Private equity acquisitions of physician practices have grown rapidly in the last decade. Ophthalmology in particular is an attractive medical specialty for its high procedural volume and the high demand for ophthalmic care among the aging population. In the year leading up to the COVID-19 emergency, monthly acquisitions of ophthalmology and optometry practices averaged 5.71 per month and increased to 8.78 per month from January to September 2021, following vaccine availability.1

For many ophthalmologists, private equity partnerships have helped their practices realize their dreams of expansion while offering quality business expertise. These advantages don’t come without some measure of change, however. Here, doctors who’ve gone through a private equity sale share their experiences and discuss the compromises that come with the territory.


Physicians’ Experiences

Private equity investment in medical practices seeks to increase the value of purchased practices through consolidation, streamlining of operations and increasing revenue before reselling at a profit to another private equity company.

Richard L. Lindstrom, MD, and his colleagues at Minnesota Eye Consultants, co-founded Unifeye Vision Partners with Chicago-based private equity firm Waud Capital about seven years ago. “We wanted to open a large office in St. Paul, but the cost was significant,” he says. Because partner bank debt guarantees would challenge some younger partners, they began investigating private equity opportunities.

The decision to join with private equity didn’t come about lightly. “We spent nearly three years making the decision, and then we did it,” Dr. Lindstrom says. “The ten partners in our group all chose to join. We had several votes along the way, all of which were unanimous to proceed. We had all the partners check with their own personal financial advisors to see if this venture seemed like a good idea for them, and interestingly enough, the younger doctors had even greater positive input from their financial advisors than the older doctors, because they of course have more opportunities in the future with recapitalization and the like.”

Over the last seven years, Unifeye Vision Partners has acquired 25 practices in Minnesota, other parts of the Midwest and in Southern California and Texas. “We’ve just begun in the Dallas-Fort Worth, Texas, area,” Dr. Lindstrom adds. “We’ve grown meaningfully, and we’re still with our first [private equity] partner. During the worst of COVID-19, we consolidated what we had and kind of stopped doing acquisitions, but since that time, we’ve continued to grow.”

Dr. Lindstrom says that the way he and his partners practice hasn’t been affected by the private equity partnership. “They’re not in the clinic with us, so to speak. They’re certainly reviewing our productivity and overhead, but we always had our business associates doing that in the past as well, so that really hasn’t changed. We run our clinics the way we’ve always run them.”

At Minnesota Eye Consultants, teaching the next generation of doctors is an integral part of the practice. Experts say it’s important to find a private equity partner who wants to support your practice’s values. (Courtesy Richard L. Lindstrom, MD)

David M. Brown, MD, of Retina Consultants of Texas, says that initially, his practice didn’t intend to go into private equity. “We were happy with our practice, and we were making a good living,” he says. “We didn’t see how it would be beneficial. But we decided that we ought to do our due diligence and make sure we were correct that we shouldn’t [go into private equity].”

Dr. Brown’s practice created a private equity committee of doctors to look into it. “When you first approach private equity, one of the first things you need to do is find an investment banker,” he says. “We wanted to make sure we had the right investment banker for us, so our committee interviewed 17 different investment bankers and narrowed it down to five and then did five live interviews. We eventually chose Wyatt Ritchie of Cain Brothers & Company.”

He says the next step in their process was determining their goals. “When we started our practice in Houston in the 90s, we were 17 retina doctors, and everyone was within about a mile of each other,” Dr. Brown says. “The business plan was to put world-class retina in West Houston, North Houston and South Houston and at the same time to create research centers. What we were essentially looking for in a private equity transaction was ways to increase what we’ve already done and grow from Houston to Greater Houston to Texas and then to the United States. We wanted a company that was willing to help us expand our reach to patients so we could improve patient care and build our research empire. We also determined that we would remain retina-only. It didn’t make sense to us to engage in a private equity venture that involved buying up our referring entities.”

Dr. Brown says his group’s investment banker pitched their practice to several of the biggest private equity firms in the medical field that were known to be hands-off. “He pitched us to 30 different firms, and 17 said ‘It’ll never work, no thank you,’ but 13 said, ‘That’s interesting. Let’s talk.’ Our private equity committee went to New York and speed dated 11 firms over two days, an hour and a half each. Then, we invited two of them to Houston.

“We created Retina Consultants of America,” Dr. Brown says. “It’s a pretty unique private equity venture in that 44 percent is owned by the retina doctors. Our private equity sponsor owns 14 percent and the rest are limited partners. Retina Consultants of America is run by a medical leadership board that’s composed entirely of retina doctors.”

Douglas K. Grayson, MD, of Omni Eye Services in Iselin, New Jersey, and the New York Metro Area, joined with private equity in 2017. “We were four partners—two optometrists and two ophthalmologists,” he says. “None of us were planning on retiring, but we wanted to try to expand because we felt we were doing pretty well, and we could grow. We’d already looked at some neighboring practices that we wanted to either merge with or acquire. So, the concept of private equity seemed a very good prospect. It would give us the cash to be able to acquire these practices and it would give us the expertise of people who were used to integrating EMR systems, billing systems, HR systems, etc. to reduce redundancy and hopefully improve our efficiency.

“In a four-way partnership, there are always issues that come up,” he continues. “Going forward with a private equity entity, a single check would be split four ways, and we’d be minority partners. The majority partner, the private equity entity, would have the final say in any disputes. So, for all of these reasons, private equity seemed like a good choice for us.

“They made our accounting system more efficient, and we acquired a few neighboring practices,” he says. “They appointed leadership, marketing and brought in a host of officers who laid out an infrastructure for us to be able to acquire more practices and grow much bigger. They were mostly hands-off, so they didn’t interfere much with the day-to-day operations or patient care. They mainly focused on trying to merge all the cultures of the different practices they acquired and lower overhead.”


Considerations for Private Equity

Experts say that private equity partnership has a lot to offer practices, but compromise is necessary. Here are some of the changes that accompany a private equity deal:

• Added business acumen. “Most doctors want a hands-off [private equity partner] because if you’re already running a great business, why would you want somebody to do it differently?” Dr. Brown says. “That being said, there are many economies of scale. While most of us don’t want to be told what we should do with an individual patient or how to treat patients, there are probably ways in which billing, for example, could be improved. We were amenable to changing some business and back-office operations.”

“Anytime you’re in a group setting, there are differences of opinion and challenges along the way,” Dr. Lindstrom notes. “When you bring in a private equity partner, you’re bringing a very meaningful additional partner to the table. Today we spend more time looking at the financial ramifications of purchases and acquisitions and growth opportunities than we did before.

“I see this as an asset,” he continues. “We do an analysis of whether a purchase makes sense from a patient-care perspective and from a return-on-investment perspective. Our private equity partner hasn’t interfered with our practice style or our ability to provide high-quality care. They also haven’t interfered with our partners’ ability to consult with industry or our ability to do clinical trials.”

Dr. Lindstrom says that before the private equity partnership, while the managing partner led the practice in most ways, the practice administrator brought business savvy and outside consultants Bruce Maller & Associates brought business acumen as well. “Prior to helping found Unifeye Vision Partners, it was challenging and relatively complex management, with four ASCs, five offices, 10 partners, 30 doctors and over 300 employees,” he says. “Now, we have the input of many highly educated MBAs who help analyze our decision making. In some cases, it’s led to increasing investment in some areas. We’ve enhanced our offices and improved our internal and external marketing by being able to hire high quality experts and spend more in those areas.”

• The decision-making process. Adding a business-minded partner to the mix has its advantages, but this entails giving up some measure of control. “We’ve moved more toward the way in which corporations would manage their decision making,” Dr. Lindstrom says. “Some ophthalmologists would find this undesirable or even unacceptable. I think you have to be a little insightful as to whether or not you’re willing to give up some control. You’re in a group practice when you join private equity, you’re not a solo practitioner. It’s a more corporate decision-making process with a board of directors and leadership team.”

Dr. Grayson says that private equity partnerships may struggle when business leaders fail to incorporate doctors’ advice. “There are a tremendous number of subtleties in taking care of ophthalmology patients,” he says. “We’ve got different subspecialties with completely separate procedures—retina, cornea, pediatrics, oculoplastics and cataracts. We have an integrated blend of MDs and ODs. It’s a very complex arena. The managers hired by private equity are well-intentioned and want the best for patients, but they aren’t always able to completely understand all the subtleties of a medical practice.

“Medicine isn’t the same as traditional business,” he continues. “Every patient needs to be treated as an individual with individual needs. A business-focused manager, for the most part, has the viewpoint that if the practice is running well as a business, then there shouldn’t be emergencies or fires to put out. But there will always be emergencies despite structured plans and a need for rapid change to address them. In the past, the partners would get together to make those changes happen quickly. Now, the required business meetings often delay action.”

• Strength in numbers. Dr. Brown says that “most retina practices on their own aren’t big enough to be able to get economies of scale in terms of contracting abilities to negotiate with vendors on EMR, for example. A practice of 10 or 12 doctors is small in the grand scheme of things, statewide and nationwide. A 265-doctor retina practice [like Retina Consultants of America] is definitely stronger.”

In a related vein to decision making, more doctors can mean more collaborative challenges. “The biggest challenge is when we acquire a smaller group practice with one to four doctors,” Dr. Brown says. “Those groups haven’t necessarily had to figure out the best way to work together. Certainly, if the doctors are all owners in the entity, then I think they’re more likely to see the benefit of doing things together, as opposed to if the doctors are employees.”

• Recruiting young doctors. Bringing in the best of the next generation is always a goal for growing practices. “Most of the next generation of doctors are going to be employee doctors,” Dr. Lindstrom points out. “They’re not going to be practice owners in a major way, which was the way it was when I started out. If you join a university medical center or any large consortium of doctors, you’re an employee doctor. If you join a private equity group, you’re an employee doctor.

“Some private equity companies have made it possible for younger doctors to acquire equity,” Dr. Lindstrom continues. “Just like any corporation, when they want to recruit and retain people they’ll find a way to equity-integrate their most talented individuals. That’s the corporate world. But many doctors coming out now are going to find the opportunities for ownership to be less than they were when I started in practice almost 50 years ago. Then, it was very common. Now, sometimes equity ownership is good and bad. There are practices today that are struggling and having capital calls or even failing. It isn’t always fun to own equity and be responsible for the challenges that arise—like COVID-19, where all of a sudden, we weren’t seeing patients and there was no income.

“So, it’s not always great to be equity-integrated, but there are individuals who want to be, and I’d say the numbers of opportunities for that are going down,” Dr. Lindstrom says. “There’s probably only 30 percent of practices today that are totally independent, where you can ‘buy in’ in the classical way, buy a meaningful share of the practice. Now, for most doctors, it’s a little like going to work for a corporation. We’ve been able to recruit many talented, high-quality doctors at Minnesota Eye Consultants and Unifeye Vision Partners, and I think the way we’re set up allows for us to do that. But there are some doctors who want to own a third, a half or even all of a practice, and that’s not going to happen in our setting, just like it’s not going to happen in a university or VA system.”

“Recruitment was one of our biggest worries initially,” Dr. Brown says. “Would we be able to continue to recruit top talent? We have. We’ve got some great fellows coming out of top programs. They’ve been excited to join because they actually make more money starting than they would have starting before private equity. They’re all given equity without a buy-in. In other words, before private equity, doctors were paid less and then would pay with cash post-tax dollars to get ownership of the equipment, etc. Now there’s no buy-in. The doctors make more and they become a partner sooner. There are also more opportunities across the country to participate in research and join collaborative projects that go to Retina Society, Macula Society, AAO and other major meetings. It’s been a pleasant surprise that recruitment hasn’t been the problem we thought it would have been.”

• Compensation. Dr. Brown says that the individual practices within Retina Consultants of America continue to get their compensation as they had, or as they want. “My group splits the pool, but other practices that were ‘eat what you kill’ before have remained that way,” he says.

“One difference between private equity practice and private practice retina is that in private practice retina, if you decide to buy a piece of expensive equipment, then you all take home less money,” Dr. Brown notes. “With private equity, there’s more capital and you can buy that piece of equipment and it doesn’t hurt your income because you work on EBITDA—earnings before interest, taxes, depreciation and amortization. Hard assets are a capital expense, so they depreciate over time. If you think a piece of equipment is going to make your practice better or is going to help improve patient care, then there are more resources and incentive to buy the equipment as opposed to saying, ‘we’ll get by with this 10-year-old OCT that’s a bit behind the times.’ I think that’s a big difference that really helps patient care.”

• Overhead trade-offs. The overhead put in place by private equity may help to alleviate the burden of day-to-day practice management, but too much overhead can weigh a practice down. “During COVID-19, it became more challenging to maintain the overhead with markedly decreased patient care visits,” Dr. Grayson says.

“As we started to emerge [from the pandemic restrictions] and get our volume up almost to where we were before, everyone got slammed with interest rate hikes, which effectively caused our debt service to the bank to increase substantially,” he continues, adding that as a well-run, efficient practice before the private equity expansion, there wasn’t much room to increase revenue. “We were stuck with all this infrastructure and a higher debt service on interest rates, and that’s when things became more difficult.”

Dr. Grayson explains that one of the initial attractions of private equity was the ability to create value through efficiencies and consolidation, and then sell the new entity to another buyer at an even higher multiple than the initial purchase price, therefore increasing the value of retained ownership. This sale, of course, depends on the practice’s financial health and integration with all the other acquired practices. The resale outlook was clouded by increased interest rates, higher debt and decreased profitability.

“Many cost-saving maneuvers including outsourced billing, call centers and prior authorization and decreasing personnel were implemented, which put a strain on the overall functionality of the practice in the short term,” Dr. Grayson says. “However, as the managers learned to control the new outsourced entities better, the practice is back in growth mode and doing well.”

• Practice growth. It isn’t as simple as just selling to private equity when you want to as a private ophthalmologist. “Private equity does its due diligence as well,” Dr. Lindstrom points out. “There are a lot of practices that think, ‘When I’m ready, I’ll just join private equity,’ but there are a lot of practices that private equity doesn’t want. Private equity is for the most part interested in practices that can grow at 10 to 12 percent per year, not those that will grow at only 2 to 3 percent per year. Some practices are happy the way they are and don’t want to grow, but that doesn’t work in private equity.”

• Navigating state laws. Multistate private equity groups must consider individual state laws. “We spend a lot more money on lawyers and compliance than we ever did before,” Dr. Brown says. “Before, it was really just learning about what you did in your own state.”

Overall, he says it hasn’t been an obstacle. “It hasn’t affected us much. Some things are more of a Retina Consultants of America problem vs. Retina Consultants of Texas or California,” he says. “Certainly, it makes you think more about these things when an issue is multistate.”

• Standardizing data protocols. “Another challenge with a conglomeration of retina doctors is ensuring that each local group remains what it was before (i.e., the top group) while also getting them to realize that some things are going to have to change,” Dr. Brown continues. “We have to consolidate our data and have similar OCT scanning protocols, for example. A group might be used to the way they did it before, but some change has to happen when you’re getting together the power of a large group.

“We partnered with an artificial intelligence company called Retina AI that can do automated reading of OCTs,” he says. “Some people get 16 lines of OCT scanning, others get 32 or 120. It’s not that [the number of scans] changes the way you treat patients but certainly if you want to consolidate data, your data is stronger if everyone’s acquiring it in the same way. We haven’t mandated this, but we’ve worked together so that the majority of people realize it’s not too big a deal to change the way they do OCT scanning.”


The Right Culture

“We’re big believers that culture is critically important,” Dr. Lindstrom says. “Our culture was an ‘academic’ private practice, where we provide the highest quality patient care and surgical care, teach, do clinical research and work with industry in developing the next generation of drugs, devices and diagnostics. We wanted to be able to continue to do that, so we needed to find a partner who also valued those things.

“We were initially founding a Midwestern group, so we were looking for a Midwestern partner,” he continues. “Though we’re all Americans, our culture is a little different from that of the East or the West or the Southeast, Southwest or the South Central. We wanted a quality partner with an upper Midwest culture. We found our partner in Chicago—a family-owned private equity company with similar values.

“I think it’s really important to take a look at what you’re doing today and what you want to do going forward,” he says. “We have two MD fellows and two OD fellows in our system, and we do a lot of teaching in the local community, nationally and internationally. Many of our doctors are KOLs. We would’ve been really unhappy if we brought in a private equity company that said, ‘We just need you to see patients all day, as many of them as you can, and we don’t want you to teach, do clinical research or consult with industry.’”

Many of the doctors in Dr. Lindstrom’s practice were engaged in the business of the practice prior to the private equity partnership and wanted to continue to have a voice. “We made sure they had that voice,” he says. “There are four MDs on the Board of Directors at Unifeye Vision Partners. Our doctors’ voices are heard—we prioritized that.

“We continue to operate our own clinics and ORs in the way we think is best, with one caveat: We do business decisions together [with our private equity partner],” Dr. Lindstrom says. “We wanted to open a new office in outstate Minnesota, but when we did the business analysis our business partners didn’t think it was a good idea. So together, we decided instead to consolidate from five to four offices and remain focused on Minneapolis and St. Paul, because one office wasn’t very productive. Everyone’s happier now, and the doctors are happier because they’re now in a setting where they’re busier and more efficient.

“When it comes to opening any new office, we do a very careful analysis,” he continues. “Where should we put it? How big should it be? How many doctors are going to work there? It’s very helpful to have smart businesspeople helping us make that decision. I don’t think that we, as a group of doctors, would have done it as well on our own, although we would have hired consultants to help us. Having an equity-integrated partner, where the outcome is as important to them as it is to us, definitely helps.”

Drs. Lindstrom, Brown and Grayson are participants in private equity operations. 

1. Patil SA, Vail DG, Cox JT. Private equity in ophthalmology and optometry: A time series analysis from 2012 to 2021. Digit J Ophthalmol 2013;29:1.