Value-based care

Will Private Equity Achieve Its Goals in Ophthalmology? 

By Maria Shinn Bouck

Blog    Will Private Equity Achieve Its Goals in Ophthalmology? 

Private equity is greatly expanding its influence in ophthalmologic medicine. Investors are eager to acquire ophthalmology practices, usually intending to slash costs, consolidate with other practices, and resell at a profit. What's more, private equity firms are paying top-dollar for ophthalmology practices. Why? 

As the population ages, the need for eye care increases. The only way private equity firms can make sought-after profits from their recent investments is to grow acquired ophthalmology practices at a scale that truly reflects the shifting demographics of our population. This is the bet private equity is making. 

For their new owners to win this bet, acquired practices must be combined into larger, more tightly organized, more efficient organizations. Service offerings such as comprehensive ophthalmology, ambulatory surgical centers, retina care, and optometry must be combined as well. Simply put, private equity owners are under the gun to grow and scale up operations. 

Pathways to private equity goals

How can a private equity firm grow a portfolio of ophthalmology practices, post-acquisition? One way is to increase the number of patients seen per business day. However, this approach is not always feasible: Capacity for new patients may be depleted or opportunities to attract new patients may be limited. 

A second approach is to negotiate new contracts with third-party payers. Because the organization is now bigger and responsible for more covered lives, private equity owners may be in a better position to negotiate compared to provider-owned practices. Access to enterprise-wise business intelligence to show added value is important to equity stakeholders in such negotiations.

Most private equity firms have an exit strategy with a five to ten-year time horizon. By the end of that five to ten years, they must be providing care for more patients, earning more money per patient, or both. And the scale of business operations must be improved as well; the business office must be leaner but managing more money.

Get more juice out of the squeeze

Some private equity firms are learning a painful lesson; they lack the business intelligence they need to get more juice out of the squeeze—that is, achieve increases in efficiency and higher levels of profitability from the consolidated practice. 

One reason: many times, practices purchased and combined into a single business entity are on disparate EHR and practice management (PM) platforms. Private equity owners try to bang and patch together these disparate systems to run clinical and financial operations more efficiently and gather business intelligence. 

Given their tight time horizon and ambitious goals for profitability, private equity owners of ophthalmology practices should seriously consider whether the disparity of EHR platforms in their portfolio of practices will meet their needs when its time to scale up operations and foster growth. The question becomes: What does private equity need from an EHR?

What private equity needs from an EHR

For private equity, it is essential that an EHR platform offer access to business intelligence, support for the central office, and scalability.

Business intelligence

The EHR must support gathering business intelligence across a portfolio of practices. Strong business intelligence can help private equity compare financial metrics to determine which practices in the portfolio are underperforming and need more careful management. 

For example, the EHR should support access and analysis of data to compare clinical practice parameters or profitability measures, or specific metrics such as A/R liquidation. Ideally, the EHR should allow easy access to this data online via a web browser or smartphone.

Access to business intelligence is also essential when negotiating rates with third-party payers. For example, the EHR should enable private equity owners to obtain data on disease burden management and covered lives per payer and take this information to market when renegotiating rates.

Central business office support

In addition, the EHR should support the functioning of an efficient central business office, including maintaining a one-stop shop for managing billing and processing denials. Inline edits should be powerful enough to be applied in all circumstances across the portfolio of practices and flexible enough to accommodate variances due to the marketplace or different third-party payers. The central office should be powerful enough to manage claims statements and submissions from a single location.

The EHR should also support the central office in bad debt management and contract management. Ideally, it will offer a rules-based engine for dispersing key tasks to right-level office resources. 

Scalability

Private equity owners need a scalable enterprise platform. Their EHR must have the ability to consolidate key functions when onboarding new practices and allow for ambitious growth without a proportional increase in administrative costs. It should support clinical integration and registry reporting at the enterprise level. 

Private equity meet NextGen Healthcare

Many private-equity practice owners are not aware that NextGen® Enterprise is ideally suited for their needs. For example, NextGen Healthcare's approach to revenue cycle management is a good fit for private equity firms: With NextGen® Enterprise PM, the central business office is set up so staff can support the entire enterprise, freeing private equity stakeholders to focus on strategy—instead of the day-to-day drudgery of running a medical office.

Enterprise financials

NextGen Enterprise PM can accommodate your enterprise financial reporting and business intelligence needs. Get insight into advantageous payer arrangements in real time. Streamline accounting processes, manage resources more effectively, improve cash flow, and enhance revenue.

Services aligned with private equity needs

NextGen Healthcare will optimize your data base, reconcile claim files, send out claims and statements, post payments, implement automation where needed, and more. You gain access to a suite of solutions including ophthalmology-specific content, claims scrubbing and denial prevention rules engines, and tools for data transparency and analysis across the enterprise. Further, we offer cloud-based hosting via Amazing Web Services so as not to overtax hardware resources. 

A true path to greater efficiency

NextGen Healthcare offers mobile integration with the EHR, allowing clinicians to document care and capture charges on their smartphone, whenever and wherever it's convenient. Mobile technology is a powerful time-saver and an important way to deliver the higher level of efficiency that private equity firms need. 

A dedicated client manager

Private equity firms will also benefit from the services of a client manager who will assist them as their needs grow, making sure the expanding enterprise is getting the most value from its EHR and PM platform. Your client manager will collaboratively review key performance indicators, proactively help you identify and work through challenges, and advocate for any necessary software or technology support resources. 

Scale up without increased cost

The private equity firm can pay a single rate for an all-in package with flexible pricing as the enterprise grows. This allows for scale up without proportionately increasing costs, driving profit to the bottom line.

How to meet your goals

Will private equity meet its goals in ophthalmology? Only if you work with a trusted health IT partner who understands the urgency of your need for growth. Private equity—meet NextGen Healthcare.

 


Maria Shinn Bouck

Sr. Director, Managed Services Solutions

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