Private equity investments, a longtime staple in radiology and other specialties, are beginning to make a bigger and bigger impact in cardiology.
One sign of this growing trend is the recent rise of multiple cardiology practice management platforms in the United States. This includes Cardiovascular Associates of America, operated by Webster Equity Partners, US Heart and Vascular, operated by Ares Management, and Partners First Cardiology, operated by Varsity Healthcare Partners, just to name a few.
What, exactly, is the business model of these practice management platforms? What are their short- and long-term goals? We spoke to Tim Attebery, DSc, MBA, the CEO of Cardiovascular Associates of America and former CEO of the American College of Cardiology (ACC), to learn more.
Read the full conversation below:
Cardiovascular Business: Why are private equity investors so interested in cardiology right now?
Tim Attebery, DSc, MBA: I think it’s a number of things, actually. First, you have U.S. Centers for Medicare and Medicaid Services (CMS) evolving over time, resulting in an expanding list of codes for ambulatory surgery centers (ASCs). CMS will reimburse for pacemakers now, it will reimburse for percutaneous coronary intervention (PCI), etc. Another factor is the fact that so many cardiologists have gone back to working for hospitals—that worked out alright for some cardiologists, and not so well for others. I wouldn’t say hospitals earned an “F” over the years for their management skills, but it’s certainly not an “A” either. For the cardiologists who didn’t like being employed by the hospitals, who missed seeing immediate results and felt that they lost a lot of autonomy, it didn’t take long for them to start thinking about being independent again and being entrepreneurs. So that’s a second factor.
Another thing to remember is the rising cost of cardiovascular care, especially among Medicare patients. And with so many baby boomers getting older—coupled with a shortage of cardiologists due to so many of them retiring—it has just really increased demand for the entire specialty as a whole.
The final piece of this puzzle is actually very exciting—we are learning more and more that we can actually avoid a lot of the costs associated with cardiovascular care. There are ways to manage these patients that can reduce costs without impacting care—and the best people to do that are the entrepreneurial cardiologists.
But the entrepreneurial cardiologists can’t do it on their own; they need capital. And from the perspective of private equity investors, well, they’re staring at this from 20,000 feet up and they see an opportunity for restructuring, for transformation, for a revolution. Any time that a market goes into a period of potential unrest and change, it’s a perfect opportunity for investors to step in and offer to help.
You mentioned avoidable costs as a key factor—can you provide a bit more detail about what you mean?
I can give you some easy examples. First, if I do a same-day PCI in the hospital, it has a certain cost attached to it. If I do that same procedure in an ASC, which is basically an outpatient cath lab, it will cost about 40% less. Well, I just removed 40% of the cost—and if you do that for, say, 500,000 PCIs, you’re looking at a really big amount of savings.
Another example is the treatment of heart failure. Every cardiologist in the United States knows how many heart failure patients end up in the emergency department when they didn’t really need to be there. A different care model could have avoided that altogether—and the people who can design and implement a better care model are the cardiologists themselves. Unfortunately, today’s reimbursement system doesn’t recognize or reward the cardiologist’s ability to do that—but we’re starting to see that change. And if we can just start helping a small percentage of those heart failure patients skip the emergency department altogether and seek out care from a cardiologist, we’ve created a whole new economy for the cardiovascular enterprise.
What can you share about the overall business model at Cardiovascular Associates of America?
Well, when partner with a cardiology-owned cardiology practice—meaning we acquire that practice—the doctors receive cash and equity. So they are basically exchanging their ownership in the cardiology practice for cash and equity in the larger national company.
We want that practice to keep growing and expanding—and that’s where we come in. I like to ask cardiologists, “What changes would you make to your practice if money was no object?” With our funding, Cardiovascular Associates of America can make those dreams a reality. We can accelerate their ability to add value. Do they, for example, want to build a new ASC? We can help them develop it. It’s all about betting on yourself. If a cardiology group believes in its ability to grow, they can bet on themselves by becoming part of a bigger national entity, a national entity that can bring capital and other resources to the table.
As time goes on, of course, the goal is future liquidity events—what we call that second bite of the apple. And a third bite of the apple will eventually come, and a fourth. Our game plan is for cardiologists to become a part of this larger company and build wealth for themselves by providing value and taking care of patients. Ultimately, maybe this all leads to a deal between Cardiovascular Associates of America and an even larger private equity firm. Or maybe another strategic buyer will come along, or maybe we will eventually go public.
What does Cardiovascular Associates of America look for in a cardiology practice? What makes a practice a good fit?
Our goal is to get a thousand physicians in our practice over the next three or four years, but we aren’t going to do that by spacing them out equality from Key West to San Diego. Instead, we want to achieve that goal by focusing on certain regions that we have identified. You can probably tell what some of those regions are by looking at our roster right now, but some of those regions are also proprietary.
Once we had those regions identified, we started to look for groups with a growth mentality. If you don’t want your practice to grow, you aren’t a good partner for us. And if you do not feel that this is a transformative time for cardiovascular services in the United States, you aren’t a good partner for us.
Do cardiology practices ever worry that they will lose their freedom if they are acquired?
Oh, sure. Entrepreneurial physicians—in cardiology or any other specialty—want to protect their autonomy. And in our business model, the physicians retain clinical and operational autonomy. We do not get involved when it comes to hiring or firing physicians, hiring of firing staff, making schedules, any of those things. We just don’t get involved in those decisions. We want to support our partners, not take over for them and make decisions. Our job is to help them get things done.
How did your years of experience in cardiology, including your time with the ACC, help prepare you for this current role?
First, let me just say that it was an honor to serve as the ACC’s CEO. During my time there, they acquired MedAxiom, an organization I had helped start 20 years ago, and it was fun to see everything come together. I really enjoyed my time there and I thank the board of trustees there for giving me the opportunity to serve that community.
My time with the ACC gave me a new perspective of the economic side of cardiovascular care. It helped give me a global view of cardiovascular services. Cardiology isn’t just a key part of the overall healthcare ecosystem—it’s also responsible for a significant percentage of the gross domestic product. How many specialties can really say that?
Note: This conversation was edited in parts for length.