Data from a recent survey of approximately 100 physician groups showed that most believe they must have at least 200 physicians to pay the $500,000 or more for IT required for MIPS participation. Only 19% of respondents told the survey that they are confident or very confident in their MIPS capabilities.
Further complicating this picture are the competing constituencies across the payor–provider continuum. Payers are rapidly consolidating and building negotiating leverage over physicians.
In the past 10 years, more than 500 hospitals have merged into larger health systems. More than $100 billion has been spent on hospital consolidation in the last six years alone.
The top three publicly traded payors now have a combined enterprise value of more than $350 billion, providing scale, negotiating leverage and almost unlimited access to capital.
All of these external pressures are putting the burden on physicians to decrease costs while improving outcomes.
No wonder physicians are, themselves, consolidating in order to also build scale to counter the emerging hospital and commercial payor behemoths.
Outside Investment Zeroes in on Orthopedics
Until recently, few outside private equity investors were interested in orthopedic practices. That is changing.
In January 2017 Frazier Healthcare Partners invested a reported $50 million in the CORE Institute. Several other practices, including The Orthopaedic Institute, followed suit shortly thereafter and partnered with private equity investors.
Today, there are at least a half-dozen large and mid-sized orthopedic groups in negotiations with private equity investors.
These groups understand that the orthopedics industry is exceptionally well positioned for investment and consolidation. Many conditions such as an aging population and joint damage caused by obesity are providing strong underlying demand for orthopedic services, give PE investors’ confidence in the market.
Other Reasons Capital is Flowing into Ortho Practices
Spine, orthopedics and sports medicine practices are poised to benefit from recent changes in reimbursement—including CMS’ focus on the relatively high cost of procedures in the inpatient setting compared with an ASC—which can only help to drive more patient volume to the outpatient centers. Spine, orthopedic and sports medicine practices with the resources and scale to take advantage of these trends should see attractive growth for many years to come.
