Emerging Subspecialty

Podcast 18.10: Understanding The Increasing Acquisition Interest In Stand Alone Retina Practices

18.10This episode of PF Insights exclusively addresses the emerging popularity of retina practice acquisitions across the country. We'll discuss key differences between acquisitions of retina-only practices versus general ophthalmology practices, as well as several characteristics unique to retina-only practices that investors either see as an opportunity or risk. 


  • Stand-alone retina practice acquisitions versus retina practices as add-ons to general ophthalmology practice acquisitions  1:00 - 3:20 
  • The opportunity and risk of retina’s unique referral patterns  3:20 - 4:17 
  • Retina’s dependence and focus on injectable Macular Degeneration drugs  4:17 - 5:00 
  • How Retina’s unique recurring revenue sources are attractive to investors  5:00 - 6:25 
  • Potential threats to general ophthalmology referral patterns after acquisition  7:30 - 9:26 


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Eric:                       This is business, right. It's healthcare, but it's also a business. And private equity investors and investors generally are very interested in situations where there's a recurring revenue source. And the type of care that those patients gets happens to be recurring.

Narrator:                          Welcome to PF Insides hosted by the leadership of Physicians First Healthcare Partners. If you're a physician practice owner or an ambulatory surgery center owner and you're wondering how to navigate the mergers and acquisitions ecosystem, this is the podcast for you.

Andy:                       Hello everyone. Welcome to PF Insights. This is your host Andy Schneider. I'm the managing director at Physicians First Healthcare Partners. And with me I have Eric Yetter, our managing partner. Hello, Eric.

Eric:                          Hey, Andy. Good morning.

Andy:                       Good morning. This is episode 10, somewhat of a milestone. So, if you're listening to this one and this is your first episode, I urge you to go back and listen to episodes one through nine. These are pretty short form podcasts so it shouldn't take you that long. But we're here today and we are going to talk about retina practices. We have ... There's a lot of momentum in acquiring stand alone retina practices and I think a lot of physicians have looked at this as retina being an add on to a general ophthalmology acquisition. It's not always the case. There have been a couple retina only acquisitions across the country and we're starting to get more and more questions from physicians who are looking into it from retina.

Eric:                          And investors too.

Andy:                       And investors. That's true. We had sat down last week with an investor who at lunch told us, "We're looking for stand alone retina."

Eric:                          Yeah.

Andy:                       So ...

Eric:                          So a lot of momentum around retina practices, for sure.

Andy:                       Right. And so, let's go into maybe give us a couple reasons investors are interested and then a couple reasons that maybe other investors are hesitant and looking at only general ophthalmology practices on the front end before add in retina.

Eric:                          Yeah. So, retina's definitely different. Everyone knows that. And frankly, we really like working with retina practices. They're typically very sophisticated. They're typically very well run and they're typically very profitable. And that's one of the reasons why investors are very interested in them. Physicians who ... Retina physicians who talk to us are often kind of incredulous that a buyer would be interested in a retina practice as a stand alone acquisition. They've kind of always heard that buyers, as you said, Andy, will want to buy a general ophthalmology practice. And then maybe they would buy a practice that's kind of next door or is associated with it somehow.

Eric:                          And that's true. That's still an option that's on the table, but there's a lot of interest in them directly. And not necessarily with another general ophthalmology practice nearby. We do hear from investors two different things. We hear some investors who are very, very interested in retina and they see the benefits of it and the strength of it. And we also talked to other investors who are weary of it. And I think it comes down to what level of understanding does the investor have about retina and how retina works. And what do they see as an opportunity versus a threat. It's just like any business investment decision.

Eric:                          But at a high level, I would say what's unique about retina number one is the referral patterns. Referral to retina practices is different than referrals to general ophthalmology practices. Some investors see that as an opportunity. Some investors see it as a risk because another competitor could come and acquire a general ophthalmology practice and the referral pattern could change. Let's say that they put a retina physician in house and that retina physician starts doing more of the retina volume. That changes things. But again, others see it as an opportunity. It's a part of the care continuum. And a lot of investors want to acquire the full care continuum because it just makes sense. We're seeing vertical integration within healthcare period, and we're seeing horizontal integration within healthcare, but it's all going that way.

Eric:                          So, investors are interested in it for that reason. I think that the whole retina universe right now is very dependent and very centered around injectable drugs, macular degeneration drugs. And some investors, again, see that as an opportunity, something that they can improve on the cost side. If they create scale, they in theory will be able to get better prices on those drugs, better reimbursements, etcetera. Others see it as a risk. Technology could change. Technology could change for the better, too, make things more profitable for these practices. But, it's again, it's an investor education and appetite issue.

Eric:                          I think one part of that everyone will agree on though with especially, what AMD Injections, is that it's recurring revenue. I mean, you're seeing these patients in some cases monthly. It's not a patient getting one or two cataracts done in their lifetime.

Andy:                       Right.

Eric:                          We never want to talk about patient care as ...

Andy:                       Right. It's a different revenue pattern.

Eric:                          Right. This is a business. Right. It's healthcare, but it's also a business and private equity investors and investors generally are very interested in situation where there's a recurring revenue source. And the type of care that those patients get happens to be recurring. And that is very attractive to investors, I think. And retina physicians know this. They know how that is affecting their practice and how it's effected their practice starting in probably the mid 2000's. That really changed, I think what day to day life looked like for a retina physician. And there have been a lot of advances in surgery on the surgical side too. And it'll be interesting to see what happens over the next five or ten years. I know there are a lot of interesting things in development as there always are, but a lot of the people that we talk to and work with are doing clinical trials in those areas. So, it'll be cool to see where it goes.

Eric:                          The other thing that I would add too, is retina is retina's a little bit different than general ophthalmology because it's not a surgical. Retina physicians are doing surgeries, but there's not this huge opportunity to do a large volume of procedures in a AFC and create a lot of ancillary revenue, a lot of ancillary AFC revenue. It's a different ... It's a very practiced based specialty. It's a little different. But, like you said, investors are really interested in it and they've become more interested in it. I would say there's been a lot of advancement in their interest this year. Some of 'em are interested in acquiring retina practices anywhere. They're explicitly interested in retina. Others are more focused on one's in the same geography. That doesn't mean next door, it doesn't necessarily mean the same city. It might mean in the southeast or in the west. But, I think that retina is not ...

Eric:                          I want to be really clear and say I don't think that retina physicians should think that this is not an opportunity for them. This is absolutely an opportunity for retina only practices in addition to general ophthalmology practices. And going back to the first point you brought up about the specific referral patterns, I think we're seeing a lot of retina physicians that are interested in looking into an acquisition because of the potential threat to that referral base when an outside investor comes and makes an acquisition.

Andy:                       Right.

Eric:                          From one of their major referral sources.

Andy:                       Mm-hmm (affirmative).

Eric:                          Right. It's a good opportunity, but it can be slightly defensive as well.

Andy:                       Yeah, I mean, it cuts both ways, right?

Eric:                          So, a lot of the physicians we talk to are thinking about that. What if someone comes in and they acquire the general ophthalmology practice and they add a retina practice to that. They hire physicians, they hire retina specialists and start keeping those procedures in house.

Andy:                       Yeah, it's just like you said. They want the ... The investors want to acquire the full continuum of care.

Eric:                          Right.

Andy:                       And these regional retina practices that are close to some other big acquisitions, they want to be included in that full continuum of care.

Eric:                          Exactly.

Andy:                       And not squeezed.

Eric:                          Yeah. Yeah, exactly.

Andy:                       So, again, it's a complicated ecosystem and it really does cut both ways. It makes the sense on the physician side and it also makes sense on the investor's side for kind of the same complimentary reasons, I guess.

Eric:                          Great. If you're a physician out there listening to this and have more input as far as the retina acquisition space, feel free to look up our information, give us a call, shoot us an email, we'd be happy to discuss it with you. Find more resources on Physiciansfirst.com, check out our advisory resources page, white papers. There's a lot of great information on the website. We look forward to talking to you next time. Thanks for joining us.

Andy:                       Thanks.


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