Ep. 100 - Private Equity vs. Independent Medicine: When Wall Street Enters the Exam Room (ft. Anna Sobkiv)

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I am Meredith Hirsch, and this is Working Healthcare. I'm going to say two words to you. Private equity. If you are in healthcare, those two words evoke so many feelings.

For my 100th episode, I wanted to talk all about private equity. I invited Anna Sobkov from JP Morgan onto the podcast. She has been in healthcare commercial banking for over 15 years, focusing on for-profit organizations. So stay tuned for an in-depth conversation on private equity in the healthcare space.

Because if physician ownership is shrinking and private equity is accelerating, then the real question is not just who can buy a practice, but who gets to shape the future of healthcare. Anna Sobkiv, welcome to Working Healthcare. Thank you for having me here in this stormy weather in South Florida. Stormy weather.

And it is perfect because this is my 100th working healthcare episode. I feel special. You should feel special because private equity is such a hot topic in healthcare. And that is specifically why I chose you, not just because of the amazing person that you are, but the amazing topic we're going to cover today, because we really need to dig into it.

Private equity is certainly a lifeline for some physician practices. But the question is is independent practice sustainable? Is it going to survive? What do we see for the future of independent medicine?

So I really want to ask you when you look at healthcare today, is the biggest story private equity, or is it the decline of physician ownership? It's definitely a hot topic, right? It's more, it's becoming more and more part of our conversation, especially in the finance world. We definitely see a huge increase in a lot of transactions compared to, you know, 10, 15 years ago.

Give you a perfect example. In 2018, there were about 178 in change private healthcare private equity firms in US. Today you're looking at about 4,000. So that is a big jump, right?

So it's a topic that we cannot ignore. It's happening, especially in 2021 and 2022. Probably one of the largest healthcare transactions occur in private equity coming out of COVID. It's a hot, I'm not going to call it a trend, but it's more common in the healthcare, and it's very attractive in the healthcare space for a lot of investors.

So it's been, especially in the banking world, it's definitely part of a large volume of everything that we do today, especially in the private practice. How did you even get into healthcare banking? Yeah, that's that's a great question. A lot of clients and center of influence and just, you know, partners are always asked, well, what is healthcare banking, right?

Why does it so niche? And so I started my career in a different institution 15 years ago in very much general business banking, commercial banking space, and relocated to Florida from Cleveland, Ohio, uh, where I really started my career and about nine years ago. And got into the healthcare space. There was an opportunity, and I did not know what I was getting myself into.

Uh, but it was a very niche and interesting space. And I thought, why not do something different, something that I'm not comfortable with, right? Something new to learn, right? I did absolutely had no expectations.

And I started primarily working with smaller practices, which I think it's actually extremely rewarding to really learn when a physician either, you know, coming out of medical or dental school, or maybe spends some time in the field already, or work for the hospital and ready to go on their own. And they don't really have a lot of guidance what to do next. You know, I realize that along the line, and they're looking for advisors, whether it's an uh attorney or accountant or a banker to kind of help them get into that phase because it's pretty scary in the beginning, right?

And they don't teach business in medical or dental school, right? So uh they're excellent clinicians, they do, you know, excellent work in their field or whatever specialty they might be. But when it comes to business, it's it's a pretty scary thing. So for the last nine years, I spend a lot of time doing practice loans or you know, for acquisition practices, for startup practices, mergers, or buy-ins or buyouts, right?

So when you go through that process working with one-on-one with the uh physician, you know, to start or help them acquire the practice, along the way, you really get to learn that whole process of how do they get paid, right? What that collection process looks like. And it's different for each specialty because even in a dental world, the way that general dentist or oral surgeon, the way they get paid, or even orthodontists, is very different, right? So you kind of get to learn every single specialty how they get paid, right?

What do you see in your seat looking out at a higher level that physicians and practice owners are missing, or that you would like to teach them about what's going on on the broader sense? I would definitely say that being equipped with knowledge of surrounding themselves with the right resources, right? So what that means is having the team, you know, it doesn't have to be the team that works with them, you know, nurse practitioner or PA, having a team of advisors that really can guide them, trusted advisors that really can guide them through all the stages of their business growth, right?

So where they when they're starting, uh, were they looking to expand? Is this the right time? Should I open another practice or should I wait? I'm being approached, should I sell?

Those are big decisions that a lot of physicians or founders, they just they're not equipped with that. So I would say getting a right attorney, getting the right CPA, a banker, you know, equipping themselves and surrounding themselves with the right advising team, it's very crucial for a lot of for a lot of those, you know, practice doctor own practices. And I think that's what I'm seeing as a big lack, especially in the private space in healthcare. I would think, just looking at me, the reason why physician owners are having a difficult time getting those advisors is they don't know where to seek them out.

So somebody listening to this podcast who wants to really understand options that are available, where does he or she start? Yeah. It's a great question because you can't just look up online and say, like, I'm gonna work with XYZ, right? There's there's a lot of resources up there, right?

I think getting involved in the community, there's a so for example, a lot of physicians have to get CE credits, right? So they have to attend various maybe study clubs, or there's a lot of events happening right now, right? And what I've seen even as attended to some of those conferences or events, um, their physicians tend to just go there. They're very kind of focused on one thing.

Maybe I'll attend one session and then I'll go on with my day, right? Well, why don't you kind of spend the time and network? Because there's a room full of individuals who might be very equipped or specialized in helping you, right? So I think, yes, it's it's definitely time commitment, but they just don't think that this is something that's necessary.

And there's tons of resources out there. Even, you know, asking their friend physician, well, who are you working with, right? I think they're so focused on what do I need to do with my current practice and you know, grow my patients and making sure I do good by my employees. There's a lot of burdens on them bringing, you know, finding employees, keeping them, right?

They're so bared into managing their practices that their time could be a constraint for them. But I think if you utilize your time in the in more productive way, like, for example, like I said, you know, attending some of the seminars and conferences, that's an excellent way of obtaining a good network of maybe advisors that can help you. So it's really putting time and dedication into this. Why does your work at JP Morgan and then your previous work for 15 years prior give you the unique perspective into ownership, growth, succession planning, and how physicians need to structure their current entity or look at the entity in the future?

Why are you the best equipped to guide physicians into their current or their next strategy? I think it's experience. You know, there's no handbook that was given to me or anything that was written. This is how you should be doing it, right?

And I would say just to be part of a lot of transactions in the past, you learn through each transaction something. They're all not the same, right? So I think it's the time, it's experience, and it's the world that you surround yourself with. Fortunately or unfortunately, I've been involved in that space for many years, right?

So all I do is participate in the conferences that are either dental or medical related. Very getting embedded in that world. I mean, if you probably ask me to, you know, look at the tax returns maybe in the manufacturing, I probably not gonna be very much equipped with that versus if I look at the orthopedic or or dental practice, right? It's I think it's just the experience and time.

And I, every time, I'll I'll share a perfect example. Not too long ago, I met with uh two doctors, and we just sat down and started having casual conversations. They were trying to position themselves into eventually maybe selling to private equity, right? So, and their comment in the end was, well, what do we need to do to work with you?

And and I'm, you know, I'm thinking like, well, we just met, and what they their statement was, and this is not the first time, is we'd really never talk to anybody who would really talk our language and understand how we get paid, you know, what our specialty looks like, like what what's important in our specialty or not, you know, what marketing works and not. And and you know, they're like, Well, how did you know this? And I said, Well, I've probably done X amount of those kind of specialties in the past.

And I'm just really sharing my experience here, you know. So I think just being part of this acquisition or MA or transaction world, I think it really kind of helps you and build you for that. And also connecting with different resources, right? Like I still have a lot of clients that are coming to me and asking, hey, can you recommend a healthcare attorney or can you recommend general contractor architect, right?

I mean, from simple things like that. And you know, my network has grown tremendously, not only in Florida, but also outside of Florida. Healthcare, and you can probably attest to that, it's a such a it's a big community, but yet it's a very small community. Right?

And it's it all I can attest is just the time and experience. That's that's really it. Yeah. And I was flattered that you were the one who invited me to speak at the JP Morgan event because that is where you work, and you had found me on LinkedIn and were following Working Healthcare, the podcast, my career, and you invited me to a women in healthcare leadership conference.

So I'm glad that's how we met, Anna. And I really want to ask you, because I've been to some of these banking events. My son, who is 19 right now, is going into the whole banking industry up in New York, and you know that very well. When I look at it, it's male dominated, and it is about 30% in banking as of last year, which is actually, I was shocked that it was that high in the banking industry when it we look at the executive workforce, and we've talked about the statistics in healthcare.

While women are 78% of healthcare, we are only 32% of the C-suite. How do you work within the world that is so male-dominated? Why are you so interested in empowering women within the banking industry and the healthcare industry at large? Yeah.

So, first of all, I definitely want to go back to you participating, be part of the conference or the event that we just did. And for Lauderdale, thankfully to social media, which is how I came across, you know, your podcast. You were interviewing really interesting individuals, especially in the healthcare, you know, CEOs in MSO space or, you know, advocates in the healthcare space. And I just came across one of your interviews, and I was very fascinated.

You ask all the right questions, you had and you know, I start kind of going through various guests that you had, and they're all phenomenal founders and leaders, right? So I got really fascinated. How is she a female inviting or getting those guests there, right? And then having such a genuine and real conversation.

And it really strike me. So when I partner up with Executive Woman Association that's um going on a national scale now, and we wanted to curate an event that would be more in-market here. And this was our healthcare focused event. And we were thinking about having different presenters on the panel.

So we already had X amount of guests chosen, and then I thought, you know what, it would be so good to have you. I wasn't sure if you would be available, how you know how you are, you even be open to do this. And little did we knew that you you made it happen for us, and you were definitely a highlight of that event for us. So thank you for that.

And that going back to woman empowerment. So you're absolutely right. And I didn't know those statistics that you just brought up, but it's always been the case, right? We we do, especially in the finance world, but I do see that shifting a lot.

I think females are becoming more supportive of each other. We don't see tons of maybe groups or curated kind of female uh meetings that they would be just focused on bringing different, you know, specialties in and kind of collaborating. You know, there's always been, you know, male-driven events, if you want to say that. Uh, for example, golf, right?

I mean, it's always you always think like it's it's more of the male activity, but now you're seeing a lot of females participating in that, right? So I think maybe going 10, 15 years ago, it might have been a little bit more intimidated, but I think it is also shifting a lot where females are becoming more aware of their what their capabilities are and um and very vocal about it. And you know, there's a lot of CO females right now, especially in the finance world, in the leadership world.

Not a lot. When you do statistics, it's like 17% max. That that number I didn't know, but in regards to if you look at it maybe, you know, 15, 20 years ago, that has shifted. Okay, we're making snail.

Snail coin. We're definitely making uh a progress, right? I don't know how it's gonna look like in the next 10, you know, 20 years, but um, but it's it's definitely progressing. And I think I see even in my current environment right now, in the corporate world, a lot of females are supporting each other.

So I'm putting uh one of my coworkers is putting this female group together, and everyone that we've been asked to join have been very much open to that. So I see a shift, but it's definitely moving in a very, very slow face. That's for sure. Let's go back to private equity.

Okay. For listeners who are hearing that term for the first time, or physicians who are like, I keep hearing about it, but it's such a negative two words that are put together. How do you really just describe what private equity is? Yeah.

So going back historically, right? So in a simple word, so private equity is basically it's you you take institutional, the typical transaction, especially specifically today, you take institutional funds, right? Which could be um uh family funds, you know, various investors basically pulling the fund together that are combined with a debt, like a bank debt, right? And then they take this, it's and going to acquire uh a healthcare practice asset, right?

So this transaction is called leverage buyout. So what that means is that you take a private fund, typically that's comp, you know, will be a 70, 60 to 70 percent of a transaction, and then you'll take a debt, like a banking debt, which is usually about 30% or 20%, and then combining that together, you will acquire a practice. That's that's kind of what's typical transaction in the private equity world, right? How would you differentiate a PE back deal versus a traditional bank loan?

Great question. So traditional bank loan, and that's going back to a founder or dentist or physician looking to let's just say a start, or there's really two or three ways that I would say maybe two more common ways that a doctor can start or go in their own in a private practice, right? Whether they're uh coming out of the hospital system, maybe the group practice. So the traditional bank loan, this physician is either looking to acquire existing practice.

Maybe there's a doctor that's or dentist that's retiring. So if they're looking to acquire existing practice, they will be buying 100% of that assets, right? So the bank will typically finance that 100% depending on the specialty. Now, the other way to do that is if the doctor with experience are looking to start their own practice, right?

So the bank will typically come in and give them a startup loan. So that could be for financing all their expenses, their purchasing equipment, or giving them a working capital to start out the practice. So whatever that would look like, or doing a build out, right? So that typically would be a traditional banking loan, okay?

There's a lot of banks out there that really play in that space really well. There's bigger banks, smaller banks. And once again, this is going back to really knowing and having the resources and be educated where to go and what to do when you are in that position as a doctor to go on your own, is to work with the right bank or institution that has a dedicated group that can really support you through that process. And there's a lot of them up there.

You just really need to know. Walking in, I've seen a lot of instances that the doctors are coming out, you know, medical school or and you know, working somewhere for just two years and then they're ready to go on their own. There's a lot of also private money that they will go and obtain. And, you know, the structure on those private money could be higher interest rates, maybe their home is a collateral.

You know, it's just it's not the best option for them versus going to a traditional bank, which will give them the best option. We'll give them 100% financing, we'll guide them through the process. So I always say, you know, make sure that you do your homework when you're ready to go on your own. Have at least a few options, right?

But also gravitate towards having a right advisor to help you with that. So that's your traditional banking option, banking loan. The private equity is a little different, right? Private equity is looking to basically they're investing to for a profit, right?

And that profit could churn, you know, usually between three to seven years profit, right? So they're looking for assets or practices that are have a potential to grow, right? And turn them to the profit, right? So they're already looking for practices that are established, have good margins, and then maybe there is a way for them to come in and help.

Maybe a physician is burnt out and they just cannot do this, you know, doing clinical and managing the practice, hiring employees, the cost is going up, especially after COVID. It's probably been the most common denominator. And they just really want to focus on doing clinical, and that's where the private equity would come in and kind of take that burden out of them, help them manage and take them to the maybe growth next growth level. So there's different types, obviously.

So physicians who are looking to growth is they're either obtaining the bank loan and just going on their own, or if they're looking to grow and be part of the group, then they will obviously go the private equity route. So it just really depends where they are and what their personal objectives are. And if you're looking at the long term and you're looking at the private equity route, what would be the difference of a roll-up versus a platform practice? Can you describe that in a little bit more detail?

Yeah. So roll-up is when you have already established practice, right? And then you are acquiring either same specialties under that umbrella and just kind of growing from that standpoint. Now, it's very common in a dental space.

Um, we've seen a lot of that. It sometimes, you know, I've seen it works well because that's really the way to maybe branch out to different demographic areas, right? And then also the traditional way is where you just basically focus on your one demographic area and you just figure out how you grow that one specific location, uh, maybe bringing in more physicians, right? So you're not acquiring different practices to build the volume, but you focus on that one asset that you have today.

So it just really depends what the group or the PE are looking to do, or whether they're looking aggressively to expand to different states and markets and uh buy maybe different specialties, right? There's I've seen a lot of specialties, uh, mergers that are happening that could really maybe you look at a neurology and an infusion, or you know, it's a lot of mergers at the specialty-like practices, we see a lot of that, but it just really depends what the the goal of the group is, where they want to do they want to stay in one asset, or they were looking to kind of grow into a different uh geographic area.

Let's talk about platforms specifically. Okay. So if a PE company reached out and said, Hey, I would like you to be the platform, or a practice itself said, Hey, we are very large. I had a great conversation with Dr.

Nihad Solomon at Arizona Arthritis and Rheumatology. They are the largest independent physician practice with based on physician numbers, provider numbers rather, and revenue that is brought in every year. So if you look at those two aspects, they're the largest. Could they be an example of something that could be a platform?

Could they be a platform without bringing on private equity? Could they fund it themselves and still be considered what we call a platform practice? Can you have different platform practices in geographic areas? Can you dive in a little bit more about the term platform practice?

So when we have established practice, and let's say they're not backed by private equity, but they are physician-driven. So there's a group or board of physicians, right? The decision process is made by the board. They have established CEO or CFO or C-suite team, and they basically running all the decision making, everything.

It's, you know, there's they can go obtain a bank debt if they have a sustainable cash flow and positive net profit. So if that practice can show a positive net income and has a collateral to back up the bank loan and been in business for X amount of years, they can absolutely obtain traditional bank loan without or avoiding being backed by private equity, right? The private equity will come in primarily is when a group of physicians or a founder found themselves that they need additional help to manage the practice or help them grow that.

Or maybe they burn out by the high cost right now that we experience, the high interest rate environment, right? And that's typical, they'll make a decision to bring that PE partner to help them take it to the next stage, knowing that there is gonna have to be an equity contribution from their end, obviously, to do so. I've seen a lot of standalone platform practices that will try to go and obtain traditional bank loan first because they don't want to give up that equity, right?

They want to try to find ways how they can sustain what they do in today and obtain the same equity and ownership without giving them up. So I've seen more likely that they'll do that. And then if they cannot do that, that they would be much open to bring up that partnership, right? Of a PE.

So it really depends on a specialty, depends on maybe even the age of the physicians or where they are or what their objectives are. You know, some of them are very comfortable just to be, and I'm hearing that a lot is you know, we've we know this market, we want to be in this market, we're not looking to go to XYZ market. And some of them will say, you know, we did really well in this market, we want to take it to that next phase, right? Or maybe, you know, expanding geographic location and we need the help or we need expertise to do so.

So there are options. It it just really depends on the structure of that, you know, platform that is today and what their long-term objectives are. If you look at 2022, 4.5% of physicians said that they worked for a private equity-backed company.

In 2024, it rose to six and a half percent. So this is definitely a hot topic. Why are physician practices so attractive to investors right now? Yeah, high margins.

It's probably one of the safest industries. I mean, if you even look with COVID, right? Healthcare was was still doing really, really well. Um, in 2021, there was, I think, you know, I'm not sure if I mentioned it early, but there were 515 healthcare transactions that occurred in 2021, or was it 2022?

One of those years coming out of COVID. So it's safest, strong margins. I had a dentist that told me, and it really stuck with me for a while. He said, You gotta be a really bad dentist if you don't do well.

He said, if you just open a door and put a sign on it, it says dentist, you go and everybody needs a dentist. There's always gonna be patient coming in. It's what do you do with that? It's how you manage that office.

And he's absolutely right. And he's now retired, but it's one of the most obvious, like I said, high margin, profitable. The security is there. It just really depends where obviously specialty plays a big role.

There's a private insurance, there's a fee for service specialties, there's a good mix, but historically, it's always been it's one of the biggest industries that we have. And today, healthcare, uh, PE considered to be a one trillion dollar industry. Oh, yeah, I would believe it. Let's look at it from the physician aspect.

So are physicians really looking at PE just for the opportunity that could be available to them, or is it really just because of the economics of running a practice in 2026? I think it's both. And it's interesting because my answer to this question would probably seven, eight years ago could have been very different than what it is today. The shift in group practices has definitely been an increase for for the last, I would even say, 10 years.

And it's funny that you say that because coming in from the world where I work with a lot of one or two, three office practices, and the doctors would always say, you know, I'm gonna sell it to another doctor, right? I'm gonna go through this, you know, acquisition process. And yet those same doctors are approaching today and they're asking, I want to learn more about private equity groups, the DSOs and MSOs. And why they're doing that is A, it's definitely obviously a lot of them get that really great paycheck in the beginning, right?

So it is attractive for them. A lot, they typically they'll stay three to five years. The average time is three to seven years, depending, you know, where they're at in life. But once they they do this exit, it has to be a good fit for them.

So there's another education topic that I definitely want to point out later on, but it depends where they're at in life. So, like I just had a recent one that this physician was his personal life was not in the stage where he could work crazy hours, finish his clinical, and then stay after work till five, eight o'clock, you know, five, seven o'clock to just maybe do the more administrative job, right? Uh, or maybe his front desk would call off. So, you know, as a doctor, he still managed the business side, right?

So he pretty much got burnt out managing multiple locations. And he was at the point where he still could work for the next probably 10 years. But he said, I don't have time with my kids and I don't have time with my family. I heard that my friend got, you know, sold to a group and he's really happy.

It's his life and balance got much better, you know, work life balance. And I would be very interesting to learn about that. So, you know, maybe at that stage where in personal life that could trigger something for them, right? Now, also a lot of them are looking for options to help them cut costs, the costs in purchasing equipment, regular supplies, or negotiating with vendors.

It's time consuming, right? Or not even time consuming, but I'm thinking economies of scale. The larger you are, you're getting a better deal. Exactly.

So they're looking from the operational cost standpoint, is where if you look at their maybe even margins or net income, if that operational cost is hitting their bottom line, then it's probably something that they would think of like, I need to bring someone in to kind of help me manage that. Rising costs is another contribute to why they're looking to sell. I've seen a lot of them, not just because they're at the certain age, but a lot of them at a younger age are actually even exploring that option, right?

So the age has not even become a factor anymore. It's really the lifestyle and where they're at with their practice. You know me, I'm a big statistics person. I keep spewing statistics.

But among physicians who sold in the last 10 years, 71% cited inadequate payment rates, 65% cited costly resources, and 64% cited payer burden. So, yes, it definitely aligns with what you're saying right now. Do you think that independent medicine is viable? That's the $10 billion question.

I don't want to obviously put my personal opinions because there's gonna be a hundred percent, in my opinion, think it is. What are you seeing in the market? Do you see that independent medicine is sustainable or in 10, 15, 20 years? That's sort of gone.

If we do the direct payer model, maybe it's available. But if we continue to go down the route of insurance or government assistance type programs, can independent medicine be viable? Yeah. It's it's hard, you know.

I don't have a crystal ball, but it's hard to predict because there's been a lot of changes, especially, and it's happening really rapidly with government, obviously. We've seen value-based care, you know, we haven't heard about that before. There's a lot of shift happening. The big beautiful bill is also changing.

It's hard to predict what's gonna happen, but it is here today, right? We we didn't see that private equity will be coming in the last 10, 20 years. So it's hard to predict, but we see in hospitals shifting. I don't know if you know, you love statistics.

So going back to private equity, kind of the taking a history uh lesson a little bit, but in healthcare, when they started, it was primarily in nursing homes and hospitals, right? And the first private, uh first acquisition in a hospital, which I believe was with the HCA in 2006. I think it was like a $33 billion acquisition. So, you know, that being a for-profit hospital right now.

So that's really how it started. It's in that space, right? So now looking back into the private world, it shifted there, right? Because of strong margins, how it's sustainable.

There's a lot of private physicians there are lacking, there's a lot of opportunities there, right? They're lacking time, the knowledge running the practice. So there's tons of opportunity in that space, and which is why private equity sees it as a very hot industry. In my mind, it has to be economies of scale.

I look at our numbers from 2025. We actually increased our gross revenue by three and a half million dollars. Congrats. Our net income only increased by $50,000.

Yeah. So you can see this huge disparity. And that essentially is a loss if you look at it on the bigger picture, because of the cost of living increase. And that is because the spread on drugs has decreased so much.

All of the money is going into these vertically integrated conglomerates. They're health insurance companies, there are specialty pharmacies, they're the PBMs, they are the larger entities that are all gobbling up each other and becoming these mega mammoth industries. So, at what point do practice owners really have to start thinking or shifting their mindset from growth and survival and succession? Yeah, that's a good point.

I see that a lot depends on the specialty, right? And also a lot depend on the physician or a founder, especially physicians, because you know, founders would typically see them in group practices, you know, and so on. But physician during practices, some of them are comfortable where they are at. And some of them do want to grow, but they're getting pressed by a competition or maybe a hospital or a group that's coming in, right?

So it really depends where they're at. When they see that, like to your point, right? When you're seeing the costs increasing and you just cannot sustain any more of uh managing, hiring employees and figuring out where what do I need to do to increase the cost of my EMR or EHR, right? I mean, that's shifting a lot right now.

So how do I stay competitive in this market? We've seen AI right now coming in from all angles, right? It's it is another hot topic outside of the private equity. Can I afford investing into a platform or bringing that technology to my practice, right?

I think at that point of time is where they started to think how I can sustain my practice. Do I just want to be comfortable where I'm at and um find ways to keep the cost low, right? Or do I want to continue scaling? And the only way to do that is me investing more time into, you know, obtaining maybe credit, traditional bank credit, maybe getting lines of credit, bringing additional equipment.

And a lot of physicians, they do have that entrepreneur skill in them, right? And it works for them, but not all of them are like that, right? So it's interesting that that some, I you know, I've seen so many instances that, and sometimes you just know when they have that business entrepreneurial skill in them because they just they always figure it out somehow, right? They can still do the clinical and they also, you know, grow their practice.

And some of them, they just did it well and they just don't know what to do next with that. And that's where the advisors, that's where pulling the trigger at the right time also matters. There's a lot of practices I see, especially in the dental world or primary care world, is that they grow the practice to a certain level, they did really well, you know, 30, 35 years, one location or two locations, and then they're hitting a certain age and they don't really know what to do with that practice.

And a lot of times they are the practice. And that practice can lose a lot of value if something happens to that doctor, right? So pulling it the right time and maybe structuring your practice the right way where you're not all the collection, you know, 100% revenues depending on your work. I think a lot of times is bringing, you know, maybe different revenue streams, maybe bringing an additional PA or physician to the mix.

But once again, they don't have tools. Some of them don't have knowledge to do that. We have to look at making a change, a pivot. I had that conversation with Joe Luminello last week, actually, in the podcast episode, is that not all CEOs are the same.

Some are really built on that visionary work, some are more of the operator and have the consistency side to it. So, going to your point, some are really focused on that growth aspect, but the sustainability makes it more difficult. If you look back in the 1990s, roll-ups are really popular in the healthcare industry. That's when my dad left medicine.

Do you think now in 2026, these opportunities or these PE-backed practices and firms are more sophisticated? Are they just more aggressive? Do you think it's just more widespread? And that's in the current conversation now.

I think they're definitely more sophisticated. And there's definitely more structure now. And number one, there's a lot of policies coming in, you know, even from the government standpoint. There's some states today that they're not allowing PE transactions to even occur, right?

California, for example, I think it just this year recently, the state, if there is a PE healthcare transaction, the state has to give them a pre-approval. So this just happened in 2026. So there's definitely more policy and control happening over the healthcare space. Uh, but going back to your question, there has been more traction that occurred in the last, you know, 10, 15, or 20 years in the private equity space, especially in healthcare, that when they are doing the next transaction or the next roll-up or whatever you want to call it, they're more equipped.

There's more historical traction now. So when they do the next one, like you say, you know, lesson learned, right? So they are better equipped, you know, what would you do different from the first one that we've done, right? So there's just more experience out there, operators, right?

Uh, more experienced PE firms. They're, you know, I'm not gonna say learn from their mistakes, but technically, yes. So they're more equipped, there's more uh education out there right now. There's more advisors, there's more legal control, accounting available for that.

So it's definitely we're better equipped today, even from the banking standpoint. Looking back, I never really thought that we would even have a platform or will be able to um support transactions that are private equity backed. That was not the case, you know, eight, nine years ago. But even in the financial world, that is changing a lot because we we've seen more traction happen.

You know, there's a historical numbers to back it up. There's a successes for that, and there's also failures, obviously, right? So I think we're better equipped today when it comes to private equity, and especially in healthcare. AI is coming in pretty strong.

I mean, I go to different conferences, whether it's dental or medical, and you see all these various vendors, and you ask them, like, What do you do? And they invest into this platforms to help attract patients, right? They even have automated front desk where you call to make an appointment, you know, the speed, how your patient records come in, they know who you are, right? There's technology also equipment helping to bring that and make the private equity has funds to spend on the technology.

If you look at a single practitioner, they might not be able to afford XYZ platform to replace maybe their front desk, right? So even marketing, I think marketing has shifted a lot. Social media, I mean, I see a lot of practices or even group practices investing in that in those platforms, because that is their marketing tool, right? You go into a doctor, everything is available in our fingertips.

We can Google their name, we get the reviews, right? So I think the social media, the technology has shifted a lot of that. And private equity has resources and money to spend on that to help those practices to be better and better equipped to thrive. And to jump on the AI train, I was at the Medical Group Management Association, and I know that you have your CM PE.

So I'm sure that you've been to the MGMA meeting in the past. But this last meeting in particular, I think 80% of the vendors were in the AI space. So it's something that's hot. And I look at it as a single owner, even though I would say we're a medium-sized medical practice.

But I look at it going, it is very expensive. And at the rate and the rapidness of all of this AI and functionality in which we need, how am I going to fund it? How am I going to pay for it? And at that point, I'm like, what am I leveraging?

What am I doing? I need other people to have more skin in the game. Am I going to be that risky? So I was just sharing a little bit about where I'm thinking about this aspect because for me, it has to do more with the ability to put money into the practice for growth.

Rheumatology, though, is not in sight for PE. It doesn't seem to be in sight for PE. I know you talked about dental. What are the hot specialties for PE right now?

I always say cardiology, orthopedics, it's always been the case and still is. Dermatology in a dental world, you know, obviously uh oral surgery, pediatrics, orthopedics has always been the case. Why are they choosing these? Because I'm looking at it going, okay, if we look at all physicians nationally, 1% are dermatologists.

My brother's a dermatologist, he still has an independent practice. But 15% of private equity acquisitions are in the dermatology space. So to me, that's mind-boggling. Why is PE going into these specialties that you just mentioned as opposed to rheumatology?

Reimbursements. When you look at a derm, it's a really good payer mix because you have your FIFA service. It's a cash income business. It can be combined and you can bring a lot of different add-ons to the to that specialty.

If you look at orthodontists or the average, you know, you go to your orthodontist, you probably pay anywhere between three to 10, 15,000 to get anywhere from the Invisalign and wherever. So definitely the reimbursements. Plus, if you do have an insurance, right, it will only cover certain amount. The rest is also always going to be out of pocket.

So the margins on those specialties historically always been pretty strong. And dermatology has been probably one of our, if not the best, specialties, right? And then they're, like you said, the private equity has been after them for many years. Right now you have the aesthetic piece that can also be added.

There's medical dermatology, and there's also a lot of aesthetics. So you can definitely combine um both, and that's been happening a lot. But I think just higher margins, that's really, you know, and they've been very sustainable margins. We haven't really seen a lot of regulators or the government policies affecting those specialties.

Although I did actually had a one of my cardiologists' uh uh clients told me that on, and I don't want to misinterrupt what his statement was, but um his in international cardiology apparently there was some kind of change that happened, the reimbursement on the specific procedure that they've been doing actually went up, right? So, you know, and I'm just using that as an example because it was part of our conversation, but to your point, it's just been always the safest and historically very consistent margins in those specialties.

For somebody sitting back saying, this is a great opportunity for me, looking at succession planning, looking at the ability to raise funds. Uh you sitting in the seat that you sit in, what one piece of advice would you give a physician owner? Start early. Start early and don't wait till the last minute to start kind of pulling all your resources and figure out what I'm gonna do today, right?

Succession planning is extremely important, right? Because if you especially if you're one physician practice, you are the practice. So earlier we talked about is how do I differentiate or diversify, actually, that's a better word, my collections. What do I need to do to make sure that I am not the practice, that I can go on a vacations, right?

Or something does happen, you know, from disability standpoint or whatever to my practice that I'm protected. So having everything set in place at the early stage is crucial. That's when the succession planning comes. Also, you know, I recently came across, uh maybe a year ago, two doctors that are, you know, been part of the medical space and you know, work for different systems and now they're going on their own, right?

And what they do, and they're kind of starting backwards. So they're figuring out what do we need, how do we need to structure our business, our practice today that we could be attractive to a private equity sale, for example. And they already know from day one that that's what they want to do. It's their preference, okay?

They're already structuring how they're gonna build their practice. Obviously, physicians, their patients' care comes first and they're excellent physicians, but they also, you know, they have to use that business mentality, right? So they're structuring themselves for the next 10 years that they actually could, you know, the practice is not depending on them 100%. And um, how can they diversify that collection, that revenue to be comfortable and not to be just the business, right?

So it's starting early, it's also having a plan, right? A lot of them just don't really have a plan. They're, you know, they love taking care of patients, which is the reason why they're even there as they should, but there's really no plan what to do next. And that's actually a very common thing.

So, where do you see private equity in five years or even in 10 years in the healthcare space? I see it definitely staying here. It's not gonna go anywhere. There might be more regulations around that.

I will specifically talk on, you know, in South Florida or Florida in general. We're a very attractive state right now, right? We have pro-business, so it attracts a lot of larger corporations here, a lot of private equities actually moving to South Florida. We kind of become in the bullshit of South right now.

So just seeing the inflow of PE coming in, even from like Europe or Canada, right? It doesn't have to be just, you know, the US, but it's coming from different countries, and we're seeing them coming even into South Florida. So I don't see that shift decreasing per se, but potentially increasing, right? Uh, I think there's definitely gonna be a lot of maybe consolidations happening in the between the group practices, but there's definitely been a huge increase in them.

Mind you, there's only in a dental world, there's 30% healthcare, private equity groups and dentistry. So there's still a lot of opportunity for growth there, right? You know, 12% is oral surgery, for example. So there's still a lot of opportunities for growth.

So it's gonna be interesting to see if there's gonna be certain, you know, policy or regulatory shift that probably could affect that. But other than that, there's a lot of positive that we've seen. And I have a lot of doctors that had a good sale. And of course, I see some of them that were not successful at that just because maybe they didn't do their due diligence to do an you know, upfront, having negotiating that contract the right way, doing their homework and learning a little bit more about the group.

Is the culture going to be a good fit for them, right? I think, you know, going back to your question, like what should they do better? I think a lot of doctors they see that great paycheck in the beginning, and they're that big, beautiful number is very attractive to them, but they don't go behind the scene and learn about, well, what is the culture of this practice? Can my practice fit there, right?

And they don't look at the long term. And I think that's actually one of the biggest mistakes or biggest issues that I've seen when the sales goes wrong. So I definitely see private equity staying there. Anna, thank you for being my 100th episode.

This was insightful with the unknown with private equity. We also have unknown with working healthcare. Who knows where we're going next? So thank you for joining me.

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