Private equity fellowships?

[Ly_x_Lz=ihLx]

I think the doom and gloom of PE is well known, but I was wondering if that also applied to fellowships as well? I’m applying retina and there a some great programs like ARC Beaumont, Rush, RGW and RCM that are PE owned. I wanted to know if having trained under one of these fellowships would be detrimental to future jobs in physician owned private practice or are acceptable given clinical exposure.

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[mjohnsonets]

The fellows I've interviewed from these practices haven't mentioned feeling like their training was less than nor have I had any clients lament that these groups were now PE involved. If anything, I'd guess the volumes may have increased a little from their non-PE days.

 

[vm26]

I think the doom and gloom of PE is well known, but I was wondering if that also applied to fellowships as well? I’m applying retina and there a some great programs like ARC Beaumont, Rush, RGW and RCM that are PE owned. I wanted to know if having trained under one of these fellowships would be detrimental to future jobs in physician owned private practice or are acceptable given clinical exposure.

Disclaimer I may be way off since nothing associated with PE in my field (radiology) is great. PE practices are actually imploding but def not going away. Also while I know of a few PE residencies, I am unaware of any fellowships...Regardless I would think that legit physician owned PPs would look at PE fellowship as a plus since they know as a trainee you survived the ridiculous high volume model of PE, and are capable of cranking. On the flip side, do you want to work that hard/fast just to ensure the PE-backed investors get paid?

 

[Slide]

Disclaimer I may be way off since nothing associated with PE in my field (radiology) is great. PE practices are actually imploding but def not going away. Also while I know of a few PE residencies, I am unaware of any fellowships...Regardless I would think that legit physician owned PPs would look at PE fellowship as a plus since they know as a trainee you survived the ridiculous high volume model of PE, and are capable of cranking. On the flip side, do you want to work that hard/fast just to ensure the PE-backed investors get paid?

There's lots of PE-backed fellowships in ophthalmology, especially retina. Some of the more prestigious fellowships are PE-owned. Surgically the quality of the training has not changed, however, some of the career and financial advice the trainees there have received has unfortunately has not been balanced.

 

[vm26]

There's lots of PE-backed fellowships in ophthalmology, especially retina. Some of the more prestigious fellowships are PE-owned. Surgically the quality of the training has not changed, however, some of the career and financial advice the trainees there have received has unfortunately has not been balanced.

That's interesting to hear. Guess the label "PE" is heterogenous. I'm assuming these programs were physician owned private practices at one point? If so, are the remaining attending's legacy partners or new employed ones?

 

[solitude]

There's lots of PE-backed fellowships in ophthalmology, especially retina. Some of the more prestigious fellowships are PE-owned. Surgically the quality of the training has not changed, however, some of the career and financial advice the trainees there have received has unfortunately has not been balanced.

How do you know the quality of the surgical training has not changed? Many of these practices are doing less surgery as it is not profitable, or at least less profitable than doing a high-volume clinic of injections. We all know harder cases like TRDs and PVR are less profitable than easier cases. And some of the stalwarts of these PE practices have left/retired. Many more will surely follow soon. In contrast, the volume at many academic centers has been rising because they have more flexibility with OR scheduling and because the institutional overlords let academic surgeons do longer and less profitable cases. I think there have even been a couple peer-reviewed articles about this phenomenon.

 

[Slide]

How do you know the quality of the surgical training has not changed? Many of these practices are doing less surgery as it is not profitable, or at least less profitable than doing a high-volume clinic of injections. We all know harder cases like TRDs and PVR are less profitable than easier cases. And some of the stalwarts of these PE practices have left/retired. Many more will surely follow soon. In contrast, the volume at many academic centers has been rising because they have more flexibility with OR scheduling and because the institutional overlords let academic surgeons do longer and less profitable cases. I think there have even been a couple peer-reviewed articles about this phenomenon.

This anecdotally has not been the case for me, working at an academic center with a PE practice just down the street. My opinion comes from those who have known some recent graduates and are connected to fellowship training in general. But I do think you're right in that the quality will probably change in the next several years with the final sale occurring. Also, academic centers are also feeling the pressure of this too - at least here the hospital has been much stricter about in-network or self-pay patients, and are forcing patients to shoulder the entire cost up front, which usually means they go right back to where they were referred from.

 

[Slide]

That's interesting to hear. Guess the label "PE" is heterogenous. I'm assuming these programs were physician owned private practices at one point? If so, are the remaining attending's legacy partners or new employed ones?

Yes, virtually all of them were physician owned at some point. Every PE is different but for retina at least, the big one has been RCA/Webster. The remaining attendings are now employed but have "influence" - at least for RCA from what my colleagues have informed me, partner physicians are on the board of their local practice to determine how to run things, but it's reminiscent of academia/employed positions - stuffed with idiots with at most an MBA (usually just a bachelor's) who have equal influence of how to run your practice. How long the senior partners stay depends on the wording of their contracts - usually the very first ones can retire pretty quickly but many often have vested shares that do not pay out unless you fulfill a certain number of years, hence the golden handcuffs.

At this point however the discussion is just for discussion's sake - RCA/Webster accomplished what they set off to do, which was flip for a significant profit, and now it's a new owner. Some partners will say that the original contracts will be honored to a point, but based on historical experience with the oncology arm, whatever favorable terms were present will likely not exist anymore.

Last, if this weren't perverse enough, the reason why you don't hear current employees dissing their practice is because it's specifically disallowed in their contract. If you do, your bonuses are gone. In fact, there are major bonus structures for employees to recruit new doctors to these practices.

 

[vm26]

At this point however the discussion is just for discussion's sake - RCA/Webster accomplished what they set off to do, which was flip for a significant profit, and now it's a new owner. Some partners will say that the original contracts will be honored to a point, but based on historical experience with the oncology arm, whatever favorable terms were present will likely not exist anymore.

Appreciate all of this info...In radiology, it seems (anyone feel free to correct if I am mistaken) that PE (RP being the largest player), are unable to flip and just keep lingering, almost 10 years for some practices. Frustrating part is that there is a shortage of radiologists yet a significant % are willing to work for PE at a major discount (30-50%?) which keeps the ship afloat.

 

[Slide]

Appreciate all of this info...In radiology, it seems (anyone feel free to correct if I am mistaken) that PE (RP being the largest player), are unable to flip and just keep lingering, almost 10 years for some practices. Frustrating part is that there is a shortage of radiologists yet a significant % are willing to work for PE at a major discount (30-50%?) which keeps the ship afloat.

I'm not a business person nor claim to be the savviest in healthcare revenue but I suspect the difference is that buy and bill practices are able to provide relatively constant cash flow in addition to services provided. The discounts/rebates and the scalability of some of the practices compared to radiology are prob what helps push it over. Radiology (correct me if wrong) has low overhead but while there's a shortage of radiologists, it's harder to expand your market without some entity to help increase demand, while in ophthalmology it's much easier to expand your network despite the overhead via satellite clinics.

 

[vm26]

I'm not a business person nor claim to be the savviest in healthcare revenue but I suspect the difference is that buy and bill practices are able to provide relatively constant cash flow in addition to services provided. The discounts/rebates and the scalability of some of the practices compared to radiology are prob what helps push it over. Radiology (correct me if wrong) has low overhead but while there's a shortage of radiologists, it's harder to expand your market without some entity to help increase demand, while in ophthalmology it's much easier to expand your network despite the overhead via satellite clinics.

Seems your savviness on this topic easily surpasses my own!...My rudimentary understanding of PE's role is to improve a companies bottom line and then resell at a profit. With radiology, given that the vast majority of PP does not own/profit from equipment (tech fees etc), the only way to do this is to improve efficiency (which was sold as PE having a much more sophisticated IT infrastructure) but which ultimately required non-legacy partners to read faster at a lower pro-fee rate so that profit margins would improve. Unsure if PE factored in CMS cuts and/or over-estimated how quickly and effective AI software would help improve reading speed. I think in the ER PE model, rampant mid-level use improves the bottom line.

PE rad groups are hurting now but I do not think they're going away anytime soon. Despite the fact that they offer "partnership" most rads these days know this is bogus, and they cannot recruit (which is also true for most legit PPs and other practice models). Their turn-around times are pretty bad (weeks for outpatient exams at some places). It's a chaotic market, and traditional PP groups like mine are dropping contracts in order to stay afloat. Hard to say how this will all play out

 

[Slide]

Seems your savviness on this topic easily surpasses my own!...My rudimentary understanding of PE's role is to improve a companies bottom line and then resell at a profit. With radiology, given that the vast majority of PP does not own/profit from equipment (tech fees etc), the only way to do this is to improve efficiency (which was sold as PE having a much more sophisticated IT infrastructure) but which ultimately required non-legacy partners to read faster at a lower pro-fee rate so that profit margins would improve. Unsure if PE factored in CMS cuts and/or over-estimated how quickly and effective AI software would help improve reading speed. I think in the ER PE model, rampant mid-level use improves the bottom line.

PE rad groups are hurting now but I do not think they're going away anytime soon. Despite the fact that they offer "partnership" most rads these days know this is bogus, and they cannot recruit (which is also true for most legit PPs and other practice models). Their turn-around times are pretty bad (weeks for outpatient exams at some places). It's a chaotic market, and traditional PP groups like mine are dropping contracts in order to stay afloat. Hard to say how this will all play out

Yes and no on the PE's role ; PE is in the end a financial institution interested in extracting every cent possible, not to deliver the best healthcare possible. PE groups go in without the intention of running it, but juicing the books in order to flip it for a quick 20%+ profit margin. They absolutely no nothing about running any sort of practice nor do they want to, and often leave the physicians in charge initially - which is why you may have seen some stakeholders claim there's no change to how they practice things...at first. The squeeze occurs after the second sale or if it doesn't happen, if the latter happens then the PE firm tries to at least show some cash flow out of it.

For radiology since there's really not much you can "optimize" other than "efficiency" and we all know how that goes at a certain point. My layperson opinion is that once interest rates come down a bit more, you may see the final flip, and that's when things will get bad (like in House of God, they can always hurt you more). PE firms have also learned their lessons from the 1990s and have these punishing reward structures to keep people locked in (one example is you get your bonus spread out over 5 years, and/or the practice has to grow to X number of physicians). I know it sounds doom and gloomy but I think in the next few years we are going to see a smash grab and run on Medicare/insurance which is going to leave lingering effects for a while.

 

[Bgladney]

Yes and no on the PE's role ; PE is in the end a financial institution interested in extracting every cent possible, not to deliver the best healthcare possible. PE groups go in without the intention of running it, but juicing the books in order to flip it for a quick 20%+ profit margin. They absolutely no nothing about running any sort of practice nor do they want to, and often leave the physicians in charge initially - which is why you may have seen some stakeholders claim there's no change to how they practice things...at first. The squeeze occurs after the second sale or if it doesn't happen, if the latter happens then the PE firm tries to at least show some cash flow out of it.

For radiology since there's really not much you can "optimize" other than "efficiency" and we all know how that goes at a certain point. My layperson opinion is that once interest rates come down a bit more, you may see the final flip, and that's when things will get bad (like in House of God, they can always hurt you more). PE firms have also learned their lessons from the 1990s and have these punishing reward structures to keep people locked in (one example is you get your bonus spread out over 5 years, and/or the practice has to grow to X number of physicians). I know it sounds doom and gloomy but I think in the next few years we are going to see a smash grab and run on Medicare/insurance which is going to leave lingering effects for a while.

Totally agree. We have seen some sort of "corporate model" about every ten years, which always fail. PRG back in the early 90s. Most recently American Optical which was an absolute disaster for many.