By Dana Jacoby, MBA, MHS; Alec S. Koo, MD, FACS
The advent of value-based payments, declining reimbursements and consolidation of medical markets mark a seismic shift in the healthcare industry.
With annual expenditures of $3.35 billion and comprehensive spending equating to 20% of the US GDP, the healthcare sector offers private equity, investment banking, and family offices considerable opportunities for short- and long-term investment. Since physicians dictate 80% of all healthcare expenditures, much emphasis is being placed on consolidation of physician groups, revenue cycle management, and cost analytics of spend by physician entities or healthcare groups.
Led by the Centers for Medicare & Medicaid Services, the entire payment and reimbursement system in healthcare has been adjusted to reward value-based efforts vs. a fee-for-service methodology of care. As a result, physicians and healthcare leaders are looking to investors for capital and resources while undergoing substantial changes across revenue streams.
Previously, many physicians have operated in small practices unable to take advantage of efficiencies of scale, cost-analysis metrics or value-added revenue streams. By consolidating physicians into larger groups under PE guidance, standardized business and clinical practices can be scaled to a more optimal level.
A compelling case can be made for capital entities to redirect their pipelines and strategically reap significant ROI by appropriate due diligence around aggregation of physician groups, while working to implement new service lines and business practices.
To continue the discussion and receive a complete healthcare due diligence checklist and needs assessment, please email your request to DJacoby@djiconsulting.com. This article represents the author's views only and doesn't necessarily represent the views of PitchBook.