Private Equity Ophthalmology Acquisitions Doubled From 2017 to 2018

A Health Affairs study found that while private equity investment has increased in ophthalmology, there is not enough "quantitative evaluation of the impact."

Private equity (PE) investment acquisitions of ophthalmology practices doubled from 2017 to 2018 according to a Health Affairs study released on Monday afternoon.

The acquisitions rose from 15 in 2017 to 31 in 2018, the research found. Over the course of that year, most of the PE-led acquisitions were concentrated in “the Southeast (especially Florida), the Northeast (especially New York), and the West (especially California)."

The move by PE firms to acquire physician and specialty practices has been an ongoing trend in recent years.

A 2020 study by JAMA found there were more than 350 PE acquisitions of physician practices between 2013 and 2016. According to Buyouts, a HealthLeaders sister publication, PE investors began switching their focus from hospital acquisitions to less-costly, smaller healthcare specialties back in 2018.

By the end of 2019, PE firms had the highest-ever unspent capital of almost $1.5 trillion, according to the Health Affairs study.

As part of the Health Affairs study, lead author Eloise May O'Donnell and researchers from Weill Cornell Medicine interviewed industry stakeholders to analyze both the PE acquisitions of ophthalmology practices and acquisitions of general physician practices.

Why are PE investors interested in ophthalmology?

• Consolidation of ophthalmology practices provides opportunities to increase value.
• A strong demand and short supply of ophthalmology services means services are needed.
• Opportunities for a diverse revenue stream including "ancillary income sources and self-pay services."

Why sell to PE firms and not to other buyers?

• Major changes in the healthcare market are creating increased competition and expenses for independent practices.
• PE firms offer higher purchase prices.
• Hospitals are generally "less interested in acquiring ophthalmology practices."

While interviewees noted that acquisition by a PE firm could mean more autonomy for the physicians, there were conflicting views about the overall impact of PE acquisition. The study concluded that there was a consensus that PE acquisition of physician practices is “consistent with larger trends in the US."

"Evidence is needed on the impact of acquisitions on the quality, cost, and use of care and on patient and physician experience," the study said. “Because there was only an increase in PE firm acquisition of ophthalmology practices recently, there hasn't been enough time to gather ‘quantitative evaluation of the impact.’"