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  • RadPartners management fee buyout multiple

    Posted by Unknown Member on March 8, 2023 at 3:54 pm

    Much has already been said here regarding RP, most negative as “skimmers” of radiologist work. However, now that I’ve been in practice for a while I can see some advantages to a corporate approach– dealing with unproductive partners, keeping staff expenses low, taking care of billing, HR, IT, etc.
     
    Anyone know what a typical buyout looks like in terms of multiple of EBITDA? How much cash vs equity in RP? What is a typical management fee percent? I’ve heard 30% thrown around but this seems very high. Also how does sale of RP stock work? Is it based on a valuation of RP revenue and assets as a whole, or of the individual practice?
     
    I’m asking for reference reasons from my peripheral involvement with corporate buyout offer for a non radiology practice. I assume the answers to the above questions may covered by an NDA so it would have to be on a rumor basis.
     
     

    afazio.uk_887 replied 1 year, 3 months ago 15 Members · 39 Replies
  • 39 Replies
  • Unknown Member

    Deleted User
    March 8, 2023 at 8:06 pm

    I hope you feel great shame even posting this crap

    • ipadfawazipad_778

      Member
      March 8, 2023 at 10:35 pm

      Dont mind you posting. Legit questions. Just hope you are within five years to retirement. Working or selling out to RP isnt a terrible idea if you have less than five years left. Just make sure if you sell out you get cash not stock. Make sure there are no contingencies on cash. If you take stock, my dog has more business brains than you. Know a dentist who sold out and made this happen. It sucks working for the three years left on his contract, but after three years its over. Also the PE firm could t even negotiate better rates with insurance companies than a single dentist. The PE/corporate guys are dumb but backed by enough enough money to think they actually add value.

      • mwakamiya

        Member
        March 8, 2023 at 11:38 pm

        VIRGuy — whatever it is you are smoking doc….please pass it along so we can share living mentally somewhere in that portion of the stratosphere where you are.
        The GREAT MAJORITY of newly acquired contracts by the PE guys are NOT “bought out” like you mention. There is no buy out, equity, stock, upfront cash, vesting schedule, EBITDA multiples, etc. therefore the financial parameters you bring up are of no consequence. GREAT MAJORITY of new acquired business is by the old group getting kicked out and the new equity backed PE group coming in and taking over. SIMPLE AS THAT. Left over old geezers who have roots longer than marijuana plants and no transferable skills (think 80 year old guy reading nothing but plain films who has undergone 4 divorces) are usually offered some initial “special one time, unique, never to be matched contract (think used cars salesman)” to salvage the deal and stick around. These guys become the so called “boots on the ground” for about 30-40% discounted salaries relative to the previous years.  Every other study under the sun from that new contract is piped to a radiology sweatshop far away, typically in a large city in the same state/region — coincidentally these cities tend to have one or more residency programs to keep feeding the beast with clueless residents/fellows. 
        “While I can see some advantages to a corporate approach– dealing with unproductive partners, keeping staff expenses low, taking care of billing, HR, IT, etc.” Seriously man, just take another drag and keep it in the lungs just a little longer. 

        • smfst7_929

          Member
          March 9, 2023 at 12:54 am

          Dealing with unproductive partners?  Haha that is laughable.  I have talked to acquaintances in PE groups. They are outraged at what some people get away with by doing the bare minimum with a clock puncher mentality.  They do exactly nothing to deal with unproductive members.  At least not in this market, because they CANT.  They need any warm body with a pulse right now and can’t even find those. 
           
          A tightknit private group is leaps and bounds better in terms of the workflow issues the OP alludes to.  If you are in a small to medium sized democratically run group, it’s painfully obvious who the outliers are.  I know of zero private groups with extreme outliers.  They could never do the solo call on their own without drowning.  Once they decide they can’t handle call, they retire.  This is the way. 
           
          As far as keeping expenses low? Pssshhhhhh.  You think the managers in PE are making peanuts?  You think keeping those places staffed with competent ancillary is easy when Mcdonalds pays $18 per hour?  You think the clockpuncher rads care about making addendums for billing when they know they can’t be fired during a severe staffing shortage?  When rads eat what they kill, they have an incentive to ensure proper indications and MIPs measures are in their reports. There is zero accountability in most of these PE groups.   
           
          If you want economies of scale, then your best bet would be merging with other groups to become a mega PP.  
           
          Otherwise, things run most efficiently when people have skin in the game.  Even hospital employed rads have very little incentive to have accountability for billing etc unless they have a contract where they are bonused out based on their successfully billed RVUs.
           
          And as has been previously mentioned ad nauseum, these sellouts only really benefit if they have 5 years left in their radiology lifespan. Otherwise you shoot yourself in the foot financially on a longterm basis.  Sure you could claim you’ll find something else in 5 years, but good luck. Maybe if you move to bumfark nowheresville or if you have a buddy who can get you into another group.  Groups don’t look to highly upon sellout rads when it comes to hiring.  And trust me, if they will know if you are a sellout, especially if you are local.

          • smfst7_929

            Member
            March 9, 2023 at 1:05 am

            I have personally vetoed (along with several others in my group) two potential candidates because I know they left their group 5 years after it was sold to private equity (when they vested).  I think PE sellouts are scum of the earth and I will do everything in my power to make sure they never work in my group.  Plenty my friends in other groups feel the same way.  It’s sort of like hiring a convicted felon to babysit your kids.  Sure they might be good people or have seen the light— but you just can’t bring yourself to trust them.  

            • Unknown Member

              Deleted User
              March 9, 2023 at 6:41 am

              Nicely done sartoriusBIG, thats putting words into action.

            • ranweiss

              Member
              March 9, 2023 at 6:43 am

              Quote from sartoriusBIG

              I have personally vetoed (along with several others in my group) two potential candidates because I know they left their group 5 years after it was sold to private equity (when they vested).  I think PE sellouts are scum of the earth and I will do everything in my power to make sure they never work in my group.  Plenty my friends in other groups feel the same way.  It’s sort of like hiring a convicted felon to babysit your kids.  Sure they might be good people or have seen the light— but you just can’t bring yourself to trust them.  

               
              I totally see your point…But you have to consider there were likely people in some of these groups that didn’t want to sell out and were outvoted…May have had geographic restrictions etc. So what can they do – obviously just take the money and stay…
               
              But I agree with you about the general mentality of people who sell out. I personally know multiple people who were completed screwed by their partners (ie, were like 1 year or less from partnership) and group sold. They got peanuts. One of them had the ability to say FU and leave on the spot, the other was pretty stuck bc of house, kids, etc. He eventually moved on but didn’t benefit much from the PE buyout. Got some crummy 2-300k equity as a non partner and was employed onwards. 

              • Unknown Member

                Deleted User
                March 9, 2023 at 8:09 pm

                Thank you to all for your great responses. I don’t want to spam the thread by replying to anyone individually.
                 
                First off I do feel somewhat dirty for posting this.
                 
                I actually walked away from a radiology practice in the midst of a corporate buyout where I hadn’t made partner. I still wonder if I made the right decision, I might have ended up with some shares and a decent salary.
                 
                However, I’m asking these questions because I want some context for the process for a friend who has a corporate offer for a non radiology physician practice. There are some key differences to radiology where the practice has a number of non physician staff members, and the practice has multiple different revenue streams. The person in question is convinced the corporate entity will help reduce the practice’s staff overhead costs and take care of billing and contract negotiations. The person is also convinced that the corporate entity will not interfere with the physicians building new revenue streams, but I’m very skeptical as some of these streams might indirectly compete with the overall goals of the corporate entity.
                 
                Buyout stats are basically 8x EBITDA before physician salaries, 75% cash, 25% stock, and 20% management fee from EBITDA. Shares can be sold after holding them for 5 years (if separation is in good standing). Corporate entity takes care of billing (which already costs the practice 6%) and HR, IT, and staffing management.
                 
                I’m of the opinion as most of you that a well run PP is leaps and bounds better than an MBA run corporate entity, but many docs just don’t want to invest time in running and building a practice. And among those who do, their partners do not want to give any time or money to the person who is inclined to run things.

                • smfst7_929

                  Member
                  March 10, 2023 at 6:56 am

                  Be wary of corporate suits. They will tell you what you want to hear now then you will find out later what legalese your contract has that now controls you. Physicians are too trusting. They just assume because patients are involved that corps will do the right thing. Well- they will do the right thing as long as people are watching. If they can get away with compromising patient outcomes and make more money, they will do so. Heck, they will even make physicians scapegoats if need be. Not many average citizens feel sorry for physicians making 300-400k. Think about it- if corps somehow had the ability to create a monopoly and pay us all 150k, most average people in the US just wont care about our plight. Biden literally has people working on cutting provider reimbursement to balance the medicare financials. So much for covid frontline heroes.

                  Point is, you are much better off if you control your own destiny as much as you can. PP is the way.

                  • Unknown Member

                    Deleted User
                    March 10, 2023 at 7:56 am

                    So if IT starts to suck they have no power to actually make changes. Basically they become cog in the machine for 6XEBITA in cash plus some stock that isnt able to be traded on the open market.

                    What happens in 5-7 years when the practice is malfunctioning? How do you recruit new physicians?

                    Remember private equity is designed to extract value from businesses in the end. A physician practice is basically physician labor as the business. This model is not sustainable

                  • landk_304

                    Member
                    March 10, 2023 at 4:56 pm

                    Quote from sartoriusBIG

                     They just assume because patients are involved that corps will do the right thing. Well- they will do the right thing as long as people are watching. If they can get away with compromising patient outcomes and make more money, they will do so. Heck, they will even make physicians scapegoats if need be. 

                     
                    Exactly – corporations take into account fines/lawsuits when calculating their bottom line. You getting sued (and patient getting hurt) will not matter to them when it resulted from them making tens of millions by forcing all their doctors to produce more than their comfortable with, by cutting corners, by staffing complex cases with mid-level providers, etc. 

                    • afazio.uk_887

                      Member
                      March 10, 2023 at 5:24 pm

                      RP strategy has shifted. They are no longer interested in buying practices. Now they are using scale to pressure health systems for subsidies.

                    • Robbro524_990

                      Member
                      March 10, 2023 at 7:35 pm

                      And can’t private practices do that same thing as well?

                      Plus, private practices don’t have PE and a bunch of shareholders to answer to. They can just move on contracts quickly, as needed.

                    • Robbro524_990

                      Member
                      March 10, 2023 at 7:36 pm

                      Smaller is usually better (in this situation).

                      And also, usually, less fragile.

                    • tdetlie_105

                      Member
                      March 11, 2023 at 7:18 am

                      Quote from DOCDAWG

                      And can’t private practices do that same thing as well?

                      Plus, private practices don’t have PE and a bunch of shareholders to answer to. They can just move on contracts quickly, as needed.

                       
                      Likely both PE/PP will have receive subsidies to remain competitive in recruitment/retainment.  I would imagine that its no brainer that rads in PP would more readily see this in their $/wRVU compensation, but I’m guessing the PE will be creative in some type of work-around where they can continue to siphon profits while somehow maintaining adequate staffing

                    • Unknown Member

                      Deleted User
                      March 11, 2023 at 9:33 am

                      The problem with private equity practices demanding stipends is that its obvious to hospitals that they are just paying to have money siphoned away from their communities. The whole argument to hospitals was that they would be a cheaper option. Stipends negate all the advantages a PE backed group provides to a hospital

                    • tdetlie_105

                      Member
                      March 11, 2023 at 5:39 pm

                      Quote from seagull

                      The problem with private equity practices demanding stipends is that its obvious to hospitals that they are just paying to have money siphoned away from their communities. The whole argument to hospitals was that they would be a cheaper option. Stipends negate all the advantages a PE backed group provides to a hospital

                       
                      true but when push comes to shove, the threat of losing 24/7 rad coverage will likely make hospitals simply pay (as its easier than trying to get a new group to cover, particularly given the shortage of rads)

                    • smfst7_929

                      Member
                      March 11, 2023 at 6:06 pm

                      Plenty of hungry PP groups out there willing to go from 18 weeks vacation to 9 to soak up another hospital while they wait to hire to restore their vacation. Pretty sure thats what people were saying about the 5 RP hospitals in Chicago. They were given away to a megagroup PP. So much for that idea. Sorry.

                    • smfst7_929

                      Member
                      March 11, 2023 at 6:09 pm

                      What people who are hospital employed and PE employed dont understand is that PP groups can actually take on contracts with current staffing- they of course just have to lose vacay. If majority votes to drop from 18 weeks to 9 weeks or 12 weeks to 7 weeks, they can pull it off. Easier for a PP to hire to fill the vacation back up later. Silly employees! Dont you know its not just binary 0s and 1s? Grey areas exist in staffing. Just a matter of whether majority votes to make more money and decrease vacay. PE or hospitals are much more reluctant to unilaterally take on business because they have contractual obligations usually for vacation time etc. or they dont want to upset their warm bodies with a pulse. They need every single one just to survive with all the PE attrition

                    • DanielQuilli

                      Member
                      March 11, 2023 at 6:29 pm

                      Quote from sartoriusBIG

                      Plenty of hungry PP groups out there willing to go from 18 weeks vacation to 9 to soak up another hospital while they wait to hire to restore their vacation. Pretty sure thats what people were saying about the 5 RP hospitals in Chicago. They were given away to a megagroup PP. So much for that idea. Sorry.

                       
                      Do you really think so? Everyone I know is understaffed and the shifts are brutal. No way I would give up time off for more money, juice isnt worth the squeeze. I do agree that subsidies will need to be forthcoming, its been past the point where some of our hospital contracts are just not worth it. We’ve already walked away from one because they refused our request for a very modest subsidy. They went with RP which is taking them to the cleaners now.

                    • smfst7_929

                      Member
                      March 11, 2023 at 6:39 pm

                      By understaffed what do you mean by that?  Are the radiologists working with only 6 weeks vacation?  
                       
                      If so, then not truly understaffed. At most they are running super lean to maintain vacation at or above 10 weeks per year.
                       
                      Please explain your definition of understaffed.  For most PP groups, as long as the list can remain relatively clear throughout the day, you aren’t really understaffed.  Understaffed would be letting the list pile up to a few hundred studies because you just can’t get caught up.  Then sure, it’s understaffed especially if the group is already at 8 weeks vacation or something like that.   

                    • 22002469

                      Member
                      March 11, 2023 at 8:01 pm

                      Quote from sartoriusBIG

                      By understaffed what do you mean by that?  Are the radiologists working with only 6 weeks vacation?  

                      If so, then not truly understaffed. At most they are running super lean to maintain vacation at or above 10 weeks per year.

                      Please explain your definition of understaffed.  For most PP groups, as long as the list can remain relatively clear throughout the day, you aren’t really understaffed.  Understaffed would be letting the list pile up to a few hundred studies because you just can’t get caught up.  Then sure, it’s understaffed especially if the group is already at 8 weeks vacation or something like that.   

                       
                      Your example of 18 weeks seems like a pretty big outlier for typical PP vacation to me. Certainly those groups exist, have some slack in the system, and could cut a lot of vacation. But that’s not the norm.
                       
                      It’s also not just about vacation/days off. If people are already reading 15k+ wRVUs/year, it’s not always easy to just add 25% more wRVUs to the pile and expect them to get read by the same # of rads, even if people work more shifts.
                       
                      Most people aren’t 20k wRVU/year rads (not should they be), they’ll crash and burn trying to keep the same pace up with 40 extra shifts per year. 
                       
                       

                    • smfst7_929

                      Member
                      March 11, 2023 at 6:45 pm

                      Also what do you mean by RP is taking them to the cleaners?  RP has demanded and received a subsidy?  Seems doubtful based on what I’ve heard and read on these forums.  Let’s say they demanded a huge subsidy, again I highly doubt the hospital C -suite wouldn’t be contacting every private group in the area so see if they would do it for no subsidy or less subsidy. Because I also highly doubt RP would be passing much of any subsidy on to its peons.  RP is having a terrible time retaining people and the ones they do retain are either sellouts locked in for 5 years or they are subpar radiologists who to be frank just aren’t good enough or fast enough to be branching out.  
                       
                      I’ve seen the sites where the rats abandoned the ships post vesting period.  The ones that stayed on are clearly not the cream of the crop.  Some of they I wouldn’t even let pour me a glass of milk because I’d be afraid they’d mess that up.

                    • DanielQuilli

                      Member
                      March 11, 2023 at 8:02 pm

                      There isnt really any real competition in our area. The level of staffing required to cover the system made it unprofitable compared to the rest of our business. The system tried to approach us about coming back but we werent interested.
                       
                      By understaffed we are at around 7-8 weeks of time off, and the list is continuously 200+ deep. I do not consider time off “vacation” it is more time to recover from the draining shifts. This is not by choice we are in a difficult area to recruit. Having less time off than that would make it even harder to recruit what we need.

                    • Patrick

                      Member
                      March 11, 2023 at 8:20 pm

                      Tigershark get back to the tables and have a drink at your conference.

                    • satyanar

                      Member
                      March 11, 2023 at 11:13 am

                      Quote from jd4540

                      Quote from DOCDAWG

                      And can’t private practices do that same thing as well?

                      Plus, private practices don’t have PE and a bunch of shareholders to answer to. They can just move on contracts quickly, as needed.

                      [b]Likely both PE/PP will have receive subsidies to remain competitive in recruitment/retainment.[/b]  I would imagine that its no brainer that rads in PP would more readily see this in their $/wRVU compensation, but I’m guessing the PE will be creative in some type of work-around where they can continue to siphon profits while somehow maintaining adequate staffing

                       
                      Yes. This is all good news for traditional PP. PE backed groups used to compete. Now they make the market. Many of this have been saying it for years. Learn a bit about business and prepare to provide excellent service. You will be well rewarded financially in this market.

                    • mwakamiya

                      Member
                      March 10, 2023 at 7:40 pm

                      Dong, 
                      Wow — their future is bleaker than what I initially thought. Health systems will see right through that and when there is a relative downturn in the market, the tables will be turned. Various large systems are already floating RFPs — all public and well known information. 

                    • afazio.uk_887

                      Member
                      March 11, 2023 at 7:10 am

                      Downturn? Might not happen for decades in the Rad market.

                    • mwakamiya

                      Member
                      March 12, 2023 at 6:32 am

                      DONGER — market cycles in radiology are about 5 year in normal environments. If your have abnormal /atypical conditions (i.e. COVID pandemic as an obvious example), these cycles are thrown off — just see back 1.5 to 2 years ago. You could not find a decent job for a good rad if your life depended on it.  When anyone in any industry starts talking about “decades” with respect to anything — watchout!

                    • smfst7_929

                      Member
                      March 12, 2023 at 11:48 am

                      As a general statement I would have to agree with you. However, this is a perfect storm of forces affecting the rads job market.

                      Mass retirement of boomers + lazy (lifestyle seeker) new rads + increasing volumes (boomers need imaging and midlevels are going wild overordering) + decreasing reimbursements + no real increase of rads in training (and half those ones that do come out are looking for lifestyle gigs or part time).

                      Unless you see a significant shift in some or all of those factors above, yes at least a decade of good job market is upon us. I would say 15 years. Not enough hardworking boomers left to hang on during this downturn like the last one. Theyre just too old and decrepit so they wont be able to throw their weight around.

                    • buckeyeguy

                      Member
                      March 12, 2023 at 5:08 pm

                      Quote from sartoriusBIG

                      As a general statement I would have to agree with you. However, this is a perfect storm of forces affecting the rads job market.

                      Mass retirement of boomers + lazy (lifestyle seeker) new rads + increasing volumes (boomers need imaging and midlevels are going wild overordering) + decreasing reimbursements + no real increase of rads in training (and half those ones that do come out are looking for lifestyle gigs or part time).

                      Unless you see a significant shift in some or all of those factors above, yes at least a decade of good job market is upon us. I would say 15 years. Not enough hardworking boomers left to hang on during this downturn like the last one. Theyre just too old and decrepit so they wont be able to throw their weight around.

                       
                      Agreed on all accounts except something has to give. The 2000s made as much and we’ve lost all that and then some due to cuts and inflation. Volume is so stupid, it’s a joke. I don’t think the system can actually last that long, to be honest. I also don’t get why doctors want to make 800-1 mil when they could make 300k less and share that pie so that they aren’t working all the time, or all these dumb weekends. It’s really weird to me, especially given the tax bracket stuff …

                    • smfst7_929

                      Member
                      March 12, 2023 at 5:31 pm

                      Some people are just wired to work. I honestly prefer a balance. I wouldnt want any less than 10 weeks vacation or 1 in 5 weekends. Anything above that below that in vacay or more weekends than that would be intolerable. I want to make as much money as comfortably as I can for now. I would actually like to scale back, but I think the federal and FICA taxes will only go up from here- so trying to take advantage while the sun is shining, relatively speaking. If Biden or the dems eventually pass anything close to his current budget taxation proposal, I will probably go close to half time or sell most of my weekends. His budget would create a huge marriage penalty for my wife and I. We would likely pay an extra 100k in taxes. No thanks. Another consideration is that I have the energy for now. Who knows what Ill feel like in 15 years. For now I Dont really feal burned out.

                    • afazio.uk_887

                      Member
                      March 12, 2023 at 5:36 pm

                      I am not burned out but prefer not to work when possible. Time off is really nice.

                    • buckeyeguy

                      Member
                      March 12, 2023 at 5:55 pm

                      Quote from PirateRad

                      DONGER — market cycles in radiology are about 5 year in normal environments. If your have abnormal /atypical conditions (i.e. COVID pandemic as an obvious example), these cycles are thrown off — just see back 1.5 to 2 years ago. You could not find a decent job for a good rad if your life depended on it.  When anyone in any industry starts talking about “decades” with respect to anything — watchout!

                       
                      Great call.

                    • Unknown Member

                      Deleted User
                      March 13, 2023 at 7:56 am

                      As they say…that was then and this is now!  RP made their splash by buying all those private groups in highly desired areas like Houston, Dallas, Phoenix, etc.  They paid way more than the actual value because what actual value is there in 180 day hospital provider contracts.  What they bought was the goodwill of the practice partners for them to stay on for 5 years and keep the practice together.  It’s now been 5 years and many of those who sold out are moving on.  The question is will RP be able to maintain enough on the ground presence.  The shortage of radiologists is hurting them in this but it is also helping in some ways as hospitals that have a clue know they won’t be able to find another provider, especially since RP has wrapped all the locals up in non-competes.  To my knowledge the corporates are only taking on new growth with distressed groups and hospitals.  I have actually seen examples of hospitals that won’t financially support their current private practice but will offer huge support to a corporate or other predatory group to take over.  It’s a crazy world.

                    • Unknown Member

                      Deleted User
                      March 13, 2023 at 8:04 am

                      Quote from Daniel Corbett

                        I have actually seen examples of hospitals that won’t financially support their current private practice but will offer huge support to a corporate or other predatory group to take over.  It’s a crazy world.

                      Not really. Hospital knows RP can drive down rad rates better than any one hospital or hospital system can.

                    • Unknown Member

                      Deleted User
                      March 13, 2023 at 8:15 am

                      Quote from Waduh Dong

                      RP strategy has shifted. They are no longer interested in buying practices. Now they are using scale to pressure health systems for subsidies.

                      It is risky to ask hospitals for money but bold. There are other PE entities out there that may bid for contracts. No big players though. Envision, the next biggest PE player, teetering on bankruptcy so they are out.

                    • Unknown Member

                      Deleted User
                      March 13, 2023 at 10:40 am

                      I always thought that rads would be the only victims in the PE scam. Now I think PE may get powerful enough to extract money from hospitals and insurance companies too. Why stop at extracting money from rads? Get every penny you can.
                       
                      Insurance companies will cry antitrust. Pot calling kettle black.

                    • afazio.uk_887

                      Member
                      March 13, 2023 at 10:45 am

                       
                      When businesses talk about “scale” what they mean is gaining monopoly pricing power.   That’s the ultimate goal of a good capitalist… monopoly or cornering a market.   In Rads, it is more like local or regional monopolies are possible.