The COVID-19 pandemic has wrought a swift and unprecedented impact on the United States economy following implementation of efforts to fight the spread of the disease, including the forced closure of many businesses and issuance of stay-at-home and shelter-in-place orders across the country. Unlike preceding recessions and economic shocks during which healthcare providers have generally fared better than many other sectors, governmental orders limiting non-emergency visits and procedures have caused many physician practices and other clinic-based providers to experience staggering declines in patient volumes, almost overnight. Through mid-April, volumes for various medical specialty practices have declined between 30 to 75 percent.[1] Physician Practice Management (“PPM”) organizations are no exception, although some may be better equipped to handle the downturn. Looking forward, many participants in the PPM space are optimistic that the outlook for these organizations remains positive and expect robust transaction activity to resume once the pandemic is contained.

In addition to the sharp decline in patient/procedure volumes, there are many potential short-term and longer-term impacts to physician practices and PPMs resulting from COVID-19. The following list highlights some of the operational and financial considerations that will challenge PPM platforms in the coming months and years.

Private equity firms have more than $2 trillion in uncalled capital and many operators in the PPM space expect robust transaction activity in the second half of 2020 and into 2021. 2020 Transaction activity got off to a strong start pre-COVID-19, and some PPM transactions that kicked off prior to the pandemic have closed, including deals in gastroenterology, ophthalmology, and behavioral health. While very near-term transaction activity will likely be muted due to uncertainty surrounding the duration of stay-at-home and shelter-in-place orders, there are many factors that point toward a strong rebound in deals once the outlook becomes less uncertain.

In a recent article by Bain & Company regarding the impact of COVID-19 on private equity, the authors indicated sector expertise would be crucial to generating strong returns going forward.[8] With over 20 years of experience in healthcare valuation and transaction advisory, HealthCare Appraisers is well positioned to guide PPMs toward stronger future performance. Specifically, PPMs may need outside expertise in the following areas of transition:

Many operators in the physician practice and PPM space expect robust transaction activity later in 2020 and beyond due in part to the impact of COVID-19 on independent physician practices. HAI’s expertise and experience in providing valuation and consulting services for these transactions can be an invaluable resource for platforms and their physician partners. Contact one of our experts today.

[1] Medical Economics. “Physician Practices Reeling From COVID-19 Financial Losses.” https://www.medicaleconomics.com/news/physician-practicesreeling-covid-19-financial-losses. Accessed April 30, 2020
[2] Healthcare Dive. “Doctors Say COVID-19 Has Slashed Patient Volumes, Made Finances Shaky.” https://www.healthcaredive.com/news/doctors-say-covid-19-has-slashed-patient-volumes-made-finances-shaky/575876/ Accessed May 1, 2020
[3] Google. “Connecting People To Virtual Care Options.” https://blog-google.cdn.ampproject.org/c/s/blog.google/technology/health/virtual-care-covid-19/amp/ Accessed May 1, 2020
[4] Modern Healthcare. “APPs Hope That Temporary Scope of Practice Tweaks Bring Lasting Change.” https://www.modernhealthcare.com/operations/apps-hope-temporary-scope-practice-tweaks-bring-lasting-change Accessed May 1, 2020
[5] Modern Healthcare. “Private Equity-Owned Doc Practices Shut Out of Small Business Bailout.” https://www.modernhealthcare.com/finance/privateequity-owned-doc-practices-shut-out-small-business-bailout Accessed May 1, 2020
[6] Senior Housing News. “McFarlin Group Raising $100M Fund to Target COVID-19 Distressed Senior Housing.” https://seniorhousingnews.com/2020/04/13/mcfarlin-group-raising-100m-fund-to-target-covid-19-distressed-senior-housing/Accessed May 1, 2020
[7] Reuters. “As Coronavirus Fears Grow, Private Equity Eyes Distressed Investments.” https://www.reuters.com/article/global-privateequity-distressed/ascoronavirus-fears-grow-private-equity-eyes-distressed-investments-idUSL5N2AQ4WY Accessed May 1, 2020
[8] Bain & Company. “The Impact of COVID-19 on Private Equity.” https://www.bain.com/insights/the-impact-of-covid-19-on-private-equity/ Accessed May 1, 2020