Selling your practice to a private equity firm? Things to think about, ethically and otherwise

A few years after optometry school, you fulfilled a dream of owning a practice. You put your heart and soul into serving the community for many years, but now you’re ready to step back as you approach retirement age.

Enter a private equity (PE) firm that wants to buy you out. Do you accept its lucrative offer, setting you up for retirement? Or do you sell to the young doctor of optometry who has designs on buying you out? In Case Study No. 20, the AOA Ethics and Values Committee (EVC) presents several considerations in this real-life scenario. Find the case study in the AOA’s EyeLearn: Professional Development Hub.

“It’s up to each doctor of optometry to weigh the potential positives and negatives of selling a practice to a PE firm,” write case study authors Doug Totten, O.D., M.B.A, EVC chair, who practices in Michigan, and Bob Moses, O.D., EVC member who practices in Indiana.

There is no right or wrong decision, say Drs. Totten and Moses, who conducted research and interviews for the case study. But if doctors are considering such a sale, there are concerns to address. Any decision to consider an offer from a PE group should be weighed carefully and in consultation with accounting and legal advisors.

Among those considerations:

• Relinquishing management control over how the practice is run, staff is compensated and the vision of the group. “Doctors of optometry do need to accept loss of control of the practice they have built,” Dr. Moses says. “Some may not be prepared psychologically to accept becoming an employee of what was their practice.”
• Abiding by a more corporate approach to patient care (volume contracts). “Patients also will be impacted by the philosophy and business plan of the private equity group acquiring the practice,” Dr. Moses says. “Will there be a greater focus on retail or an expanded medical model? What will happen to the practice when the private equity group sells to the next larger entity in 3 to 5 years as most plan to do? Time will tell.”
• Selling to private equity firm vs. young doctors who have their own dreams of owning a practice someday. What impact will it have on the optometric profession—perhaps the most significant ethical issue raised.
  
• Giving up earnings as an owner to become an employee.

With more optometric practices being sold via private equity transactions, the topic is timely and complex, the authors say.

“The primary equity movement into our profession seems real and the rate of this happening seems to be continuing,” Dr. Totten says. “It seems it's wise for every doctor of optometry/owner to ponder and consider the potential positives and negatives of this method of practice transition for ourselves and for the next generation of doctors.”

Dr. Moses adds, “We see this trend throughout health care.”

See how to access Ethics and Values case studies on EyeLearn.