BLOG: PE, PPM and MSO: The alphabet soup of physician practice consolidation
As we all know, consolidation in the physician practice space, most often by platforms backed by private equity, has been occurring, and arguably increasing, for several years now.
While there may be general familiarity with the concept of private equity (PE) investing in physician practices, understanding the details before you embark on exploring a possible deal with a strategic partner is critical.
Generally speaking, a physician practice sells the nonclinical aspects of its business to the buyer, often a PE-owned management services organization (MSO), that then enters into a management agreement with the practice at closing. The practice retains its clinical assets and operations, which continue to run through the practice after closing. Consideration paid to the selling physicians is generally in the form of cash and equity in the buyer’s MSO platform (roughly split 75-25).
That said, there are many layers to these deals and plenty of considerations that often get overlooked. In working with practices and physicians to help them navigate these physician practice management (PPM) deals, we often see many of the same issues, questions and complications arise from deal to deal. Our goal with this new blog is to give you an inside look at PPM deals to help you examine more closely the detailed aspects of these transactions. We’ll address topics such as tax considerations and deal structures, post-closing governance issues, impact on associate physicians, how indemnification works, the importance of compliance and various other issues.
These posts might be helpful for those of you who are contemplating a transaction; for others, it might just be fascinating to hear about the issues your peers have had to navigate in these complicated deals. Either way, we hope that you’ll find these blog posts insightful — and if we’re truly successful, somewhat entertaining, though that might be a high bar for us lawyers!
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