The healthcare industry is undergoing rapid changes and challenges, especially after the pandemic. For many physicians and healthcare providers, navigating the complex regulatory, financial, and operational aspects of running a practice can be daunting and distracting from their core mission of delivering quality patient care. That is why some physicians are considering partnering with private equity firms or strategic buyers to access capital, resources, and expertise that can help them grow and optimize their practice.
In a recent webinar hosted by Nixon Peabody LLP and Align Business Advisory Services, we discussed the benefits and considerations of healthcare M&A transactions for physicians and healthcare providers.
Why should physicians consider selling their practice?
Healthcare M&A transactions can offer physicians and healthcare providers the opportunity to monetize their life's work, diversify their income streams, and participate in their practice's future growth and value creation. As Craig Wendel, managing director of deal origination at Align, explained, "You now have the ability to monetize what you've created over those decades that you've been practicing medicine . . . and you have a rollover percentage of equity. And so, you're effectively double-dipping in terms of the value of the transaction."
Healthcare M&A transactions can also enable physicians and healthcare providers to focus more on their clinical care and patient outcomes while delegating the administrative and management tasks to their partners. Wendel noted, "It frees them up to do what they enjoy doing and why they went to school, and to serve their patients. It relieves the stress of the business side of caring for patients and has them focus on what they like to do, and that's clinical care, that's seeing patients, that's caring for patients."
Navigating the evolving healthcare regulatory landscape
Healthcare M&A transactions can also help physicians and healthcare providers adapt to the changing healthcare landscape, such as the shift to value-based care, telehealth, and digital health. Nixon Peabody partner Rebecca Simone pointed out, "There's an interest in remote patient monitoring, which I think is connected to value-based care with physicians wanting to implement tools that can help reduce risk."
She also mentioned that regulatory and compliance issues need to be considered when implementing new services or technologies, such as the Stark Law, HIPAA, and state laws.
Setting expectations in the healthcare M&A process
Healthcare M&A transactions are not one-size-fits-all, and they require careful planning, due diligence, and negotiation to ensure a successful outcome for both parties. As Nixon Peabody partner Michael Schnipper emphasized, "It is still an environment in which buyers are very focused on diligence. Buyers are taking longer to close deals than in 2021 and 2022, which were very busy healthcare M&A years. We expect deals will close in 2024, but you may see protracted timelines as there's a focus on what we call quality of earnings, a report that is a financial due diligence component that buyers often do."
Michael also advised sellers to have a clear vision of their goals and expectations and to work with experienced advisors who can help them navigate the process and structure the deal to align with their interests.
