With governments locking down communities to combat the COVID-19 pandemic, health care providers and practitioners scrambled to find ways to deliver care to patients at their homes or residences. CMS relaxed restrictions on providing health care via telehealth, allowing for all Medicare patients to receive care via two-way, audio and video communications, and even via telephone calls notwithstanding that patients may not reside in rural zip codes. Hospitals pivoted to providing services to patients in their homes, again using telehealth modalities or by deploying practitioners to a patient’s home. Skilled nursing facilities also adopted strategies of keeping patients in their homes, deploying needed skilled caregivers to the patient. And while home health services may have hit a lull in the first couple months of the pandemic, services provided by home health agencies soon started to soar. Home health agencies started to become busier than ever, with many providers reporting overall growth due to demand to receive services at home instead of hospitals, skilled nursing facilities or nursing homes.
Private money (e.g. private equity) is in full swing purchasing medical practices with large profit margins (e.g. dermatology). This is NOT the same thing as when physician practice management companies (PPMCs) bought practices the 90s. Back then, the stimulus for the seller was (a) uncertainty re practice profits in the future, and (b) the stock price. Selling practices got some or all of the purchase price in stock, with the hopes the purchasing company stock would far exceed the multiplier applied to practice “earnings” (the “multiple”). Buyers promised to stabilize and even enhance revenues with better management and better payer contracting. If the optimism of the acquiring company and selling doctors was on target, everyone won because the large stock price made money for both the buyer and seller. The private equity “play” today is a little different.
Today’s sellers are approaching the private equity opportunity the same way they did with PPMCs, except for the stock focus since most private equity purchases don’t involve selling doctors obtaining stock. Sellers hope their current practice earnings will equate to a large “purchase price.” And they hope the buyer have better front and back office management that will result in more stable and even enhanced earnings. And for this, the private equity buyer takes a “management fee,” which they typically promise (though not in writing) to offset with enhanced practice earnings.
Health law is the federal, state, and local law, rules, regulations and other jurisprudence among providers, payers and vendors to the healthcare industry and its patient and delivery of health care services; all with an emphasis on operations, regulatory and transactional legal issues.