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What private equity’s growing investment in urology practices means for oncology manufacturers

By Daniel Blumin

Associate partner at The Dedham Group, a Norstella company

Over the past five years, private equity groups have slowly increased their acquisition of urology practices, increasing their footprint and influence in the urology channel. While many debate the impact of private equity on healthcare delivery and quality, the PE footprint across U.S. healthcare is expected to grow consistently over the next few years.

Private equity involvement within the urology channel can be multi-faceted, and thus requires an informed, nuanced, and targeted top-down engagement strategy for PE-backed managed service organizations. To ensure enhanced urologic oncology brand access and drive value at an account-level, manufacturers must learn to understand and navigate this evolving market. For example, PE groups may drive deals for acquisition of urology practices via managed service organizations (MSOs) (e.g. Solaris, United Urology), or tactically acquire individual urology practices as a part of larger multi-specialty network models (e.g. Integrated Oncology Network). Given that decisions made by PE-backed MSOs such as Solaris are centralized, manufacturer engagement at the MSO-level can have high downstream implications for brand perceptions and access. Here’s what manufacturers need to know about private equity’s growing role in the urology practice channel.

Historical data and present-day deal trends indicate that PE firms are actively competing for market share of the urology practice channel. Dominant private equity-backed MSOs such as United Urology, Solaris, and US Urology Partners have already acquired a vast portion of large independent urology practices outside of an institutional setting, leaving remaining PE firms to focus on mid-size groups (7 urologists or less) without a LUGPA affiliation. Private equity groups view these independent practices as potential drivers of revenue; with a steady stream of patients and established referral patterns, additional layers of ancillary service support and management oversight can maximize practice success. Conversely, independent urology practices may consider private equity partnership to counterbalance the pressures that large health systems or payers exert over their network and patient volume or as avenues to support capital investment for capabilities they are looking to develop.

Deal structures for private equity acquisition of urology practices vary case-by-case, but physicians typically retain a portion of practice ownership. As a part of acquisition, physicians retain a portion/remainder of practice ownership to support incentives for continued growth and performance for future sale. In certain case studies, independent urology practices have rejected PE partnerships after weighing the limited capital benefit of acquisition against a salary buyout that was lower than anticipated, or broader misalignment with long-term practice goals. Following acquisition, PE groups with a multi-specialty focus (e.g. Integrated Oncology Network) may then pull in newly acquired urology groups into their vertically integrated network, extending their ancillary service offerings and capabilities (such as radiation oncology, patient imaging, and ambulatory surgery centers). At an operational level, PE groups may support urology practices with limited staffing and administrative infrastructure by investing capital in hiring billing staff and nurse support, or may even become involved in establishing firmer management protocols to ensure smoother practice operations and bolster business management.

From an operational perspective, one of the largest ancillary service opportunities for urology practices is the development of internal dispensing pharmacy capabilities. Private equity groups may support newly-acquired urology practices by helping establish their IODP, thereby supporting enhanced oncology patient retention, leveraging the added clinical benefits of internal dispensing (such as improved AE management, patient visibility and outcomes), and potentially increasing revenue. On the other hand, certain PE groups view medical benefit drug purchasing and administration as potential risks for small-scale urology practice revenue, given slim reimbursement margins, perceived high buy-and-bill risk in the case of product denial, limited urologist familiarity with newer oncology brands (e.g. CAR-T & PD-L1s), and the coordination/services required for infusions. In addition to IODP support, private equity groups may work with their acquired urology networks to establish competitive and favorable contracts for urologic oncology brands which support enhanced practice revenue. While most PE-firms have limited involvement in clinical decision-making outside of quarterly or annual meetings of practice performance, certain MSOs may place increased emphasis on contracting and establishment of pathways/guidelines to guide urologist decision-making or ensure medical necessity of high-cost regimens.

Lastly, there’s considerable discussion regarding the impact of private equity involvement in the quality of care delivery at urology practices. Certain studies have demonstrated challenges with PE-backed practices and attainment of quality standards – according to a study published by the American Urological Association in November 2023, private-equity-backed urology practices have scored lower than non-private-equity-backed practices in the Merit-based Incentive Payment System (MIPS), which measures quality of patient care and provides bonuses for high-performing practices. The study assessed overall MIPS performance, and secondary outcomes which included quality, interoperability, improvement across key areas, total cost of care and the percentage of urologists receiving a bonus payment; PE-backed urology practices scored lower, igniting a debate surrounding the true impact of PE on care delivery in urology.

Outlook for private equity’s role in urology practices

The future of private equity investment in the urology practice channel is continuing to evolve, with an increasing emphasis on delivery of urologic oncology care. As the urology practice channel becomes more adept at treating and retaining oncology patients, private equity group management of acquired urology practices may shift to reflect this changing treatment paradigm.

To be prepared for the increasing role of PE and MSO activity within the urology practice channel, oncology manufacturers need to understand the organizational dynamics of private equity and MSOs, and how their approach to management of acquired practices can impact brand-level decision-making, purchasing, and total cost of care analytics.

To learn more about The Dedham Group’s strategic consulting services, contact us.

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