Billions in private equity eyecare are seen as the firm’s goal of high-profits

ST. LOUIS – Christina Green hoped cataract surgery would clear up her cloudy vision, which worsened after she took medication to fight breast cancer.

But the former English professor said her 2019 ophthalmology consultant’s surgery did not bring her 20/20 vision or correct her vision – despite the $3,000 out-of-pocket charge for the vision surgical upgrade. Green, 69, said he felt more like a dollar sign at the practice than a patient.

“You’re a cow within a cow when you go from this station to this station to this station,” he said.

Ophthalmology Consultants is part of EyeCare Partners, one of the largest private equity-backed US eye care groups. It is headquartered in St. Louis and counts approximately 300 optometrists and 700 optometrists in its networks across 19 states. The group declined to comment.

Switzerland-based Partners Group bought iCare Partners for $2.2 billion in 2019. Another eye care giant, Texas-based Retina Consultants of America, was formed in 2020 with a $350 million investment from Massachusetts-based Webster Equity Partners, a private equity firm, and now says on its website that it has 190 physicians in 18 states. Other private equity groups are building regional footprints with practices such as Midwest Vision Partners and iSouth Partners. Acquisitions have increased so much that private equity firms are now routinely selling practices to each other.

American Academy of Ophthalmology President Dr. Robert E. Over the past decade, private equity groups have gone from taking over a handful of practices to working with 8% of the nation’s ophthalmologists, Wiggins Jr. said.

As the U.S. population ages and opportunities to make money in medical eye care increase, they are scooping up eye care physician practices nationwide. Private equity groups, backed by wealthy investors, buy these practices — or consolidate them under franchise-like agreements — hoping to increase profit margins by cutting administrative costs or changing business strategies. They often resell the exercises to the next bidder at a higher price.

The profit potential for private equity investors is clear: Like paying to upgrade plane seats to first class, patients can opt for expensive add-ons for many eye procedures, such as cataract surgery. For example, doctors can use lasers instead of manually cutting eye lenses, offer multifocal eye lenses that eliminate the need for glasses, or recommend vision correction, which Green said he was sold on. Often, patients pay out-of-pocket for those extras — a health care payday that isn’t limited by insurance reimbursement negotiations. And such services can be performed in outpatient and independent surgical centers, both of which can be more cost-effective than in a hospital setting.

Investments that private equity groups provide can help doctors market and expand their practices, as well as negotiate better prices for drugs and supplies, Wiggins said. But he cautioned that private equity companies’ quest to maximize profits runs the risk of compromising patient care.

“The problems are piling up and driving up prices,” added Aditi Sen, director of research and policy at the nonprofit Healthcare Cost Institute, which provides data and analysis on health care economics.

Yasswini Singh, a health economist at Johns Hopkins University, and her colleagues analyzed private equity acquisitions in ophthalmology, gastroenterology and dermatology and found that post-acquisition practices charged an additional 20% for insurance, or an average of $71. According to their study, published Sept. 2 in the medical journal JAMA, private equity-owned practices saw significant increases in new patients and more frequent returns of old patients.

A KHN analysis also found that private equity firms are investing in the offices of doctors who prescribe two of the most common macular degeneration eye drugs at high rates, meaning the doctors are likely seeing a higher volume of patients and are thus more profitable.

KHN analyzed the top 30 indications for macular degeneration eye drugs Avastin and Lucentis in 2019 through a Centers for Medicare and Medicaid Services database. Private equity firms went on to invest in 23% of the top Avastin prescribers and 43% of the top Lucentis prescribers – far more than the 8% of ophthalmologists in which private equity currently holds a stake. For example, Retina Consultants of America has invested in the practices of four top Avastin prescribers and nine top Lucentis prescribers.

“The private equity model is a model that focuses on profitability, and we know they’re not randomly selecting practices,” Sen said.

He noted that the volume of patients would be attractive to private equity, as well as the idea of ​​investing in practices using expensive Lucentis prescriptions, which cost about $1,300 an injection. Moreover, he said, after an acquisition by private equity, doctors could potentially change their prescribing habits from cheaper Avastin that costs about $40 to Lucentis — improving the bottom line.

Retina Consultants of America did not respond to a request for comment.

Last summer, Craig Johnson, then 74, decided it was time to have cataract surgery to fix his deteriorating eyes. He decided to go to CVP Physicians in Cincinnati, calling it “the cream of the crop locally for eye surgery” because they do “100s a day.” The practice was already part of a private equity investment but has since been acquired by another investor, Behemoth Eye Care Partners, for $600 million.

Johnson, while happy with the results of her surgery, didn’t know about the manual cutting version of the surgery — a cheaper but just as effective alternative to using a laser. Johnson was using private insurance because he was still working, and he said there were more than $2,000 in out-of-pocket charges for each eye. Laser surgery usually costs more than manual surgery and may not be covered by insurance plans, according to the American Academy of Ophthalmology.

Johnson explained that a salesperson, as well as a physician, gave him options to improve his vision.

“Seniors are a vulnerable population because they’re on a certain income, they’re a little older, they trust you … you’re wearing a white coat,” said Dr. Arvind Saini, an ophthalmologist who runs an independent practice in California’s San Diego County.

Many patients have no idea whether private equity investors have a stake in the practice they choose because they are often referred to them by another doctor or have an eye emergency.

David Zielenziger, 70, felt lucky to get a quick appointment with a vitreoretinal consultant in his NY practice after his retina detached. Zelenziger, a former business journalist, didn’t know it was affiliated with Retina Consultants of America. He loved his doctor and had no complaints about the emergency care he received – and continued to go there for follow-ups. Medicare covers almost everything, he said.

“It’s a very busy practice,” he said, adding that it has expanded to many other areas, which should please investors

In 2018, Michael Croin co-founded Physician Growth Partners, a group that helps doctors sell their practices to private equity firms, to capitalize on the explosion of interest. Eye care is one of the largest areas of investment, he said, because specialty health care services are applicable to such a broad market of people.

16 of the 25 private equity firms identified by industry tracker PitchBook as the largest healthcare investors bought stakes in optometry and ophthalmology practices, a KHN analysis found.

Croin expects private equity investment in practices to only accelerate as competition from the “1,000-pound gorilla” of hospitals that are also acquiring practices and insurance reimbursement bureaucracy forces more physicians to seek outside help. “If you don’t grow, it’s going to be difficult to survive and make the same kind of income as you historically have,” he said.

Some health care experts worry that private equity firms could end up holding an over-leveraged bag if other firms don’t want to buy the practices they invest in, which could lead to the closing of those practices and ultimately more consolidation.

“I’m not convinced that most physician practices are so inefficient that you can get 20% more profit out of them,” said Dr. Lawrence Peter Casalino, chief of science in the division of health policy and economics in Weill Cornell Medicine’s Department of Population Health. And, he said, investors rely on reselling to a buyer who will pay more than they paid. “If it doesn’t work, the whole thing will unravel.”

KHN investigative reporter Fred Schulte contributed to this article.

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