Dermatology Practice Consolidation Fueled by Private Equity Investment

Resneck, Jack S.

doi:10.1001/jamadermatol.2017.5558

Cited by 79 publications

(86 citation statements)

References 4 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Dermatologists, despite comprising 1% of physicians in the United States, were involved in approximately 15% of the more than 200 medical-practice acquisitions by private equity in 2015 and 2016. 3 Some have expressed concern that private equity ownership may create an emphasis on profitability, which influences patient care. 3 In particular, dermatologists reported pressure to meet production numbers for procedures, sell products (eg, acne creams and antiaging products), and refer patients to affiliated specialists, laboratory technicians, and estheticians.…”

Section: Potential Consequencesmentioning

confidence: 99%

Potential Implications of Private Equity Investments in Health Care Delivery

Gondi

Song

2019

JAMA

122

View full text Add to dashboard Cite

Much of the US health care system relies on private physician practices. Little is known about the role of private equity in today's health care delivery system. From 2010 to 2017, the value of private equity deals involving the acquisition of a health care-related company (most involving physician practices and hospitals) increased 187% and reached $42.6 billion, while the number of health care deals increased by 48% (eFigure in the Supplement). 1 Given the increasing role of this type of financing, physicians and policy makers should understand private equity, common strategies used by its firms, and the potential risks and benefits for physicians and patients.

show abstract

Section: Potential Consequencesmentioning

confidence: 99%

Potential Implications of Private Equity Investments in Health Care Delivery

Gondi

Song

2019

JAMA

122

View full text Add to dashboard Cite

show abstract

“…Despite enthusiasm from investors, PE-backed dermatology practice acquisitions remain controversial. 1,21 Physicians have raised concerns about the loss of physician autonomy and conflicts of interest that may arise from profit-seeking behaviors, as PE firms have a fiduciary responsibility to generate investor returns. 21,27 Large groups that employ multispecialty physicians (eg, dermatopathologists, Mohs and cosmetic surgeons, and pediatric dermatologists) can take advantage of the in-office exception to the Stark Law, which allows physicians to legally refer patients to other professionals employed by the same group practice.…”

Section: Discussionmentioning

confidence: 99%

“…ermatology practices have caught the attention of private equity (PE) investors, who have sought to consolidate practices and produce economic value through operational efficiencies, revenue enhancement, increased market share, and economies of scale. 1 Although PE firms vary in their investment strategies, the typical investment process within dermatology practice management is described herein (Figure 1). Limited partners, such as endowments, pension funds, and high-net worth individuals, provide capital to a PE firm and seek future returns on their investment.…”

mentioning

confidence: 99%

“…2,[4][5][6] The DMG may subsequently receive financing, in the form of equity investments and debt, to fund the acquisition of dermatology practices (add-on acquisitions) or to grow organically by opening new clinics and hiring health care professionals to staff them (de novo growth). 1,2,4,5 Additional strategies may be used to increase the valuation of the DMG by increasing revenue or decreasing costs. 4 A robust bull market, which has been the case over the past decade, also contributes to rising practice valuations.…”

mentioning

confidence: 99%

“…3,7,8 After a holding period of 3 to 7 years, many PE firms seek to exit their investments, often through a secondary sale of the DMG to another PE firm. 1 The roll-up model, which is characterized by platform investments into physician practice management companies, with subsequent add-on acquisitions and de novo growth, has also been reported in medical specialties beyond dermatology. 6,9 Other researchers, including Konda et al, 10 have sought to describe PE investment in dermatology practices.…”

mentioning

confidence: 99%

See 2 more Smart Citations

Trends in Private Equity Acquisition of Dermatology Practices in the United States

et al. 2019

View full text Add to dashboard Cite

IMPORTANCE Private equity (PE) firms invest in dermatology management groups (DMGs), which are physician practice management firms that operate multiple clinics and often acquire smaller, physician-owned practices. Consolidation of dermatology practices as a result of PE investment may be associated with changes in practice management in the United States. OBJECTIVE To describe the scope of PE-backed dermatology practice acquisitions geographically over time. DESIGN, SETTING, AND PARTICIPANTS This cross-sectional study examined acquisitions of dermatology practices by PE-backed DMGs in the United States. Acquisition and investment data through May 31, 2018, were compiled using information from 5 financial databases. Transaction data were supplemented with publicly available information from 2 additional financial databases, 2 financial news outlets, and press releases from DMGs. All dermatology practices acquired by PE-backed DMGs were included. Acquisitions were verified to be dermatology practices that provided medical, surgical, and/or cosmetic clinical care. Private equity financing data were included when available. The addresses of clinics associated with acquired practices were mapped using spatial analytics software. MAIN OUTCOMES AND MEASURES The number and location of PE practice acquisitions over time were measured based on the date of deal closure, the geographic footprint of each DMG's acquisition, and the financing of each DMG. RESULTS Seventeen PE-backed DMGs acquired 184 practices between May 1, 2012, and May 22, 2018. These acquired practices accounted for an estimated 381 dermatology clinics as of mid-2018 (assessment period from May 1 to August 31). The total number of PE-owned dermatology clinics in the United States was substantially larger because these data did not reflect DMGs that opened new clinics (organic growth); acquisitions data represented only the ownership transfer of existing practices from physician to PE-backed DMG. Practice acquisitions increased each year, from 5 in 2012 to 59 in 2017. An additional 34 acquisitions took place from January 1 to May 31, 2018. The number of financing rounds to sustain transactions mirrored the aforementioned trends in practice acquisitions. Clinics associated with acquired practices spanned at least 30 states, with 138 of 381 clinics (36%) located in Texas and Florida. CONCLUSION AND RELEVANCE The study findings suggest that PE firms have a financial stake in an increasing number of dermatology practices throughout the United States. Further research is needed to assess whether and how PE-backed ownership influences clinical decision-making, health care expenditures, and patient outcomes.

show abstract

Private Equity Investment in Health Care—Reply

Gondi

Song

2019

JAMA

View full text Add to dashboard Cite

Dermatology Practice Consolidation Fueled by Private Equity Investment

Cited by 79 publications

References 4 publications

Potential Implications of Private Equity Investments in Health Care Delivery

Potential Implications of Private Equity Investments in Health Care Delivery

Trends in Private Equity Acquisition of Dermatology Practices in the United States

Private Equity Investment in Health Care—Reply

Contact Info

Product

Resources

About