Private equity Archives

With 85% of cardiologists now employed by health systems, it may seem like the days of independent cardiology practice are long gone, but Atria Health is looking to reverse this trend with the help of a unique private equity model.

The shift towards corporate and hospital-owned cardiology groups stems from a long list of factors like falling reimbursements, rising costs, and partners who want an exit.
However, many cardiologists aren’t happy with their hospital employment and might be more likely to look for a partner to help their shift towards “independent” practice.

This is the niche Atria aims to fill, with their new business model seeking out cardiologists in hospital-owned groups (10-15 docs and up) who are looking to go independent.

As part of the model, Atria uses PE to help carve out and fund the new cardiology practices while ensuring the docs keep at least 40% ownership, and keep getting paid until their practices get off the ground.
Atria’s money also goes into the tech and infrastructure needed for high-ROI assets like cardiac imaging, cath labs, and EP labs.
Because it builds these practices from scratch, Atria avoids tech debt and the hurdles of integrating different acquired practices.

That sounds like a pretty good deal for the docs, but it’s still a PE partnership, and Atria also makes it clear that the physicians can’t sell the practice once it’s established.

Instead, Atria acts as a financial backstop to get physicians out from under their hospital employers and then takes about half of the profits.

But it’s not open season for Atria, as the company will have to compete with traditional PE and other practice growth-supporting companies like CardioOne.

Atria differs from typical PE models by its focus on hospital-employed groups, and its shared ownership strategy .
Perhaps most of all, Atria will have to overcome many physicians’ negative perceptions of PE.

The Takeaway

Whether or not Atria will succeed depends on outcomes for both physicians and patients. If the docs are happier and the patients are healthier, then Atria’s alternative private equity model that invests in – but does not completely own – independent practices could be a viable way forward.

Private equity’s massive expansion across US healthcare has largely skipped cardiology, but a new JAMA paper suggests that cardiovascular clinicians should expect PE to have a much greater influence within their specialty going forward.

Over the last decade private equity firms spent over $750B acquiring healthcare organizations, with annual investments surging from $41.5B in 2010 to $119.9B in 2019.

Those investments often went to hospital systems and practices within key medical specialties like radiology and dermatology. However, new market factors are driving PE’s increased interest in cardiovascular groups:

CVD is expensive, driving $407B in annual costs in the US between 2018-2019.
The transition to outpatient and value-based care suggests that more of that money could flow to practices with the right strategies and capabilities.
Practices with Ambulatory Surgery Centers (ASCs) are becoming particularly attractive, as CMS added 23 ASC cardiac catheterization and PCI codes in just the last two years.
Many of the 3k cardiology practices across the US make for attractive regional “roll-up” acquisition targets for PE.

There are pros and cons to PE’s expected cardiology expansion. PE provides smaller or struggling cardiovascular practices with the capital needed to support operations and achieve scale in the face of major challenges (i.e. clinician shortages, the VBC shift), while giving practice partners attractive payouts. However, there’s also a long list of concerns.

Private equity acquisitions have shown to drive up the cost of care, especially when a PE-owned group controls a large share of a local market.
PE ownership has been known to lead to compensation and working condition challenges for practice employees.
Previous studies have shown that PE ownership hurts care quality and outcomes.

So how and when are all these PE-driven cardiology practice acquisitions going to take place? There are already at least 12 PE firms targeting cardiology, and at least six major acquisition-focused cardiovascular practice platforms. These PE-owned practices made at least nine acquisitions between January and June 2023, nearly matching 2021 and 2022’s full-year totals (10 & 11), while far surpassing 2018 through 2020 (6 in 3yrs).

Those are small numbers compared to other specialties, but they could be rising fast.

The Takeaway

Cardiology practices have largely avoided PE’s expansion across healthcare so far, but that could change over the coming years, and at least according to this paper, it would bring more challenges than benefits.

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