Selling an Orthopedic Practice

The healthcare industry has been the target of significant mergers and acquisition activity over the last decade with private equity firms and large consolidators rolling up specialty practices into nationwide platforms. But perhaps the most sought after medical specialty for private equity in today’s market is orthopedic groups practices.

The combination of strong revenue, high reimbursement rates, and integrated ancillary services makes orthopedic groups an attractive target for investment. In the US, our aging population has led to a strong demand for orthopedic procedures like joint replacement and spine surgery. The migration of these procedures to safe, convenient, and more affordable outpatient settings, driven by advances in technology, CMS approval of procedures, and a push from payors makes this one of the most sought after specialties.

Physicians, executives, nursing staff, and support teams all play pivotal roles in the success of these organizations, and understanding how these elements contribute to overall value is essential for any physician-owner who is considering the sale of their orthopedic practice.

The Market for Orthopedic Practice Acquisitions

Investment, consolidation, and buyouts are reshaping every sector of healthcare, and orthopedics is a growing part of this trend. Large regional and national platforms are emerging, and while investment in orthopedic groups is not new, private equity’s interest in this specialty area continues to gain traction. A private equity firm will form a platform by buying into a large group, providing them with the infrastructure, leadership, physicians, staff, technologies, and all that is required to start building a dynamic organization. From there they will look to add groups that are a good strategic and cultural fit, and will enable them to grow their newly created business.

There are now at least 20 private-equity and institutionally backed platforms actively pursuing orthopedic group deals. The chart below from The Journal of Orthopaedic Experience & Innovation shows recent orthopedic private equity transactions beginning in  2017.

Benefits of Selling an Orthopedic Practice

Physician owners of orthopedic practices can realize many benefits from a sale to private equity or a partnership with a large MSO, consolidator, or hospital system. While a natural focus is on the financial impact of the liquidity element that is part of any transaction, it is imperative that groups consider how important it is to retain as much of their clinical autonomy as possible while leveraging the benefits that a partner with true scale can bring. These challenges and opportunities need to be fully vetted and considered during the evaluation process and determined before making any decision regarding moving forward.

Independent orthopedic practices today face substantial challenges that can strain resources and limit growth. Finding the right partner and negotiating the best terms can provide solutions to many of these challenges. Through joining a larger platform, practices gain access to capital, and specialized expertise that would be difficult or impossible to develop independently. Specifically, large private equity backed organizations or MSOs are better positioned to manage:

• Governance and Compliance
• Physician and Staff Recruitment
• Capital for Growth
• Revenue Cycle Management
• Payer Contracting
• Infrastructure and Support Services

For physicians, retaining clinical autonomy while offloading much of the work associated with running and growing a practice can be an appealing option.

How to Sell an Orthopedic Practice: The PTA Process

Selling an orthopedic practice may represent the single most significant financial and professional decision a physician group will ever make. It is imperative to remember that regardless of how you feel about prospective partners, they have considerable experience and expertise in managing these transactions and are supported by teams of investment bankers, attorneys, and analysts whose primary goal is to structure deals in their favor. Without an experienced advisor, physicians are at a serious disadvantage when it comes to negotiating the best valuation and deal structure for their orthopedic practice.

The Physician Transaction Advisors team has guided physician owners through more than 300 practice transactions across multiple specialties, with deep expertise in orthopedics specifically. We serve as trusted partners who help navigate complex transitions and maximize value during organizational change. Whether you’re exploring your options, in active discussions with buyers, or ready to move forward with a transaction, we can provide the guidance necessary to successfully navigate every phase of the transaction. Unlike investment bankers or brokers who are largely made up of finance degreed individuals, our industry leading team is comprised of career outpatient healthcare leaders who leverage their decades of experience combined with having successfully completed more transactions than any other firm to ensure our clients’ best interests are addressed by leveraging our risk-free process, which includes:

Our Recent Orthopedic Transactions

With over 300 transactions closed, Physician Transaction Advisors has the expertise to achieve the best outcome. Below are some recent orthopedic client transactions.