Ophthalmology, a Visionary Future for the Healthcare Industry
The M&A sector of healthcare is one that is always looking for the next great area to invest in. Be it for Ambulatory Surgery Center purposes or just another lucrative investment in a private equity group’s portfolio, the next great venture is always on the horizon for potential buyers and investors. One of the latest fields that investors are interested in is Ophthalmology and the services that it can provide to both patients and managers in the business.
The Ambulatory M&A Advisor has looked into the Ophthalmology field and brings its readers an in-depth view of what the healthcare sector has to offer to potential buyers, what types of sales are going on in the field, the challenges and benefits to Ophthalmology and the ways that the industry is changing for better or worse.
Jo Burnett, Executive Director of Pacific Vision Foundation, a non-profit with the sole purpose to support the residency program, patient care and research activities the Ophthalmology California Pacific Medical Center, also a division of Sutter Health says that for investors looking into the field or physicians looking to start up a new practice for future sale, there are several appealing traits in the field.
“If you are a physician, the reason why it is an interesting specialty to be in, is because there is an enormous need for people needing vision care, and there are not enough Ophthalmologists to serve the aging population,” Burnett says.
“People often think it is eyeglasses, and they confuse the difference between Optometrist and Ophthalmologist. An Ophthalmologist is a MD, went to medical school, and chose to specialize in various in cataract, cornea, glaucoma, plastic surgery, pediatrics…all of these are sub-specialties within Ophthalmology. It is a very complex field and there is quite a bit of surgery involved, so it appeals to people who like this very complex way of treating patients.”
For a physician choosing a specialty, Burnett says the field has a certain allure due to the American Academy of Ophthalmology, which has 30,000 members across the country who participate in the organization. Those numbers alone could be reasons why one might choose to become an Ophthalmologist or invest in the field.
As far as challenges go, Burnett says one of the biggest challenges is the Medicare shrink on the field.
“With all of the talk about the Affordable Care Act and any changes to it, nobody is talking about adding provisions to provide vision care. If you are Medicare it will cover your eye surgery, but will not actually pay for the standard care,” she says.
“For people who don’t have means and fall in that crack without vision insurance, all of a sudden, they could be faced with a rather large bill, and the doctor can’t give it away for free. That is the big challenge; as Medicare shrinks their reimbursement, other insurers also shrink, and then the patient is under the gun to spend more money eyes are something that you can neglect, and unfortunately, some people neglect them when they have to.”
Kyle Cooke, owner of Mansfield Vision Center says that although they are different fields, the lines do blur between Ophthalmology and Optometry.
“Pretty much, an Optometrist can do just about everything an Ophthalmologist can do with the exception of any surgical procedures like lasik or cataract surgery, or laser surgery to the retina. As far as getting prescriptions for glasses, contacts, and treating surface eye disease, an Optometrist is on a fairly level playing field as an Ophthalmologist,” Cooke says.
Trends in the Field
Bruce Maller, President of BSM Consulting says that when discussing trends in the field, there is a lot of consolidation activity driven by a number of key macro trends.
“I think the primary driver is the continued shift or trend in terms of the aging of the population. When you look at all of the aging trends across America you can correlate that trend with the prevalence and increase of eye disease and the requirements for more treatments among the demographic. These types of diseases are more prevalent in the older aging population, hence if that percentage of the total demographic is increasing, you are going to see a greater prevalence in eye disease and the requirement for more treatment,” Maller says.
“You also have an overall trend that is impacting physicians in all specialties, and that is the increase in the legal and regulatory burden. That makes it difficult to practice as a smaller independent practitioner or a small group practice, because there is a certain amount of cost associated with maintaining compliance today, and that cost makes the effort to work difficult, so many practitioners choose to join others or aggregate into larger groups so they can more effectively manage some of the regulatory changes.”
A third dynamic which is somewhat unique to the field is an increase of monies which are being deployed into new technologies for various treatments. Maller says that over the past 10 years, there are new technologies for treatments of cataracts, retinal disease, glaucoma, and those innovations are driving interest in the field from financial investors. Coupled with that, is that Ophthalmologists offer many types of elective or cash-pay services that are not depended wholly on third party reimbursements as is the case with other specialties. In Ophthalmology, there are elective procedures such as lasik and that offers the ability for the surgeons to charge patients over and above what they would normally get paid from a third party payor.
“I think those are some of the bigger trends that are impacting the space and making it attractive for investment,” Maller says.
As far as current trends in the field, Cooke says there is a lot of improvements with technological advancements so it is probably going to eventually drive those costs down for patients.
Cooke says that technological advancement in the field is not such a bad thing, but as time goes forward, it is going to be interesting to see how that trend affects a mom and pop place like his. That is probably the biggest trend impacting the field in his opinion.
When discussing other challenges in the field, Cooke says a lot of vision companies feel like they are under-compensated by most vision insurance plans. The challenge is not so much filing medical with something like Medicare, because things are being reimbursed fairly well, maybe slowly at times, but they still reimburse. The challenge is that there are vision companies taking over smaller companies and they are setting reimbursement costs for doctors and requiring the doctors to meet certain visionary goals. So very slowly. the private doc is losing a bit of control with the work that they do due to vision insurance companies and larger companies in the field.
ASCs and Ophthalmology
Although many ASCs already have Ophthalmology procedures in place, Maller says this is still a lucrative area for ASCs that solely focus on the specific area of Ophthalmology.
“Over the past 25 to 30 years, there has been a shift of Ophthalmic surgeries away from the hospital outpatient department to the ambulatory surgical center. Today, based on some surveys I have seen, probably 80 percent or more of Ophthalmic surgery is performed in the ASC. I think it is great for patients. It is a very convenient experience for patients versus having to go to the hospital’s outpatient department. The cases can also be performed in a very efficient way, and the reimbursements are reasonable in relation to the expenditure of resources to the surgery center,” Muller says.
“As the result of that, you can drive a high amount of volume, and in the case of eye surgery through an ASC, so it turns out to be financially an attractive option under most circumstances. In some cases, if the center is not set up to do eye surgery, adding eye surgery may not essentially drive up the same type of efficiency.”
Burnett concurs with Maller and says that ASCs provide investment opportunities the Ophthalmology field.
“Running a good surgery center is another element to the field. It used to be that eye surgery was done at general hospitals. 30 years ago, if someone needed their cataracts done, they became an in-patient. Things have changed so much that today, almost every eye surgery is done in an ASC where a person comes in and then goes out the same day. A few things are still done in general hospitals, but in general eye surgery is performed at ASCs across the country,” Burnett says.
“One of the things that makes ASCs unique and profitable is again, eye surgery is extremely precise. You need team that knows how to manage the patients, specifically eye surgery. One would not perform an Orthopedic surgery in the same kind of operating room as you do an eye surgery.”
If you have an interest in learning more about the subject matter covered in this article, the M&A process or desire to discuss your current situation, please contact Blayne Rush, Investment Banker at 469-385-7792 or Blayne@AmbulatoryAlliances.com.