Tell us how you got to Austin and then started selling medical practices.
Well, I’m from Amarillo but came down to Austin for UT and moved around a bit after that for jobs and family. But after being back in Amarillo for some time, my wife and I looked at each other and said, we’ve got to get back to Austin. So we came back down here and we’ve been in Lakeway for 20 years. We’ve met the best people – I play golf with the same 12 guys every Friday afternoon – that type of stuff.
I’ve been a healthcare administrator for the past decade-plus, but also bring the perspective of an entrepreneur who’s been an owner of companies in no less than half a dozen industries. From manufacturing to owning a painting company to being a partner in a Mexican call center where we answered questions about George Foreman grills at 3 o’clock in the morning. The list goes on. I can look at business transactions with a variety of past experiences.
Drawing on your experience as a healthcare administrator, what are some common themes you are seeing across the industry right now?
A couple of things come to mind. As a sidebar, my brother is a recently retired ENT doctor who practiced for 30 years in Austin. I believe his story is a great testament to the trend I have noticed that doctors have no control over their pricing.
What does that mean?
Doctors are doing their service but medical insurance companies dictate what the agencies will pay doctors. That payment has been squashed and squashed and squashed and now it’s significant. A doctor with all their years of training doesn’t make the money like they used to, especially in primary care and pediatrics.
How significant is this reimbursement dynamic?
Excluding what COVID-19 has brought (there are primary care doctors that made $20,000 in 2020) I bet doctors are making $140,000 a year on average. When you consider it takes 4 years for undergrad then 4 years of grad school, then specialties go to more school – that’s 8 plus years of costly education to make that amount of money… it’s starting to tip the wrong way.
Even if you are getting paid, the complexity of getting paid is increasing. Now insurance companies require medical records to be submitted and pre-authorizations to be obtained. Steps like these take full-time employees to get done.
Is it fair to call it red tape?
Yeah, It’s a lot of red tape that just keeps getting gradually added.
This trend has led to some of my most recent transactions. I’ve noticed it’s much harder to make an appropriate living as a physician. What solidifies that? The data shows the number of doctors choosing to work for a hospital. I’ve seen these hard-working men and women go to work, get a paycheck and have no worries. There goes your entrepreneurial spirit. Now you’re being told what to do, when to do it, how to do it.
In your opinion what makes Practice Medical Transitions unique?
I am able to utilize data and information to quickly put together a practice valuation. We have the ability to organize a vast amount of CPT codes. The data is complex and we know how to take it in, pull reports, and turn it into a real offering for buyers.
Why not just hire a lawyer?
As an example, my brother could have used a broker to do the accounting and put in the add-backs to EBITDA – he could have had much cleaner books.
Plus the size of the data files is immense, so the ability to process those and then analyze the risk associated is going to be one of the most important offerings.
Ultimately, brokers offer nuanced expertise and my brother probably could have gotten a larger valuation or multiple.
Big groups and private equity are likely going to do this themselves, but we work with practices up to $15MM where that risk assessment and reporting is a huge load off the seller’s shoulders.
Finally – how are they going to find a buyer? We’re developing access to buyers and then packaging all of that info into a CIM – confidential information memorandum in our world. It’s like a transaction Bible. And then we bring that package to the buyers that we have relationships with in hopes to get a competitive offer.