Private equity infusion: A question of balance of growth vs. control for doctors
By Katherine VogtAmerican Medical News
Oct. 23/30, 2006
For the last few years, a growing pool of private equity investment money has been pouring into health care firms, swelling these enterprises until they are big enough to crest in rewards for investors.
The dollars have streamed into biotech, pharmaceutical, device and equipment companies as well as into hospitals, ambulatory surgery centers and even physician networks, providing relief for businesses that were thirsty for capital to grow and expand.
But implications for physicians are murky. Certainly some physician-led enterprises have benefited from the financial infusions. Yet those physicians may also be losing some control of their businesses as the private equity investors gain a stake. And, the increased leveraging of those enterprises may spell more risk for the physicians who have to make the businesses financially successful.
The money also is flowing into health care services such as integrated health care delivery systems, said Craig Frances, MD, a principal with the Palo Alto, Calif.-based private equity firm Summit Partners. “You’re seeing the resurrection of people believing after all there is a lot of value to some of these physician networks that are built differently, … as long as you are able to appropriately align incentives with doctors,” said Dr.
Frances, who was trained as an internist but no longer practices medicine.
“The difference with private equity is that although it’s a good source of capital, it also comes with owners and investors. And they will want results,” said (Richard Gundling, vice president of the Healthcare Financial Management Assn., a Westchester, Ill.-based association of health care financial executives). “Those private equity investors may want a seat at the table to govern changes. And you may have to give up some control.”
http://www.ama-assn.org/amednews/2006/10/23/bisa1023.htm
Comment:
By Don McCanne, MD
Res ipsa loquitur