Geographic expansion key in search for private equity partner

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We are still looking for a good private equity partner who will help us grow — and by grow, I mean expand geographically into markets where it strategically makes sense. We also want to expand organically in places we currently exist.

Building better business and administrative and data systems requires capital, and we do not really have means to do so, other than taking lines of credit or tapping into our own financial resources. That is a tough sell to physicians: to invest in ourselves to the degree we would need to.

Glenn Littenberg, MD, MACP, FASGE, AGAF
Glenn Littenberg

On the other hand, there is the potential to monetize the practices we have spent years building and get something of value for the future, if we can build an enterprise that is effective, able to grow and able increase its value in a way that many private equity-backed physician groups have managed to do.

A partner should be cognizant of the fact that physicians need to maintain their autonomy in many respects, within their own practices. Although we want to maintain control over the way we schedule, how we practice and the standards we set, we are often open to better ways to run our businesses and new opportunities to expand what we do.

A good private equity partner will respect the boundaries of clinical autonomy. Why we went into private practices and why we have maintained that has to do with our ability to set our own schedules, working closely with our own staff in what are commonly smaller offices and not large bureaucratic institutions. That is what we value and that is what we want to maintain.

Alternatives to private equity are not very clear these days. A lot of physician practices and younger physicians are being scooped up by hospitals and health care systems — even by insurance companies — that have much deeper pockets than physicians in private practice. For many medical specialty organizations, the private equity model has firmly brought appeal and value as an alternative where the partner is the right one, and the market is in the right area. The market must be in a geographic area that has potential for substantial expansion and consolidation.

However, in California there are a lot of small practices that have not fully developed the kinds of ancillary activities that would benefit their practices, and who could do a lot better in how they administer their practices. We hope we would be able to find a lot of attractive partners to bring into a consolidated group if we become a platform for private-equity backed growth. On the other hand, if we don’t become a platform ourselves, we are also looking at large platforms that exist around the country. We are certainly open to that.

Our previous look at private equity was derailed by the COVID-19 pandemic began, and we have recently resumed looking for a good partner. The reasons were really the same all along. But we had to be sure we were coming out of the pandemic in good shape with growth internally — and we have done that. We’re busier than ever.

We believe private equity is a better alternative for us. Status quo is not an option. We really need to look at some way of growing and expanding where we are and how we function. At least for now we want to look at our best options.

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