Why are eye-care practices attractive to private equity?
If you own an optometry or ophthalmology practice, you’re well-aware of private equity interest in the eye-care market. That’s because this still-fragmented industry is highly profitable, thanks to a few factors, including:
Growth in out of pocket procedures
Aging demographics
Ambulatory Service Centers
Emerging technology
According to Review of Optometric Business, in 2018, 6.6 percent of all optometrists in the U.S. and 2.9 percent of ophthalmologists practiced in one of the private equity eyecare platforms. By 2022, that number grew to 16.46 percent and 14.52 percent, respectively, and the pace continues to ramp up.
Why does eye-care continue to draw interest from private equity? And is PE right for you? In this article, we break down optometry and ophthalmology trends that increase value and attract investor interest. We also share considerations for eye-care practice owners before selling to private equity.
Growth Trends in Optometry and Ophthalmology
Aging demographics
As the US population ages, demand for eye-care treatments for conditions like cataracts, glaucoma, or far-sightedness rises. These conditions become rapidly more prevalent with age, increasing 7 to 10 times by age 80. The rising demand is leading to market growth, as the 65+ population is projected to make up approximately 21% of the total U.S. population by 2030.
Growth in out of pocket procedures
Specific treatments like LASIK as well as many oculoplastic procedures are elective, and therefore are not covered by insurance. Patients pay out of pocket, often at a premium, which improves a practice’s cash flow.
Elective eye procedures are becoming more common and more appealing to a larger demographic. In addition to medical conditions or trauma treatment, oculoplastic surgeons can conduct a number of cosmetic procedures like eye lifts.
Ambulatory Surgery Centers
Ambulatory Surgery Centers provide outpatient treatments like cataract removals. They are an integral part of the business model to many multi-location practice owners because these highly-productive centers can perform a high volume of procedures and yield impressive revenue.
Emerging technology
Like other healthcare fields, new technology constantly brings with it efficiency, new capabilities, and better outcomes. Lasers, robotic devices, and implants are some of the innovations in ophthalmology that make the practice more profitable. These technologies offer less-invasive interventions, shorter procedure time, fewer complications, and enhanced outcomes.
How do I know if private equity is right for my practice?
If you are an independent practice owner in optometry or ophthalmology, an offer from a private equity group might be appealing. Independent practice owners face challenges, like insurance and staffing. Receiving an offer with high multiples and the opportunity to focus once again on patient care may be tempting. But is it right for you? Here are some things to consider before a transaction:
Is it the right partner for you?
Before accepting an offer, it’s crucial to conduct due diligence on the buyer–just as the buyer would on your practice. What value do they bring to your organization? How will they offer administrative support? Is their culture aligned with yours? Do they have a track record of success within the industry? And, most importantly, would you feel comfortable continuing your work as an employee to the organization?
Have you calculated the value of your practice?
If a PE group approaches you with an offer, make sure you have a thorough understanding of your own practice’s valuation. Work with an advisor who specializes in understanding not just your finances, but also your team, services, and systems and processes. Then, make sure any offer you vet is aligned to the true value of your practice.
What will happen to the culture of your business?
Before selling to PE, understand what culture and staffing changes might happen to your business. As an entrepreneur, it's likely you’ve built a business that reflects your own vision and values. Will they stay intact? You can expect changes to happen in a transaction, but make sure you (and your staff) are able to accept the future direction of your practice before signing.
Work with us to navigate healthcare mergers and acquisitions, compliance, and more
Marti Law Group’s experienced team specializes in helping healthcare practice owners and buyers navigate their most important business milestones. From start-up to sale (and everything in between) contact us to ensure and protect your long-term success.