The next frontier of value-based care may be in specialty care, health care dealmakers said at the Axios BFD on Wednesday.
Why it matters: As value-based care frameworks expand out of primary care, myriad sponsor-backed specialty physician businesses may now have a new exit thesis.
What they're saying: "Primary care companies are getting large enough, with enough lives that they'll say, 'Let's start bringing these specialties in-house," said VillageMD CFO Ross Levine, speaking at the BFD's Health Tech Expert Voices roundtable.
- "We're starting to see value-based care in specialty areas," said Clayton Dubilier & Rice Partner Ravi Sachdev, who sits on Agilon's board.
- Sachdev and others cited oncology and musculoskeletal care as logical specialty areas for risk-management arrangements.
Between the lines: There's a science to getting it right, says Arsenal Capital Partner John DiGiovanni, drawing a comparison to private equity's PPM rollup thesis.
- "There's a 'J' curve, and thats why there's some resistance to specialty areas," DiGiovanni said. "The savings are there, once the incentives are right."
Yes, but: Not every specialty is ripe to be tucked into a VBC framework.
- "Nobody here is talking about doing value-based child psychiatry [for instance]," said Oak Street Health Chief Medical Officer Griffin Myers.
- "Value capture requires value created, so we need to figure out the loser on that side of the transaction," he said.
State of play: Though market activity for specialty physician groups has slowed as the debt markets have tightened, a handful are looking at their exit options now. These include:
- Webster Equity Partners-backed Retina Consultants of America, expected to come to market in 2023.
- Silver Oak Services Partners-backed dental services organization Smile Partners USA, which hit the block this summer.
- Privately-held cardiology group Pivotal Healthcare Partners, which tapped TripleTree to advise on a potential sale, Axios reported in August.
Meanwhile, health care executives aren't sweating the Amazon effect, even after the e-commerce giant's $4 billion bet on primary care player One Medical earlier this year.
- "Amazon brings capital and tech, but they don’t bring what’s required — physicians or patients," said Ruben King Shaw, chief strategy officer of health system Steward Health Care
The intrigue: Amazon's primary care disruption will create some pricing incongruity, Arsenal's DiGiovanni warns.
- "We're entering a recession," he said. "It's going to affect the pricing of smaller deals, and you can see some erosion and potential for arbitrage at the lower end."