Eyeworld

March 2017 • Ophthalmology Business 23 tain how this will affect insurance companies and health systems, Mr. Wybo said. However, analysts still predict a similar rate of M&A activity if not more than before. "New en- trants in the field of ophthalmology bring innovation and technological advancements that attract strategic buyers who will acquire these com- petitive advantages to create growth and accumulate value," he said. Three questions to ask during a merger or acquisition Take the above trends into consider- ation if you are considering a merger or acquisition of your practice—and make sure to ask three questions before you make a commitment. What's the end game? "Too many ophthalmologists are focused on finalizing the deal that is imme- diately in front of them without considering the future," Mr. Gurman said. This question is key both for buyers and sellers. "Medical practices are like custom puzzles. Each med- ical practice can choose how they want their puzzle to look in the end, but if they don't think about the end result, the pieces may not all fit together," he said. Who's part of your deal dream team? For successful M&A deals, you'll want a seasoned mix of phy- sicians, attorneys, accountants, con- sultants, and internal management personnel, Mr. Gurman said. If any of these roles are not properly handled, the deal may fall apart or the venture could be unsuccessful. What sort of financial syner- gies, cost savings, and growth will the practice achieve through M&A? "Practices should use data obtained through due diligence and forecasts to compare projections with long- term strategic and financial objec- tives to make more informed busi- ness decisions," Mr. Wybo said. OB Contact information Gurman: mgurman@abramslaw.com Laigaie: blaigaie@wadegold.com Wybo: joelk.epstein@gmail.com and surgical centers, which is in turn driving up prices and forcing inves- tors to explore other opportunities," he said. Private equity firms have had a particular interest in dermatology, pain management, and dentistry due to the high reimbursement potential. In some markets, deals with private equity or corporate management companies have a purchase price more than 10 times their earnings be- fore interest, taxes, depreciation, and amortization, Mr. Gurman said. 6. Optical sales are less valu- able for ophthalmologists in acquisitions. "Those who sell these products are sometimes seen to be in competition with potential referral arrangements such as optometrists or other retail locations," Mr. Gurman said. "The referral of cataract patients and other procedures is viewed to be more valuable than the profits derived from the sale of eye glasses." Sometimes, medical practices with optical sales are less valuable for large practices to acquire, he said. 7. Disrupters may affect health care M&A. The merging of technol- ogy with health care—and just about everything else—has started to affect M&A activity, Mr. Wybo said. He ex- plained how companies like CVS and Walgreens, technology firms like IBM Watson, and large insurers increas- ingly use their capital, technological expertise, and advanced databases and data analytics to "disrupt" health care and better target and retain the loyalty of health care consumers. Telemedicine is another disrupter that alerts the doctor and patient interaction, he added. This focus on big data, big capital, and big cash flow will continue to influence all of health care, including M&A trends, Mr. Wybo said. Kenneth Kaufman, chair of the Skokie, Illinois-based firm Kaufman, Hall & Associates, has done a good deal of research in this area, Mr. Wybo said. 8. Changes under the new presidency may not change cur- rent M&A trends. President Donald Trump has said he may repeal ele- ments of the ACA, leaving it uncer- attracts the attention of health care practice buyers, Mr. Wybo said. It also helps that a number of patients are willing to pay out of pocket for premium eye services, therefore re- ducing the risk of a potential revenue shortfall if insurance payers continue to withhold/reduce reimbursements that fail to meet ever stringent quali- ty and value standards. Despite these advantages, prac- tices will need to stay lean if they want to be considered for a merger or acquisition. "Medical practices that can stay ahead of the curve by reduc- ing costs and implementing electron- ic health record systems and data analytics for quality measurements will maximize their reimbursement potential and be more attractive in the marketplace," Mr. Wybo said. 4. Ophthalmic ambulatory sur- gery centers (ASCs) are attractive to hospital buyers. Although hospitals once viewed ASCs as competitors, the increasing emphasis on cost cutting and providing value in less costly settings has led hospitals to recognize the benefits of ASCs, Mr. Wybo said. "This has contributed to the recent appeal of ophthalmic ASCs that have become increasingly qualified and experienced at providing safe, efficient, and high-quality care at much lower costs than hospitals," he said. Ophthalmic ASCs can benefit from hospital affiliation with better negotiating power with non-gov- ernment insurance carriers and a larger pool of skilled employees; they also can leverage the hospital name for successful marketing. Mr. Wybo cited the St. Johns Providence Health System in Michigan, which recent- ly formed a partnership ASC with ophthalmologists to form the Eye Surgery Center of Michigan. 5. Hospitals and larger practic- es aren't the only entities pur- chasing practices. Private equity involvement has made inroads in the purchase of practices, Mr. Wybo said. "Private equity interest in specialty providers is growing due to increased competition for facility-based orga- nizations like traditional hospitals

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