To Private Equity or not to Private Equity?
Here’s a tool you can use. Consider the following questions to assess whether PE investments might be worth exploring for you.
Score yourself (and/or your practice) on a scale of 1 to 5.
Questions
Your response
(on a scale of 1 to 5)
1
Is there a lot of competition in your area?
1 – low (we dominate our area)
2 – somewhat low (only a few groups offer what we do)
3 – moderate (there’s competition but it’s not threatening)
4 – high (there’s high competition for what we do)
5 – very high (weworry about losing patients to competition all the time)
2
How are your practice financials?
1 – weak (we are barely surviving)
2 – somewhat weak (we are in losses year after year)
3 – moderate (we spend all that we make)
4 – strong (we do make reasonable profits)
5 – very strong (we are highly profitable)
3
Are you under pressure from your hospital?
1 – no pressure (hospitals are desperate for our services)
2 – some pressure (we are watchful)
3 – moderate pressure (hospitals keep making us offers)
4 – threat (there’s ongoing threat from hospitals)
5 – strong threat (we strongly fear that hospitals will grab our referral base)
4
Do you have reasonable contracts from your insurance companies?
1 – weak (poor contracts or I don’t know)
2 – somewhat weak (competition seems to have better rates than we do)
3 – moderate (we have okay rates but could do better)
4 – strong (we get paid well on important services)
5 – very strong (we are able to periodically increase our rates and get paid)
5
Is your billing maximized?
1 – very poor (we lose a lot of money or I don’t know)
2 – poor (we keep leaving money on the table)
3 – moderate (we could do much better)
4 – good (our billing is effective)
5 – fully maximized (we collect maximum possible)
6
Are you entrepreneurial?
1 – not at all (I keep out of all non-clinical aspects)
2 – somewhat (I do whatever is needed)
3 – moderately (can’t say one way or the other)
4 – highly (I enjoy managing the practice and others)
5 – very highly (I’m often seen as the connector in my region)
7
Are you frustrated with administrative work (billing, staffing etc.) you need to do to stay in practice?
1 – very frustrated (I detest everything outside of clinical work)
2 – frustrated (I limit myself to only those tasks that are absolutely needed)
3 – moderately tired (I tolerate administrative work)
4 – energized (I enjoy administration)
5 – highly energized (I excel at practice administration)
8
Are you close to retirement?
1 – very early (just got started)
2 – early (many years left)
3 – in the middle
4 – close (few years left)
5 – very close (almost there)
9
How are relations amongst partners in your practice?
1 – weak (we dislike working with each other)
2 – somewhat weak (we tolerate each other)
3 – moderate (sometimes ok, sometimes not)
4 – strong (cordial relations)
5 – very strong (we have fun together)
10
How comfortable are you with forgoing autonomy in non-clinical decisions?
1 – definitely uncomfortable
2 – somewhat uncomfortable
3 – moderately comfortable
4 – somewhat comfortable
5 – quite comfortable
11
If your colleagues sell to PE and make money, how would that make you feel?
1 – miserable
2 – bothersome
3 – somewhat bothersome
4 – almost no effect
5 – makes absolutely no difference to my life
12
Seller’s remorse is a feeling of regret after acquisition. If you sell out and things don’t go as planned, how would that make you feel?
1 – highly confused (I’d be frustrated)
2 – confused (I’d look for ways to buy back)
3 – somewhat frustrated
4 – progressive (I’d look ahead to make the best of the decision)
5 – highly progressive (I’d focus on making the decision right)