My Experience Selling To Private Equity (Part 1 -- the Good)

Preface

There has been much written (and talked about) in Ophthalmology circles about how private equity has impacted our field.  Many of these sources of information have no actual personal experience with the process, or are significantly biased either for or against private equity (PE) being in our field.  I find that many people's opinions are based on self-validation:  i.e. they want to justify whatever has happened in their lives.  For example, many of those that work for Kaiser believe that their model of healthcare delivery is superior, and that anyone who owns a private practice must be swamped with administrative work on the weekends and/or they are practicing unethical Medicine.  Similarly, those who were left out of the recent flurry of PE-backed acquisitions demonize PE as the "end of Medicine" or can only point out its negatives without even having personal knowledge of the acquisition details.  Conversely, those who sell to PE tend to sugarcoat it to make their lives and careers seem better than reality especially if they are writing for a throwaway journal article. 

I am writing just to give you my personal experience with being acquired by private equity.

Background

I am a comprehensive Ophthalmologist who performs mainly cataract surgery, LASIK, as well as a variety of other anterior segment procedures (e.g. trabs, tubes).  My practice has its own ambulatory surgical center (ASC), optical shop, and a few satellite offices.  We employ some optometrists and also co-manage some of our cataract surgery with referring ODs.  Prior to being approached by private equity, my take home compensation was low 7-digits, so I was far from "needing" to be bought out.  I am a mid-career eye surgeon, though I wish I could still consider myself a "YO" (Young Ophthalmologist)!  So when PE came sniffing around, why would I consider giving up my autonomy since all the gears of my practice were chugging along?  Well first of all, I was introduced to the concept by some other very prominent eye surgeons who I greatly admired for their surgical skill, ethics, and business acumen.  These leaders, who were the initial acquisitions of the PE group, introduced the concept of being part of the "platform" (i.e. first ones in) and its financial benefits.  Second, given the climate of ever-declining reimbursements (20% cut in surgeon fees anyone?) and the writing on the wall that we may be heading to socialized medicine, I saw a PE-buyout as an attractive hedge against future turmoil (more on this later because of COVID19).  Third, the buyout amount was just too good to pass up.  Sure, I could probably earn more money over the course of a long career if I retained full ownership.  However, that assumption was based on two main premises: 

1. I continue to be just or even more productive over my entire career.  I like working, at least for now.  But to assume that I would never fall ill, lose some of my energy, or just burn out was presumptuous.  As you get farther into your career, you will realize there is more in Life than just eyeballs.  So part of me saw this buyout as a way "out," if I ever decided to take an early retirement from eyeballs and pursue other interests.
   
   
2. I can stay disciplined and maintain the same savings rate.  As most of you probably know, there is a difference between "making a lot of money" and actually being "wealthy."  The former premise is based on annual compensation while the latter, more important, concept is based on how much of that compensation you actually save.  When you make a lot, I believe there is a natural tendency to justify increased spending habits because you can always "make it up" by your next month's distribution.  Obviously, such spending habits are not conducive to true wealth building.  For me to have the same or greater amount of money (compared to the PE buyout) after "x" years of working assumes that I still have the same savings rate.  I was honest with myself and doubted that I could maintain the same savings rate to achieve the same net proceeds as the PE buyout.  I also knew that I would be better at saving if I had to protect a tangible nest egg (e.g. additional funds from buyout) versus saving toward a non-specific target dollar amount.