Should You Sell Your Practice?Anesthesia

For most anesthesiologists, owners of endoscopy anesthesia services, or pain management specialists, this question evokes a strong emotional response.  After all, your practice is your life’s work. Your answer is either a resounding “no” or a reluctant “yes”.   You might not want to think about it now. But someday it will be time to move on, cut back on your responsibilities, or retire, and you’ll want to sell your shares with the best possible financial outcome.

So, the better question is: When is the best time to sell your anesthesia practice?

Let’s face facts: stuff happens. You lose a contract, reimbursements decrease, a partner leaves, or you become ill. Don’t let circumstances force your hand into selling at a less than optimal time.

You want to make sure the timing is right because:

 The value of your shares fluctuates depending on profits, contracts, competition, and more. Furthermore, we discovered that delaying a sale in a hot market will cost your group millions even if you never ever sell.

 You want to sell when buyers are eager. Are there potential buyers out there now who are willing to pay what the practice is worth? Or more? Consider the potential future salary you’ll be giving up. Large companies with insurance company relationships may stand to earn much more than you ever did, and they should be willing to pay you accordingly.

 You deserve to get the most out of your investment. After all, the time and expertise you’ve put into growing your practice are impossible to put a price on.

At AnesthesiaStat, we are dedicated to helping you get the timing right. We have over 15 years of experience keeping a sharp eye of the ups and downs of the anesthesiology market, and how it is affected by Wall Street, medical trends, and demand. What we have discovered is that right now exists a small window of opportunity for certain groups to earn maximum price for their practice, keep most if not all of their current compensation, while potentially paying the partners a 7 figure sum each.

Here is an example of how we helped one of our clients receive the best possible price for the sale of their practice.

We considered the practice’s revenues and contracts, determined the current value, and presented the future value to the Anesthesia Management Company (AMC) that was interested in purchasing the practice:

Our Client’s Current Revenues

Our Client’s Future Revenues with the AMC

Increase

Revenues

$25,046,566

$48,089,407

$23,042,841

Units

932,862

932,862

Percent Private Insurance

59.6%

59.6%

Average Units Collected

$25

$48

$23 per unit more per case

Numbers were multiplied by a factor to comply with Non-Disclosure Agreement

Though the purchaser did not share their contract details with us, we were able to determine that the purchaser’s existing third party payer contracts would double the group’s revenues.  Even if nothing else changed, the increased revenues would come in the form of profits for the buyer.  That factor made the group very valuable, much more so than their existing $25 million of revenues or EBITDA.  That knowledge allowed us to consult with our client to reject the offer and eventually sell at double the price that was originally offered. When the buyer publicized the purchase of the group, they announced an estimated future revenue that was in line with what we had estimated. The reality is that most groups sell for much less than they are worth.

What should you do now?

Remember, this is about timing and knowing when you can maximize your investment. Even if you aren’t considering selling your practice now, you will want to some day.  Be prepared: it is critical that you get a free assessment of your group’s current revenues vs. future revenues; we provide that service for free at our contact page:

http://www.anesthesiastat.com/contact-us.php. We will provide you with a more accurate picture of how much your practice is worth — It might be considerably more than you expected. Most importantly, the assessment helps you decide when it’s the best time to sell.

Next month: How To Negotiate The Highest Sale Price For Your Anesthesia Practice and why a delay will cost you millions even if you never sell your group.

Why you Should Sell the Anesthesia Part of Your GI Practice —NOW.

A new market for physician practice acquisition has developed. ASC (Ambulatory Surgical Centers) owned Anesthesia practices and GI Anesthesia groups, which hold long-term contracts with Gastroenterology ASC’s, are now in demand. Larger companies are snapping them up at good prices. It is definitely a seller’s market — for now. You should take advantage of this situation.

Your Contracted Rates are Probably too low

Current reimbursement contracts from insurance companies for patients treated at GI Anesthesia practices tend to be 25-30% less than what larger, dedicated Anesthesia groups can negotiate. This means your practice is at a disadvantage financially. You’re just not close. Large anesthesia groups can make more money than you can from your smaller practice, and they are willing to pay you accordingly.

Financial Pressures Are Increasing

Reimbursement for GI Anesthesia services is going to decrease.  For example, Alabama Blue Cross/Blue Shield is considering a reimbursement of only 25% for the use of Propofol.

Compliance in order to receive reasonable reimbursement is also becoming more difficult. The challenges of implementing ICD-10 and demonstrating Meaningful Use are just two examples.

Managing the staffing and benefits for Anesthesia providers can be painful as well. As practicing Gastroenterology becomes more complicated and more costly, many Gastroenterologists find it is tough to properly manage the challenges of their Anesthesia business endeavors.

Why Do Larger Companies Do Better?

Balancing reimbursement and compliance risk/burden is their expertise.  More important, they can leverage the earnings (EBITDA) of acquired practices with Wall Street and/or private equity money to finance the acquisition of more groups. Size creates efficiency, savings and benefits for investors. This creates opportunity for GI groups beyond sales to hospitals or other physicians.

In one example, a company purchased a large GI group in Georgia. They followed this purchase with two smaller ones in March 2015.  They believe they have the potential to not only grow revenues via future accretive acquisitions but also through organic growth of the acquired business.

In a more recent transaction (AnesthesiaStat was the consultant), the seller was able to achieve a market-leading multiple after careful consideration and skilled negotiation.  Medical, business and legal questions added complexity and required care, but AnesthesiaStat managed these issues adeptly.

Make the Deal Yours

AnesthesiaStat can also help you consider other options. For example, a partial sale can help maintain some cash flow and allow you to benefit from better management and “income repair”.  Individuals worried about out-of-network charges and balance billing can address these concerns during the negotiation. Anesthesia staff is typically maintained, but new staff can be hired if desired.

Selling a GI Anesthesia practice allows you to cash out now, when the market is favorable, avoiding future risks. The buyer can use its superior management skills to get better reimbursement and reduce anesthesia billing, compliance and collections costs.  The key for you is to make sure you receive a price commiserate with your practice’s earning potential.  The advice and support of AnesthesiaStat will help you achieve this. More information is available at anesthesiastat.com.

GI Anesthesia– The New Frontier.

Do you want to sell the Anesthesia Component of Your Practice?

An interesting new market of physician practice acquisition is developing.  GI Anesthesia groups which hold long term contracts with Gastroenterology ASC’s as well as ASC owned Anesthesia practices are starting to be purchased by a couple of large companies.  The multiples are great and this is definitely a sellers market— for now…….

Why would one do this?  Reimbursements are declining and threatening to go down or become bundled.  Compliance is becoming more difficult.  As practicing your primary field becomes more complicated, are you really still able to properly balance other business endeavors?  This is why GI Anesthesia reimbursement by gastroenterologists tends to be 25-30% less than what dedicated providers can do.

What is the advantage for the acquirer?  Balancing reimbursement and compliance risk/burden is their expertise.  CRH, for example, made a recent purchase of Gastroenterology Anesthesia Associates, LLC with a maximum total purchase price of maximum total purchase price assuming achievement of all performance measures is US$73.2 million.  They followed this purchase with two smaller ones in March 2015.  As CRH States in the press release, “CRH believes this new platform has the potential to not only grow revenues via future accretive acquisitions but also through organic growth of the acquired business.”

Considering a purchase of your GI Anesthesia practice?  Its gives you the ability to cash out now and avoid future risks.  It allows you to find a stable partner for Anesthesia service management so that you can focus on growing your GI practice.  The acquirer can use its superior management skills to get better reimbursement and reduce anesthesia billing, compliance and collections costs.  A practice with growing volumes may even be given a premium valuation with the right negotiating support.  A recent group, for example, was offered a multiple of 6 based on growing volumes and practice improvements!   That’s why you need the advice and support of AnesthesiaStat Consulting to help.  Visit us at anesthesiastat.com for more information or email me at info@anesthesiastat.com.

 

(http://www.newswire.ca/en/story/1456663/crh-medical-announces-significant-acquisition).

Private Equity Investment in Anesthesia

In our first article we focused on the basics of anesthesia practice management companies. In this article we’re going to evaluate the specific topic of private equity groups and anesthesia.  We will discuss the basics of private equity and their desire to purchase Anesthesia groups.  Finally, we will discuss the steps you should take to either pursue a sale of your group or avoid one.

How to Save Your Anesthesia Group!

A quick look at the MGMA data over the past 10 years reveals a staggering trend.  Independent private anesthesia groups are quickly being replaced by Anesthesia Management Corporations and Hospital Employed models.  What is fueling the rapid change are decreasing hospital profits, decreasing insurance reimbursements, hospital consolidation, and the millions of dollars private equity firms are pouring into purchasing anesthesia groups.  Partnership tracks are becoming increasingly tenuous as the survival of the old anesthesia models wane.  Your group does not have to succumb to this trend.  You have all the control in your hands to save your contract, and I want to show you how.

Anesthesia Practice Management Companies (PMC’s)- Market Forces, Money and Growth

Anesthesiologists have a lot of questions regarding Anesthesia Practice Management Companies (PMC’s).  Once a small portion of practice, these corporations represent a rapidly growing percentage of anesthesia care in the United States.  It is estimated that several hundred million dollars will be spent this year to acquire anesthesia groups and gain market share.  There is an incredible amount of money flowing from capital markets and private equity into Anesthesia.  From a purely economic perspective, will this lead to the commoditization of Anesthesia Care and/or an improvement in the quality and availability of care?  This article (first of a series) will focus on the market forces leading to the growth of Anesthesia PMC’s.