Significant private equity activity in retina began in 2017 with the acquisition of Georgia Retina by Shore Capital Partners, followed in 2018 with the acquisition of New Jersey Retina by Quad C Management, and in 2019 when Associated Retina Consultants of Michigan was acquired by EyeCare Partners. These are examples of a business growth strategy called “vertical integration,” in which complementary companies are aquired, allowing the larger new entity to offer a broader range of patient care and support services. In these cases, the new eye care service entities combine optometric, comprehensive ophthalmology, and retina practices.

Another business growth strategy is “horizontal integration,” when multiple companies that provide the same services are acquired as a way to streamline costs and increase market share. Retina Consultants of America (RCA), an example of a horizontally integrated retina-only entity, was formed in 2020 when 5 retina-only groups affiliated, nearly simultaneously, under the sponsorship of Webster Equity Partners.

Today there are at least 7 private equity–sponsored entities, comprising both vertical and horizontal models, that employ approximately 440 to 475 retina specialists. Retina Consultants of America (RCA), with which my group, Retina Consultants of Minnesota (formerly VitreoRetinal Surgery) is affiliated, accounts for more than 200 of these specialists. Retina Consultants of America continues to grow rapidly, with anticipation of more groups affiliating in the future.

Given this rapid growth, it certainly appears that private equity in retina is here to stay, and that employment and partnership in private equity–affiliated retina practices has joined academia, multispecialty ophthalmology, managed care organizations, and a dwindling number of independent private practice retina groups as job options for retina specialists. As a relatively new business model in the practice of retina, private equity has generated significant interest as well as controversy, with varying perceptions among retina specialists based, at least partly, on career stage along the continuum from fellowship to near retirement.

UNDERSTANDING THE ADVANTAGES

The negative perceptions of private equity include the fear of loss of personal and practice autonomy to the private equity “goblins,” and constraints on current and future income. Positive perceptions include the opportunity to uncover and capture the intrinsic financial value of practices built, in many cases, over decades; the potential advantages of scale in an increasingly complex health care system; and the advantages of partnership with nonmedical experts highly experienced in growing business value.

Based on my experience with RCA and Webster Equity Partners, I argue that the negative perceptions of private equity in retina are overblown, and that the advantages of affiliation with private equity are tangible and significant and are applicable to retinal specialists at any career stage. I want to emphasize that my argument is based on my own intimate experience with RCA and may or may not apply to other private equity entities.

For retina specialists at any career stage who are contemplating partnering with a private equity firm, or employment with a private equity–affiliated practice, assurance of enduring personal and practice autonomy is critical. No retina specialist oriented toward private practice would be happy with nonmedical actors dictating their personal or professional schedules or exerting undue influence on their patient-care activities. My group’s personal and practice autonomy is contractually guaranteed, and we continue to operate all aspects of our practice in the same way as prior to our affiliation with RCA. We still run the practice and the day-to-day business, with assistance in the background from the business professionals at RCA. We have the same administrators and leadership team and no personnel from the private equity firm or RCA is in our offices. The details of our contractually guaranteed autonomy cannot be altered by future transactions without the approval of all my 200+ retina specialist partners and friends across the country, and I’m confident that none of us will ever cede that authority. I recommend that retina specialists avoid affiliating with any private equity firm for which there is doubt about your enduring personal and practice autonomy, and/or doubts about your potential physician partners’ commitment to maintaining that autonomy.

POTENTIAL FOR EARNINGS GROWTH

Although not always stated overtly, one of the major fears of retina fellows is that private equity will constrain future earning potential. It is true that the initial post-transaction regular income is likely to be lower than it was immediately prior to the transaction. That is part of the financial structure of most deals. However, our regular incomes remain substantial and there are multiple avenues to grow post-transaction regular incomes, including the following:

• Organic practice growth;
• Decreased overhead through better pricing of equipment and supplies;
• Much better margins on office-administered biopharmaceuticals;
• Contract enhancements with commercial payers; and
• The opportunity for participation in more and better paying clinical trials.

Retina Consultants of America has helped my group in each of these areas. As a result, we have seen continued growth of our post-transaction regular incomes.

An underappreciated financial benefit of being affiliated with private equity is the value of the equity one can own in the new entity. In a well-managed firm with high-quality practices, the value of this equity, with very favorable associated tax treatment, can be substantial. At RCA all physicians, associates included, own equity. Young physicians are very skeptical of the equity they are being offered and discount the value because they ask, “what if those shares end up being worth nothing?” Unfortunately, the length of this article and business confidentiality prohibits a comprehensive refutation of this skepticism. Suffice it to say, at the next transaction for RCA our associates will be very happy, and those who declined to join an RCA practice will realize that they missed a fantastic financial opportunity.

In summary, affiliation with a high-quality private equity–backed entity such as RCA (and perhaps others) can be a very successful choice for retina specialists at any career stage. Physicians should avoid an entity in which enduring personal and practice autonomy is not built into the DNA, and the contract, of the entity. The financial benefits are also undeniable at any career stage. For established practice partners, the initial equity transaction allows one to capture untapped practice value built over decades and provides an equity “kicker” via ownership in the new corporation. For young physicians and fellows, joining a high-quality practice affiliated with a firm such as RCA will provide job security in an increasingly insecure medical world, a fantastic and growing regular income, and a series of potential financial windfalls from equity ownership. RP