business (private practice) having less autonomy from a financial perspective, what are the other negatives? Are they taking a significant cut of your revenue? Are they increasing workload to meet quotas/revenue targets?

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[gutonc]

For those who are employed by private equity backed groups such as US Oncology, OneOncology or AON, what are the downsides of working for them, from your experience? Besides your business (private practice) having less autonomy from a financial perspective, what are the other negatives?

I think you'll find that PE backed groups have similar pluses/minuses to non-PE backed, with one potentially major minus I'll get to later.

Are they taking a significant cut of your revenue?

Unless you're fully/completely private practice, somebody is taking a significant cut of your revenue no matter the structure. You just have to evaluate who is taking it, how much they're taking, and whether or not you think it's "reasonable".

Are they increasing workload to meet quotas/revenue targets?

Again, every group, of any structure, is going to do this in one way or another. Definitely not unique to PE.

The biggest potential minus, from my perspective, about PE owned groups is that the group is basically just one of many widget producers that they own. So if one of the other widgets takes a dump, the PE group won't want to take a loss on that, so they'll squeeze the other widgets to make up for it. So while your group maybe kicking ass and taking names at 90th %ile productivity, when the coal mining company or EV startup they also own goes bust, they're going to expect you (and the other widgets in their portfolio) to make up for the losses. This often comes in the form not of increased quotas/targets, but decreased "ancillary costs". So now, instead of having an onsite pharmacy with techs and a pharmacist you can talk to and have adjust doses, pre-meds, etc, your drugs get shipped pre-mixed and ready to administer from and are overseen by a central pharmacy that you no longer have direct contact with. Or your scheduling desk gets "centralized" so instead of 3 people up front to help patients, you now have 1 and an endless phone tree for patients and referring docs to have to navigate. Or...or...or.

 

[HemeOncHopeful19]

Either I have a mistaken understanding of US Oncology or OP has a mistaken understanding of what Private Equity actually is - admittedly it could be me so I'd love some clarification.

US Onc is a partnership with McKesson which is one of the largest companies in the world, but they're listed on the US Stock Market and aren't a PE group. Their setup is different from "the practice sold out 2 years ago and the OG partners made some bank while now the new guys are suckered into a job with 15 layers of suits bossing them around" which is what I think of as a Private Equity owned group.

In my mind there is virtually no “pro” whatsoever to joining a private equity practice. The only benefit to them at all really is if you happen to be a partner/owner within 5 years of retirement when they come knocking to buy you out.

 

[osprey099]

Either I have a mistaken understanding of US Oncology or OP has a mistaken understanding of what Private Equity actually is - admittedly it could be me so I'd love some clarification.

US Onc is a partnership with McKesson which is one of the largest companies in the world, but they're listed on the US Stock Market and aren't a PE group. Their setup is different from "the practice sold out 2 years ago and the OG partners made some bank while now the new guys are suckered into a job with 15 layers of suits bossing them around" which is what I think of as a Private Equity owned group.

In my mind there is virtually no “pro” whatsoever to joining a private equity practice. The only benefit to them at all really is if you happen to be a partner/owner within 5 years of retirement when they come knocking to buy you out.

I think I have a mistaken understanding of Private Equity. I think of PE as basically a "management company that takes a percentage cut of revenue based on provided services (lab, real estate, ancillary staff, etc)." I think your definition of PE is actually correct, and I believe OneOncology is a PE backed firm (I could be wrong).

I guess my broad question is: What are the pros/cons and differences between a 100% physician-owned private practice group vs a group like one of the satellite sites of Texas Oncology (US Onc subdivision)? Hypothetically Let's say each group brings in 12 million in revenue, 2 million in overhead, and have 10 oncologists each. In physician owned practice, the math would be 12m - 2m = 10m divided by 10 = $1m per oncology partner. In the satellite site of Texas Onc (US Onc), the math would be 12m - 2m = 10m divided by 10 = $1m per oncology partner. On paper, I don't really see a big difference financially. Is this a correct way to think about it?

 

[gutonc]

I think I have a mistaken understanding of Private Equity. I think of PE as basically a "management company that takes a percentage cut of revenue based on provided services (lab, real estate, ancillary staff, etc)." I think your definition of PE is actually correct, and I believe OneOncology is a PE backed firm (I could be wrong).

I wasn't addressing any particular company, just PE vs non-PE. PE hasn't come hard for oncology yet, mostly because McKesson and CMGs already did, and they're not selling...yet.

I guess my broad question is: What are the pros/cons and differences between a 100% physician-owned private practice group vs a group like one of the satellite sites of Texas Oncology (US Onc subdivision)? Hypothetically Let's say each group brings in 12 million in revenue, 2 million in overhead, and have 10 oncologists each. In physician owned practice, the math would be 12m - 2m = 10m divided by 10 = $1m per oncology partner. In the satellite site of Texas Onc (US Onc), the math would be 12m - 2m = 10m divided by 10 = $1m per oncology partner. On paper, I don't really see a big difference financially. Is this a correct way to think about it?

Yeah, that's completely different question and not one I'm in much of a position to discuss.