A Sponsor's Perspective on MSO Transactions with Physician Groups with Andrew Welch
Below is an excerpt of the full interview conducted with Andrew Welch. Download the PDF now for the full article.
Outside of meeting minimum EBITDA requirements and target specialty, what attributes do you look for in a target physician group? What non-financial / nonspecialty characteristics would make you more likely to pass on an opportunity?
We look at several factors, including:
1. Whether the opportunity should be classified as a new platform (>$10MM EBITDA) versus an add-on (lower EBITDA is fine).
2. A culture of quality and compliance, demonstrated by several indicators.
- Peer physician references
- Patient satisfaction reviews (this is becoming increasingly important and ever more accessible in today’s social media landscape)
- Other ancillary metrics, such as clinical metrics that convey quality, malpractice history and billing / coding / compliance audits from third parties.
3. The scale of the operations, ancillary services, and quality of management team; every practice is using the word “platform” regardless of whether they have achieved it – the question is whether they’re ready to double or triple in size.
4. The number of doctors; more than 10 physician partners / providers is critical to prevent provider concentration. There are employee models in dermatology and dental practices, and in many ways, these are much easier businesses to scale. In fact, the partner tracks are harder to manage – owners need to recognize the value of non- owner providers. We are coaching providers to set aside generous pools to share with non-owners (bonus pools) who are on the shareholder track. We set up equity plans for recruiting future physicians but feel that it’s the responsibility of the shareholders to take care of existing shareholder-track providers. As important as economics is communication with shareholder-track physicians; treat them as if they were a junior partner include them in strategic discussions.
Remember, physicians can be your single greatest ally or obstacle – the priority should be to include them as much as possible.
