Private Equity Investment in the Physician Practice: Has Its Time Finally Come or Will the Mistakes of the Past Be Repeated?

• June 01, 2020

• Patrick D. Souter , Gray Reed & McGraw LLP , Dallas, TX
• Andrew N. Meyercord , Gray Reed & McGraw LLP

Abstract

The health care industry continues to see accelerated growth and increased emphasis on consolidation and coordination of care. The evolution of delivery models creates a need for capital by physician groups that in turn results in larger, more attractive investment opportunities. Private equity recently has been a significant source for funding these efforts, especially as they relate to physician practice acquisitions; however, physician sellers generally have little or no experience in such transactions and should therefore recognize that health care investments and the subsequent operation of physician practices are unique due to the multitude of business and regulatory concerns that must be navigated. The various structures used for practice acquisitions, including key agreements and professional relationships; due diligence issues; federal and state laws that impact medical record access and ownership; and fraud and abuse concerns must be appreciated and considered prior to the closing of a transaction and continue to be addressed after the transaction is consummated. Consideration of such subjects is mandatory to ensure post-transaction business continuity and maximization of investment value while limiting liability. This article examines the legal and market forces that are creating a shift in the health care industry, how one prepares for and addresses those issues particular to the physician practice acquisition, and considers what history has taught us from previous efforts by private equity to acquire and subsequently monetize physician practices.

ARTICLE TAGS

• Health Care Finance and Transactions