Private Equity, Boon or Bane, for Retina Specialists? | AAO 2023

Private equity firms can bring capital investment to practices, expand their research efforts, fend off financial threats, and considerably increase the income of retina specialists were the arguments on the “pro” side of a debate about private equity ownership yesterday the annual meeting of the American Academy of Ophthalmology (AAO) in San Francisco. On the con side: loss of control, rationing of capital purchases, prioritization of profits and loss of staff loyalty.

“Your staff will always view the PE (private equity) sale as harmful to them,” argued Richard S. Kaiser, M.D., a retina surgeon at the Wills Eye Hospital in Philadelphia. “They will not be motivated to work as hard for you or the practice. Junior partners feel universally betrayed by sale.”

When it came time for the AAO audience to vote on who won the debate, Kaiser prevailed by a wide margin, 91% vs. 9% over the private equity’s proponent, David M. Brown, M.D., an officer and stockholder in Retina Consultants of America, one of the largest private equity-owned retina groups in the country, which lists 104 locations on its website.

Kaiser and Brown’s debate about private equity was one of several during in a lively session yesterday at the annual meeting that featured pro and con presentations of a few minutes on unsettled issues in the retina specialty and then an audience vote on the winner afterward. Other topics debated in the session were early vitrectomy in diabetic retinopathy, complement inhibition therapy for geographic atrophy, and vitrectomy combined with 360-degree extended vitreous base laser versus scleral buckling.

Ophthalmology is one of the lucrative medical specialties, and private equity firms have been buying up ophthalmology practices for several years. KFF Health News reported last year that Robert Wiggins Jr., M.D., the 2022 president of AAO, said that as many as 8% of ophthalmologists work for practices owned by private equity firms. KFF Health News reported Brown’s Retina Consultants of America, was formed in 2020 with a $350 million investment from by Webster Equity Partners, a private equity firm in Waltham, Massachusetts. Brown said yesterday that Webster owns 14% of Retinal Consultants of America.

Brown compared retina practices to Celtic tribes in feudal England “strong and independent in their own valleys” but not able to fend off the Romans and Julius Caesar. Brown said the expense of hiring lawyers and consultants can be spread out and become more manageable over the larger groups that private equity firms assemble. He also said that every practice that Retinal Consultants of America has partnered with has seen an increase of EBITA (earnings before interest, taxes, and amortization), which translates to higher income for the retina specialists. “The average five doc retina group increased (income) by 22.5%, or $250,000, in the first-year post-income, making their income over a million,” Brown said. He also said Retinal Consultants of America had used $141 million in capital expenditure to create 60 new clinics, 30 remodeled clinics, and “tons of world-class equipment.”

Kaiser’s rebuttal was the private equity firms are motivated to maximize returns to limited partners and themselves and then sell as quickly as possible. After the sale, the doctors become employees, must sign noncompete agreements and practice incurs debt. He painted a picture of doctors having to meet metrics that maximize profit and are not designed to improve patient care. Kaiser also pointed to research published in BMJ earlier this year that showed that private equity investment in healthcare is associated with increased costs to patients and payers up to 35% and negative effects on healthcare quality.

“So just say no [to private equity],” said Kaiser, reprising how he began his argument. “We are lucky. As retina specialists we have effective treatments to the leading causes of blindness. We make meaningful impacts every day in our patients lives. And we're well compensated.”

Kaiser continued, “At a party in the Hamptons, Kurt Vonnegut asked Joseph Heller how he feels about his host who makes more money in a single day than Heller made from writing “Catch-22.” Heller's response was, it’s OK because I have something he will never have, enough. As retina specialists, we have enough.”