Private equity firms eye medical groups, practices

Private equity funds are scouring the landscape of the Lone Star State, looking for medical groups and practices as potential investment vehicles, the Texas Tribune has reported.

Investors have made a target of medical groups and smaller practices because of the way Medicare and private insurers are shifting to a value-based paradigm. They envision a reorganization of these groups--and the way they provide care--as a potential moneymaker, according to the Texas Tribune. They also are anticipating Texas could eventually expand its Medicaid eligibility, creating millions of more insured individuals.

Private equity has been getting into hospitals in recent years, seeing their growth potential after the end of the Great Recession and the expansion of insureds under the Affordable Care Act (ACA). On the payer side, private equity firms have been encouraged to think outside of the box in how they evaluate potential buyout targets.

Investing in physician practices is a relatively new phenomenon, although Forbes reported a couple of years ago that the healthcare sector's steady growth makes it attractive to private equity firms. Texas is considered an attractive state because so many physicians still practice solo, according to the Texas Tribune.

"There's been this enormous uptick in hedge funds and even bond funds as well as private equities not interested in acquiring physicians' practices but having control over their patient base," Derron DeRouin, chief operating officer at United MSO of America--one of the potential investors in medical groups--told the Texas Tribune. "It's kind of an ideal model because it allows physicians to maintain their autonomy--keep their practice, essentially--but to be capitalized and grouped together to leverage these numbers and leverage these patients," he said.

However, some would-be takeover targets are wary.

"Our feeling was the only way you could get those numbers back out of our practice would be to do some things with our patients and to our patients that would not be appropriate," physician Doug Curran told the Tribune regarding the offer from United MSO.

To learn more:
- read the Texas Tribune article 
- check out the Forbes article