Archive November 2015 XVI, No. 11

Legal Update: Is Your Pain Practice Appealing to Investors?

Here's what corporate partners are looking for in the specialty.

Amanda Jester, JD

BIO

Luke Mitchell

BIO

pain management injection INJECTION APPEAL Pain management services treat a growing, and increasingly unmet, patient need, which make them prime targets for investors.

Interventional pain management is a relatively convenient and remarkably profitable specialty for orthopedic and anesthesia providers to offer at the ASCs and office-based facilities where they work, or even in standalone clinics. The service line can also be quite attractive to corporate partners, if you keep the following valuation and legal considerations in mind.

Why pain management is a win-win
Most ORs that host orthopedics can easily slot chronic pain management cases into their schedules (osmag.net/aK7MKq). The treatment of a growing patient need that many primary care physicians are reluctant to handle is particularly attractive to outside investors, as is the long-term nature of the care relationship and, in turn, the recurring revenue of follow-up visits and ancillary services.

For ASCs and office-based facilities, investment, partnership and/or consolidation can help them stay competitive in the surgical marketplace through greater leverage in negotiating insurers' payment rates, the financial support for investments in technology, the ability to attract and retain surgeons, and the flexibility to meet patients' needs and improve care quality.

In recent years we've seen the creation of 8 separate interventional pain management platforms intended to combine individual pain management practices and spin off de novo offices. For facility owners and operators, a focus on the following areas can drive investor and acquirer valuations.

  • Strong physician relationships. Generally speaking, a pain management group seeing 100 total patients from 10 referral sources will receive a higher valuation than one getting 50 patients each from 2 sources. The reason being, if 1 of those 2 referring physicians retires, moves or simply becomes dissatisfied with his patients' care, the group's business could be irreparably damaged. Investors want diverse patient streams, and view a diversity of referral sources as a proxy for the market perception of the group, the strength of its marketing efforts and a testament to its reputation.
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