Recent Trends in Private Equity Acquisition of Orthopaedic Practices in the United States

Abstract

Background: Private equity acquisition of medical specialty practices has increased in recent years. With the projected increase in the volume of elective, ambulatory orthopaedic procedures, especially in the outpatient setting, private equity firms are increasingly investing in orthopaedic practices. The purpose of this cross-sectional study was to report recent trends and variations in acquisitions of US orthopaedic practices by private equity firms and other institutional investors (venture capital firms, trusts, and large investment companies). Methods: Acquisition data through January 1, 2020, were collected and analyzed using various financial databases, supplemented with publicly available information from financial news outlets, press releases, and financial analyst and industry reports. Disclosed financing data were also included, in addition to pertinent geographic information (state, city, and zip code) of the target practices. Results: Between 2004 and 2019, 41 orthopaedic practices and surgeon groups across 22 states were acquired by 34 private equity and other investment firms. A significant increase was observed in the number of acquisitions between 2017 and 2019, consisting of 70.7% of total transactions during the study period, with a statistically significant upward yearly trend (P = 0.002). The compound annual growth rate in acquisition volume was 29.2% during the study period. A disproportionate share of private equity acquisitions took place in the South, where more than half (51.2%) of the total transactions took place. Firms were markedly more likely to acquire or invest in practices located in major metropolitan areas (population more than 1 million) compared with those in mid-sized or rural areas (70.7%, 17.1%, 12.2%, respectively; P , 0.001). Conclusions: Private equity acquisition of orthopaedic surgery practices has increased markedly in recent years. The effect of private equity acquisition on physician independence, practice management, and procedure reimbursement remains unclear and may be important to explore as practice management evolves.

Evaluating trends in private equity ownership and impacts on health outcomes, costs, and quality: systematic review

“…During this stage, 26 further studies were excluded, leaving 55 studies in the final sample (fig 1). Of these studies, 32 evaluated the impacts of PE ownership on at least one category of health outcomes, costs to patients or payers, costs to operators, or quality, or a combination of these factors,2236373839404142434445464748495051525354555657585960616263646566 (table 1, table 2, and table 3) and 38 reported trends or prevalence of PE among healthcare operators (see supplementary material 3) 2136383940414245495355606163646567686970717273747576777879808182838485868788. Fifteen studies in total reported findings for both impacts and trends 36383940414245495355606163…”

“…Together, the studies evaluating trends in PE prevalence document a noticeable influx of ownership across many healthcare settings over the past 10-15 years, often increasing in yearly deal count over study duration 2165686970717275768182838486. PE acquisitions have been documented across the continental US, but PE ownership was particularly pronounced in the south,21425355697172818789 northeast,7172818889 and, specifically, in Florida39538182838488 and Texas 395360828384.…”

“…The included studies spanned eight countries, with most (n=47) evaluating PE ownership of healthcare operators solely in the US. 21 22 36 37 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 60 62 63 65 66 68 69 70 71 72 75 76 77 78 79 80 81 82 83 84 86 87 88 Other regions that were analyzed independently included Sweden (n=2), 59 61 the UK, Turkey, the Netherlands, Canada, and Germany (n=1 each). 38 64 67 73 85 One study compared developments across Canada, Norway, Sweden, the UK, and the US.…”

“… 38 64 67 73 85 One study compared developments across Canada, Norway, Sweden, the UK, and the US. 74 In total, studies assessed 16 different medical settings: nursing homes 22 37 38 40 47 48 49 50 56 57 58 59 60 61 64 67 74 were the most commonly studied settings (n=17) followed by hospital 41 42 43 44 45 52 53 55 73 and dermatology 39 46 62 77 78 83 84 88 65 settings (n=9 each); ophthalmology 62 65 72 81 82 86 88 (n=7); urology 54 66 80 88 (n=4); gastroenterology 62 65 88 and orthopedics 69 79 88 (n=3 each); surgical centers, 63 68 fertility, 36 71 and obstetrics and gynecology 71 88 (n=2 each); and anesthesia, 51 hospice care, 70 oral or maxillofacial surgery, 75 otolaryngology, 87 and plastics 76 (n=1 each). Five studies considered multiple...…”

Current Concepts in the Business of Orthopaedics

“…From 2004 to 2019, 41 practices were acquired by 34 PE firms, with 71% of transactions occurring between 2017 and 2019. 33 The acquisition rate showed a compound annual growth rate of 29.2%, primarily in major metropolitan areas. As of January 2022, there were 14 PE-backed orthopaedic platforms seeking to consolidate musculoskeletal physician practices and approximately $1.8 trillion of PE capital ready to be deployed within health care.…”