Value Creation Opportunities for PE-Sponsored Healthcare Providers
The increase in interest rates has curtailed acquisitions and increased the cost of debt, diverting cash flow from future acquisitions to satisfy debt obligations. Labor shortages and medical cost inflation have increased operating costs, further impacting operating margins.
These macro forces have resulted in PE-sponsored physician practice management (PPM) companies, group practices, and ambulatory surgery centers (ASCs) shifting their strategies from growth through acquisition to enhancing the value of their existing assets within their portfolios.
The opportunities for value creation are often significant. Practice integration activities result in immediate and sustainable performance improvement opportunities in the areas of access, quality, productivity, and financial improvement.
Examples of practice integration activities that enable meaningful value creation include:
1. Enhancing patient access to improve patient acquisition and retention.
2. Standardizing workflows, policies, and procedures and centralizing administrative functions, including revenue cycle management, to reduce operating expenses.
3. Modernizing EHR and practice management platforms to streamline workflows and reduce clinician burnout.
4. Leveraging digital tools to improve patient and clinician experience and to support participation in risk-based arrangements.
Historically, PE-sponsored PPMs and medical groups have prioritized expansion over the financial performance of these practices. Practice integration not only creates real value, but it also establishes a more efficient operating model that will enable these businesses to easily scale once M&A activities pick up.
If you would like to learn more about how BDO can help your healthcare organization create value and achieve sustainable growth, contact us today.
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