Eyeworld

September 2017 • Ophthalmology Business 19 Mr. Alpern said practices need to realize that it's a misconception that private equity can come in and make something that was marginally good into something exceptional. "We cannot do that," he said. "At the end of the day, our job with you as partners is to make mul- tiples on our capital; the way we do that is to grow an organization the right way with the right people and preserve the entrepreneurial culture that was there at the beginning … and most importantly not get in the way of a great clinical product. If all those things come together, you can be successful," Mr. Alpern said. Mr. Wilde thinks the trend to- ward private equity partnerships and other mergers is showing "no sign of slowing down," in part because ophthalmology is still relatively fragmented. "My encouragement would be for folks to at least start thinking about this. Private equity or some other form of partnership, consolida- tion is inevitable. You are best served by preparing your processes … to be ready for that consolidation to come. You want to be in the driver's seat on that," Mr. Wilde said. "Just be ready to hold on," Dr. Katzen said as a final piece of advice for those considering such a partner- ship. "It is an exciting time in the business side of ophthalmology." OB Contact information Alpern: DA@varsityhealthcarepartners.com Graber: cgraber@waudcapital.com Katzen: bkatzen@katzeneye.com Kothari: rajk@cascade-partners.com Lindstrom: blboff@mneye.com Maller: bmaller@bsmconsulting.com Wilde: blwilde@mneye.com Managing growing pains It's important for physicians used to running the business of their practice to realize that after this partnership, "you're not the boss anymore," Dr. Katzen said. "You have to be willing to let your new partner's management team hire and manage your staff and run the revenue cycle with your partner overseeing the whole process." He added that it took him some time, after managing the business aspect for so long, to decompress from that and focus solely on being a doctor. "I think the biggest thing is the hassles are gone. The problems that we used to face every day about em- ployees or staff or other issues that were not part of healthcare that do grind on you are gone. It lets doctors be doctors. … I spend more time with patients than I ever did," Dr. Katzen said. Some might see the loss of complete control that comes with a private equity partnership as a neg- ative, but Mr. Graber said it's a mis- conception to think that the private equity firm is unilaterally running the business. "It's still the people on the ground who are responsible for running the organization, both the clinical leadership as well as the administrative and executive leader- ship," he said. Mr. Wilde said that private equity relationships also might want to move quicker than physicians are used to. "The speed with which you do everything goes to a different level— in a good sense," he said. "You need to be prepared that the cadence is going to be amped up." have to ask yourself, is the structure we create something that's going to be attractive to those younger surgeons?" Dr. Katzen said negotiations took about 6 months until his deal was complete. Mr. Wilde said from the idea to partner with private equity to selecting a partner and completing the deal took about 18 months for Minnesota Eye, but he foresees this process going faster in the future for practices as more in the space enter into these partnerships. Private equity's perspective Mr. Alpern and Mr. Graber shared their thoughts on why ophthal- mology is garnering private equity's interest at OIS@ASCRS. Mr. Alpern said there will be a supply and demand imbalance, correlated with the aging population. This, he projected, will spur rapid growth in the eyecare space with a relatively small workforce to treat it. "As an investor, you look for places where there is going to be reliable growth uncorrelated with the economy, and I think that's very much ophthalmology," he said. The fragmentation of the oph- thalmic industry affords private equi- ty the opportunity to help individual practitioners manage their practices better, which Mr. Alpern thinks will result in better patient care. Mr. Kothari said there is a mis- conception among some physicians that bringing private investment in will shift the focus from quality of care to growth. He finds that's not true as private equity has learned that "you can't grow unless you have really good quality."

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