3 CEOs' bold predictions on private equity in orthopedics, ASCs

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Private equity firms are investing more in healthcare and targeting specifically orthopedic and spine groups with ASCs.

Three CEOs of orthopedic and spine groups that took on private equity partners talked about their experiences and what lies ahead at the Becker's 18th Annual Spine, Orthopedic and Pain Management-Driven ASC + The Future of Spine Virtual Event June 9. Click here to view the entire panel. Below is an excerpt of the panel discussion.

Question: What bold prediction do you have for private equity in the ASC, spine and orthopedics space?

Douglas Wisor, MD. CEO and President of National Spine & Pain Centers (Rockville, Md.): There's going to be consolidation on the PE side, and I think there's going to be some winners and some losers on investments made in the PE space in general across healthcare. I think that will lead to some consolidation or a lot less overall healthcare investors than there are today. I'm actually surprised that it has taken this long, but the hospital world and site of service differential is huge and we've kicked the can down the road as far as it can go. We're all about removing cost from the healthcare system, and we can't afford to continue to foster site-of-service differentials that aren't competitive in nature.

Andy Blankenmeyer. CEO of OrthoAlliance (Cincinnati): The biggest prediction I have is the shift of healthcare out of hospitals and other higher cost settings into the ASC. Every group that has an ASC is rushing toward the door to invest in their own ASCs and grow them. I think there are going to be some groups that do that very well and are very successful, and others that won't be able to provide cost containment. But really what's going to drive a lot of the shift outpatient is employers in all of our markets, especially the self-funded employers that are paying claims directly. They are finally waking up to the fact that they could easily shift a site of service out of higher cost settings, such as hospitals, into more privately owned or joint venture surgery centers and save significant dollars on their employee benefits.

That trend paired with Medicare continuing to allow more procedures in the outpatient setting every year, and the technology catching up as well, makes physicians more comfortable in that setting. When the cost data starts getting published showing costs at a surgery center versus a hospital setting, more than just their charge master reports and Medicare fee schedules, I think that's when you're really going to see the leadership of these self-funded employers saying enough is enough. We've got to move the volume.

Glen Silverman. CEO of US Orthopedic Partners (Jackson, Miss.): I think PE will continue to choose the landscape of orthopedics. It's inevitable. If you're looking at where eye care and dental was five to seven years ago, PE has become very commonplace now. My dentist and my eye doctor are both PE-owned, and I still walk into the office and have a great experience. PE hasn't increased my costs one bit. If we can produce value to our owners or physician owners, why shouldn't they retire with more than a gold watch and a set of golf clubs? That's what we're offering them. As a bold prediction, I would say that trend only ramps up here in the next two to four years.

 

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