FAQs

If your practice can’t keep up with the strategic and operational tasks and challenges it is facing, you need help.

• Consulting: There are firms that specialize in helping orthopedic practices both strategically and operationally. No loss of autonomy but could be expensive; the results of the intervention(s) and the value of the services may not be as hoped.
• Merger of Equals: Find like-minded groups in your area and join together. Gain market power and spread costs, however cultural differences and income distribution can become sources of contention and often take a long time to resolve.
• Join a Multispecialty Group: Become (or strengthen) the orthopedic practice of a large multispecialty group. As above, gain market power and spread costs but hard to resolve cultural, income-related, and governance/autonomy issues, and must compete for resources.
• Hospital Acquisition: Let a hospital acquire your group and become hospital employees. Easy path: transfers challenges to the hospital which can better address them; however, interests are not aligned: hospitals want to fill beds and use the ASCs and ancillary services (PT, x-ray, MRI) they own, the practice has little control over the path forward and must compete for resources.
• Payer Acquisition: Let a payer (like United) acquire your group. Easy path: transfers challenges to the payer which can better address them; interests are better aligned but not perfect as the payer is incentivized to limit cost for the population rather than provide the best possible care for each patient.
• National Orthopedic Practice Acquisition: Let a national orthopedic company (like AOP) acquire your group. The best path for many groups, but can take a long time to accomplish; transfers challenges to a national company that can better address them; interests are aligned, and practice maintains local autonomy, but now a financial sponsor (normally a private equity firm) will be involved in capital decisions.

True physician ownership and leadership.  Shared governance.  Agreeable and cooperative corporate culture. Structural and economic alignment.  Smart partners know healthcare is local.  Practice leaders run day-to-day operations and maintain authority for hiring, firing, and setting physician compensation.  Aligned budgetary and capital approval process.  Dedication to all avenues of growth: expanded geography, additional service lines (e.g., hand, spine, pediatric), additional ancillary services (e.g., PT and MRI), development of orthopedic urgent care centers, acquisition of ambulatory surgery center(s), etc.

The time required from initial discussions through closing varies primarily based on a practice’s understanding and readiness.  The normal range is 6 to 9 months.  After initial introductions and preliminary information exchange, both parties determine whether goals match and cultures are complementary.  If so, a non-disclosure agreement is signed, and the reciprocal sharing of data begins.  During this phase, both parties continue to get to know each other and work together to establish the terms of the deal and partnership. These and other important considerations are memorialized in a definitive (but non-binding) letter of intent, which includes the intended purchase price and major substantive terms.  Once the LOI is executed due diligence begins, which is a process of verification, analysis, and audit of major aspects of practice operations and finance.  Concurrent with due diligence, legal agreements are drafted, and once all outstanding questions are resolved and agreements completed, we collectively determine a closing date and the first day of the partnership.

As a multiple of earnings.  There are standard industry expectations for the value of orthopedic practices.  Investment bankers and their private equity sponsors associate the following factors with higher multiples: dominant local group with strong market share; a historical pattern of incremental, steady growth; excellent physician leadership, recruitment and retention; and a predominance of in-network contracts.  As most physician practices operate as partnerships where excess funds are distributed to the partners, the actual earnings amount is often subject to a variety of accounting adjustments.

• Strategic Growth: AOP helps its practices plan for and finance strategic growth, including new locations, ASC and orthopedic urgent care center development, new ancillary services, and new equipment.
• Information Technology and Security: AOP assures cyber security by using our servers to protect health information from outside threats, and to maintain privacy and safety within our company.
• Contracting Support: For the benefit of our practices, we identify and retain individuals who have relationships with local payer communities; we prefer in-network relationships.
• Preparation for Managed Care: To prepare for value-based care, AOP has established broader data collection requirements, including patient outcomes data. Our goal is to establish our value through outcomes rather than price.  To gain experience managing financial risk for a broad range of services (both inside and outside the confines of our practices), we are working to establish direct contracts with self-funded employers, featuring bundled payments for common orthopedic procedures.  We also are in the process of securing hospital partners to co-manage clinical services and financial risk under capitated payment arrangements.
• Retention of Key Personnel: AOP leadership development and succession programs help retain our best talent. AOP reinforces the idea that skilled, compassionate caregivers are our fundamental asset.
• Marketing: AOP provides local marketing support as well as national exposure through our website, speaking engagements, blogs, and educational materials.
• Professional Liability: AOP offers a specially designed, brokered option, which is coupled with risk management training to secure favorable pricing.
• Benefits Program: AOP offers extensive benefits, including robust healthcare, disability, life, and voluntary benefits on a national level for clinicians and administrative staff.
• Clinical Initiatives: Relationships are in place with ODG (Official Disability Guidelines) which provides complete workers’ compensation standards and protocols; PatientIQ which provides patient outcomes and satisfaction data; BioIntellisense which provides remote patient monitoring through wearable devices; and additional relationships are being established to give qualifying employees immediate access to our care on demand while lowering healthcare costs for employers.
• Administrative Burden Reductions: Management time is freed up as AOP assumes responsibility for payroll, benefits management, accounts payable, and general accounting.

AOP does not assign a general corporate overhead factor to our practices. AOP does allocate costs directly related to the commensurate value of benefits provided, as described above.  Also assigned to the practice are expenses directly related to the practice, such as legal, accounting, IT, physician recruitment, local marketing campaigns, licensing fees, etc.  Practice operating expenses continue to remain with the practice.

As our financial partner, Stone Point Capital brings a commitment to deliberate, balanced, steady long-term growth.  Stone Point’s portfolio companies include two large workers’ compensation benefit managers, as well as primary care networks.  Our physician-owner partners have the same Class A shares as Stone Point and AOP leadership; our physician-owners are not in an inferior position.  Stone Point has been in business for over 20 years, with over $26 billion in capital investments and a gross internal rate of return of 23 percent.

We look for healthy practices that want to grow.  The most important attributes are well-run, effective management; good leadership with democratic processes; favorable ownership structure (not all held by one or two individuals); strong financial performance; strong market share and high patient satisfaction; well-trained clinicians; common values and vision; positive, supportive, and nurturing culture; and strong hospital relationships which offer potential for joint ventures.

• Yes: Finance, accounting, banking, human resources, benefits management, information technology, data analytics, reporting, insurance, and risk management, legal and compliance
• No: EHR, scheduling, ancillary operations, hiring/firing, physician compensation, referral relationships, hospital relationships.
• Collaboration of Practice and AOP: Marketing, professional liability, payer contracting, operational efficiencies, revenue cycle; clinical programs, quality metrics, physician leadership development.

Any issues discovered during the due diligence process (e.g., HIPAA, IT security, or OSHA compliance) will have to be corrected.  Any business practices in violation of state or federal regulatory requirements, including the physician compensation formula, will be corrected.  Accounting and financial performance reporting will be established. AOP’s operations team will conduct an assessment and suggest areas of improvement. Growth initiatives and investment decisions will need to include AOP.  In addition, we will want to work with the practice leadership to develop a long-term strategy inclusive of a succession plan and assure that practice physicians have access to leadership development programs and materials.

Many opportunities are available. On entry, all our practices are represented in our National President’s Council, which meets monthly.  As we grow, AOP needs additional physician leadership at both regional and national levels.  In addition, we offer positions on our physician-led committees, which include Quality and Standards, Clinical Operations, Leadership, and Technology.

Opportunities are based on geography. We fold small practices into existing AOP anchor groups or use them to expand adjacent geographic coverage.