Unless you are still quarantined due to COVID-19, you have probably heard or have been approached to sell your allergy practice. I am not saying it is right or wrong, but it is definitely happening in our specialty. In June 2021, the Physician Advocacy Institute, a non-profit advocacy organization that supports private practices, commissioned a study by Avalere Health, a health care business consulting firm, to look at physician practice acquisitions between Jan. 1, 2019, and Jan. 1, 2021.
It is important to note that the first nine months of the COVID-19 pandemic are encompassed in this survey timeline. I found the numbers pretty shocking, but after some thought, I realized that it is what I have been seeing in the private practice allergy community. Let me mention some key highlights from the survey, especially concerning acquisitions by corporate entities outside of hospital systems, that you may find interesting. I know I did.
Nationally, it was found that 29,800 additional physicians left independent practice and became employees of corporate entities outside of hospital systems over the two-year period – 11,300 physicians who were part of that shift left after the onset of COVID-19. This represents a 31% increase in the percentage of corporate-employed physicians over this period. Corporate entities outside of hospital systems acquired 17,700 additional physician practices during the study, resulting in a 32% increase in corporate-owned practices. When you look at change in corporate-employed physicians in the last half of 2020, following the onset of COVID-19, you will find that there was an increase of almost 4% in those numbers.
Over the two-year period, the overall number of physician practices now owned by corporate entities grew by a staggering 48%. In the U.S., these corporate entities outside of hospital systems now own over one-fifth of all physician practices. It appears that COVID-19 had played a major effect, as the highest percent increase in acquisitions followed the onset of the pandemic.
When regional growth was analyzed for corporate-owned practices, all regions showed increases, but the highest was seen in the South, with over 24%, followed by the Midwest, West, and Northeast.
There is no doubt that COVID-19 played a role in this increase due to financial distress in many practices, but will we see this trend start decreasing now that more and more of the U.S. population is vaccinated and patients are returning? I don’t think so. The prevailing feeling is that bigger is better in health care. Just look at the hospital systems and the insurance companies. Why should physician practices be any different?
Does this mean you should sell your practice tomorrow to survive? Absolutely not. As with any business decision, there are numerous factors to weigh in determining what is best for you and your practice. Generally, private equity firms give you a way to cash out of your practice. Usually these transactions to buy your practice are based on “EBITDA.” EBITDA measures a company’s operating performance and is defined as earnings before tax, interest, depreciation, and amortization. There may also be stock, stock options or other considerations in a buyout by a corporate entity.
Selling will free you of the headaches of the business of medicine and allow you to just see patients. You get a regular paycheck. But you need to realize that you are not in charge any longer. You have no say-so in the management of the practice. All decisions are made by the corporation. Also, it is very likely at some point in the future that the corporate-owned practice for which you are an employee will be sold to another entity that may manage the practice differently.
There is so much more that needs to be considered when looking at selling your practice that can’t be covered here. It is not an easy decision. Make sure you have good legal advice and that any contract you sign states clearly all the important aspects that matter to you, including salary, benefits, bonuses, vacation, clinical schedule etc. Remember, the College is here to support you whether an owner or an employed allergist.