By Eric Yetter
Investor interest in cardiovascular services is growing, and doctors sense an opportunity. Momentum continues to build around moving key services outside the hospital. But it certainly wasn’t always this way in cardiology. In fact, when private equity investors were making their first investments in ophthalmology, dermatology, and similar specialties that had been independent of hospitals for a long time, cardiologists were moving the other direction.
Until recently and for a long time, perhaps ten years, cardiovascular services were moving toward the hospital. Many groups moved to hospital employment or increased their ties to health systems via practice management or other arrangements. Cardiologists were more dependent on hospital facilities to complete much of their most important work.
Today, many cardiologists have a new opportunity to move key services to ancillary settings. I think most believe this is in the best interest of providers, payors, and patients – enabling more efficient care delivery in a lower cost setting. Cath labs, imaging, ASCs, and even new ancillaries like remote monitoring and disease management via text message are becoming increasingly available to cardiologists.
More progress has been made in certain areas where regulations and reimbursement environments are most friendly. But we and many investors see a powerful trend that is likely to proliferate and continue – cardiologists are in the early stages of a migration away from the hospital, and a great expansion of ancillary services. This movement can help doctors meet increasing patient demand while lowering the cost of care.
Private equity investors see a key opportunity – help cardiologists make this shift by investing financial capital and business expertise. Many firms, including some of the first investors in cardiology, have extensive experience growing physician groups in other specialties. They are now seeking to apply that expertise to cardiology in a similar way, perhaps with more levers to pull.
For example, while ophthalmologists have operated largely in independent ambulatory surgery centers for 30+ years, cardiologists are just beginning that movement. And there is tremendous potential for alternative reimbursement structures in and around cardiology.
Only a handful of transactions have occurred so far, however there may be many more as new investors enter the market and execute roll-up strategies.
Eric Yetter is an investment banker focused on healthcare. His practice includes healthcare provider services, home health and hospice, and behavioral health. Mr. Yetter has completed a variety of healthcare transactions, many with private equity firms and PE-backed companies. He can be reached at 615-477-4741 or via email at [email protected].