Health care delivery in the U.S. is being bought up by corporations with money raised by “private equity” investment, a topic I introduced last issue (October). Private equity is simply money that people put into investment firms, hoping for a better return than from other investments, like stocks or bonds.
But in the past few years, private equity money (PE) has moved to invest in large medical groups, hospitals and clinics. Specialties like dermatology, and especially dentistry, are on track to be totally controlled by corporate firms, suggesting the eventual end of private practice. However, there is little evidence that private equity money is attracted to chiropractic. Why is that?
What PE Firms Want
PE firms don’t care if they invest in chiropractic offices or dog daycare (which they have). It’s all about the profit. For instance, PE money has found its way into veterinary clinics, hospice, and even funeral-home chains. Good return on investment is the idea, and most PE procurements are designed to resell to some other, usually larger, corporation within two to eight years.1
The criteria for investment usually include relative insulation from economic forces (people will continue to have back and joint problems), strong supply and demand forecasts (the population is continuing to grow), and compelling technological developments (which may not be true for chiropractic).
Is PE Investment Bad News?
Private equity money is not welcomed by all in health care. A study from a Harvard researcher showed that in hospitals controlled by PE firms, serious falls and increased infections among patients increased significantly. Less staff and less trained staff seemed to be the cause.
The scenario of what happens when PE buys a hospital usually includes making the physicians see more patients, discouraging the care of lower reimbursement patients (e.g., Medicaid), and cutting costs overall, even when they cut too deep.2
Is Chiropractic in PE’s Sights?
There is at least $1.8 trillion poised to invest in health care, according to KFF, the Kaiser Family Foundation.3 Musculoskeletal and orthopedic disorders are high on the current list for provider consolidation. That includes not only orthopedists, but also physical therapists, imaging centers, rehabilitation clinics, pain management, sports medicine, and yes, chiropractic.
This has been called the “third” or current wave of consolidation, since it has only been going on since about 2017.4 (The “first wave” began about 10-12 years ago with PE investing in emergency medicine, oncology, and anesthesia.).
Since this is a recent trend or “wave,” there is not a major player attracting PE money yet in many orthopedic-related professions. For example, there isn’t one outpatient rehabilitation corporation controlling over 10% of market share.5
I could find almost nothing suggesting serious PE money is headed toward chiropractic investment. But the investment research company Sharpsheets considers the profession to be undervalued. The firm points out that the chiropractic market is worth about $480 million, with an expected rapid growth rate of 26.3% from 2023 to 2032.6 Shouldn’t that get somebody’s attention?
The Barriers Lie Within?
One answer is the lack of homogeneity in the profession. That means that if you have been to one chiropractor, you have been to one chiropractor! McGuireWoods, another marketing firm, calls the physical therapy and speech therapy worlds “highly fragmented.”7 If that is true, then chiropractic could be suffering from “supersonic fragmentation.”
We may be the last health care profession that stubbornly celebrates “rugged individualism.” Our techniques differ, but patients seem to find their way to whichever DC helps them the most. But explain that to investment bankers. This is one of the barriers to chiropractic buyouts by Big Money.
Another barrier is that chiropractors tend to either practice alone or in mixed groups including acupuncturists, massage therapists, etc. In either case, it is difficult to brand a practice for resale. A solo practitioner is thought of as a “personality” practice. If the doctor is not in, then there is no practice.
On the other hand, in an integrated practice, it may be a motley crew, with the actors coming and going. There is often no core to hold them together since most will be independent practitioners. Big Money doesn’t like that.
An Exception to the “Rule”
One exception to this lack of investment in chiropractic clinics is ChiroOne, owned by a firm called Vistria, out of the Chicago area. Vistria has a portfolio of businesses like financial and educational institutions, as well as those affiliated with health care.
ChiroOne has about 70 clinics in eight states.8 These clinics are not franchises, which have become more common in chiropractic. ChiroOne clinics are all owned by one entity. When PE firms buy a clinic or a group of clinics, they partner with a practice management company or have a subsidiary that performs this service. ChiroOne uses the firm TVG Medulla for its management duties. Nothing like this existed in this country even 20 years ago.
If Vistria shows proven value in chiropractic consolidation, other PE firms may be studying the profession. After all, chiropractors suffer from much of the same stresses as any other doctor. We want more time with our patients, less administrative duties, less paperwork, less governmental oversight, and more money for our efforts. PE firms seem to promise they have all the answers to these questions. So, if your practice is profitable, pay attention. The private equity Good Fairy may be watching.
References
- Yetter EJ, Snyder JA. “The Physician Sellers Guide To Private Equity Firms Investing In Orthopedics.” Focus Investment Banking white paper, April 2019.
- Miller J. “What Happens When Private Equity Takes Over a Hospital.” Harvard Medical School, Dec. 26, 2023.
- Meyer H. “More Orthopedic Physicians Sell Out to Private Equity Firms, Raising Alarms About Costs and Quality.” KKF Health News, Jan. 6, 2023.
- Yetter EJ, et al., Op Cit.
- Meyer H, Op Cit.
- Sharpsheets.io/blog/chiropractic.
- “Private Equity in Healthcare - An Updated Review of Selected Niche Investment Areas.” McGuireWoods, Aug. 7, 2023.
- https://vistria.com/portfolio-items/chiro-one/.
