At McDermott Will & Emery’s 2018 Physician Practice Management and ASC Symposium, some of the leading minds in the PPM and ASC fields gathered to discuss key issues and their thoughts on the future growth and direction of the interconnected ASC and PPM industries. Below are a few of the key takeaways from McDermott’s largest conference to date:
- The True Platform. Loose confederacies of physician practices do not equal a sophisticated and integrated platform. The most successful platforms have a developed infrastructure, a talented leadership team, a simple model and a unified vision to build a national/regional company focused on quality of care, patient satisfaction and physician engagement. Competition for those platforms is tough, and building those platforms from scratch requires time, capital, organization and patience.
- PPM Differentials. We asked the CEOs of national PPMs why today’s PPMs are different than the failed PPMs of the 1990s. They discussed several key differences, including a shifting physician mentality, difficulty in sustaining independent medical practices, patient dissatisfaction with health care, the shift towards value-based care, the management company’s emphasis on delivering value, and new governance structures/compensation models that encourage communication and alignment among stakeholders. Despite these differences, it is clear that there will be some winners and losers, and that PPMs with a clear growth strategy, a compelling vision, a thoughtful compliance infrastructure and an emphasis on patient satisfaction have the greatest likelihood of success.
- ASC Perspectives on the PPM Consolidation. We asked the CEOs of leading ASC management companies for their thoughts on consolidation in the PPM industry. While some ASC management companies are pursuing a limited PPM strategy, it appears that traditional ASC management companies generally view the high multiples being paid in today’s PPM transaction as a barrier to entry. To date, many of the high valuations have centered around the dermatology, dental and ophthalmology specialties; if the transactional focus shifts towards GI and orthopedics, it is unclear whether the traditional ASC management companies may decide to pursue a more active PPM strategy.
- ASCs are Hot! Health systems, traditional ASC management companies and other top tier investors continue to strongly believe in the tried and true “ASC model” as a core part of their investment strategy. The good news for investors is that the ASC industry continues to be highly fragmented, with approximately 70 percent of ASCs continuing to be independently owned and operated, and multiples still landing in the reasonable 6-8X range. Expect the trends towards ASC consolidation to increase, as payors and health systems race to lower their cost of care and shift more volume into the outpatient setting.
- New Investors. We are seeing many changes to the traditional health care landscape, with payors investing in retail medicine (e.g. minute clinics and urgent care), primary care, ASCs and other providers in an effort to alter the health care delivery continuum. The entrance of tech companies into the health care industry is also being closely watched by payors, providers and other stakeholders. Expect new partnerships geared towards achieving the “triple aim” to emerge in the year to come.
We want to thank all of the panelists and attendees at our 2018 Physician Practice Management & ASC Symposium this year for contributing their thoughts and allowing us to leave the conference a little bit smarter on today’s PPM and ASC industries. We’re looking forward to next year!