The growth of aggregated specialist practices - HEALTHCARE SECTOR: BEYOND 2021 - Westpac
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
HEALTHCARE SECTOR: BEYOND 2021
The growth
of aggregated
specialist
practices
1 Healthcare sector: Beyond 2021
The growth of aggregated specialist practices
Welcome
New synergies for specialists
in aggregated models
Perhaps no sector has been more
dynamic than healthcare in recent times.
Even before COVID-19 put healthcare In this report, ‘Reset for growth: What’s These are exciting times. Despite the
on the frontline of a once-in-a-century the prognosis for aggregated specialist shocks and diversions of the past 12
global emergency, the industry was practices?’, Westpac Commercial Bank months, 2021 is widely touted as a major
already being profoundly reshaped by takes a close look at the evolution of opportunity for a rethink across all
digital disruption and the emergence this trend and its drivers, from increased sectors, and Westpac is delighted to be
of an array of new technologies. competition in some specialisations to working with many specialists to support
its potential to power up tech innovation their aspirations for moving into private
Simultaneously, the healthcare sector is – allowing specialists to share costs for practices, building private day surgeries Louise McCann
confronting massive growth in demand leading-edge equipment, better data and short-stay hospitals. National Head of Healthcare
for services to meet the needs of analysis and to meet patients’ post- Westpac Commercial Bank
Australia’s inexorably ageing population. pandemic expectations for telehealth, Our special thanks to the healthcare
Add to these, the pressures of rising for instance. commentators and Westpac customers
healthcare costs, both for patients who have shared their compelling
and practitioners and, like a perfect insights on the pages that follow.
storm, the confluence of these trends is Like a perfect storm,
prompting many progressive providers
to actively explore new operating models.
a confluence of trends is I hope you enjoy reading the report
and look forward to your feedback.
prompting progressive
A standout is the concept of aggregated
practice – formerly the province of GPs providers to actively explore
and allied health groups – which is now
being embraced by growing numbers of new operating models.
specialist practitioners across the country.
Aggregated groups inevitably look to
The emergence of smaller, specialist-led, economies of scale. But funding these
private short-stay hospitals, in particular, capital-intensive projects is complex as
is redefining how specialist modalities individual investors, private equity, banks
can work together to deliver better and doctors themselves seek certainty
patient outcomes and more efficient of returns from the wide range of models
use of healthcare resources. now emerging.
2 Healthcare sector: Beyond 2021
The growth of aggregated specialist practices
Introduction
Reimagining the
medical practice
Why the collective approach to
healthcare is gaining momentum.
The global pandemic has created an healthcare, says that while aggregation
unprecedented public health emergency is more advanced in the US market, new
and placed additional pressure on opportunities are emerging in Australia.
a system already under strain from
an ageing population, an increasing
incidence of chronic disease and
The consolidation of private
growing customer expectations for medical practices … may present
more personalised, digital, integrated
care experiences. a smart model for the future.
Some of these challenges have exposed “It is becoming increasingly attractive
weaknesses in traditional models of for good clinicians to engage on this
operation and, like a number of other basis due to unneccessary duplication of
industries this year, many healthcare technology, increasing subspecialisation,
specialists are reassessing their business to encourage cross referrals and the
approach. The consolidation of private multidisciplinary approach to disease
medical practices, via group investment, management. Health insurance is also
acquisition of smaller practices, or offering greater incentives to specialists
acquisition by corporates, may to minimise patient gaps where clinicians
present a smart model for the future. take responsibility for the total episode
Aggregation may alleviate high costs of care, ” Adams says.
for sole practitioners, while facilitating
the provision of high-tech equipment, This report examines the drivers,
services and systems to deliver better advantages and challenges of the
health outcomes and more efficient specialist aggregation model and
practice management. includes case studies of healthcare
professionals who have successfully
Carl Adams, Managing Director of SMS come together to deliver integrated
Healthcare and Industry Advisor in specialist care to the benefit of their
Mergers and Acquisitions for Australian patients and their businesses.
3 Healthcare sector: Beyond 2021
The growth of aggregated specialist practices
Aggregated practice: the model of the future
Promoting greater efficiency
and better outcomes
The trend that gained traction for GPs
is now being adopted by specialists.
Aggregation of healthcare is a well- where practices or practitioners are
established business model in countries coming together with the same goal
like the US. to create consistent clinical care with
greater efficiency and shared services,”
The trend accelerated in 2010 with the says Louise McCann, National Head of
introduction of the nation’s Affordable Healthcare, Westpac Commercial Banking.
Care Act (ACA), widely known as
Obamacare, which created incentives
for providers to coordinate care and
adjusted Medicare payments to make
“One of the strongest drivers is an oversupply
mergers a smart financial option. in certain specialities, which causes more
In 2018, analytics company Definitive specialty groups to merge and probably more
Healthcare tracked 803 healthcare
mergers and acquisitions and corporate ownership to come into play.”
858 affiliation and partnership Carl Adams, Managing Director, SMS Healthcare
announcements across the US. and Industry Advisor in Mergers and Acquisitions
in Australian healthcare
In Australia, the aggregation trend
has been led by general practitioners
taking advantage of opportunities to Joining the competition
share overhead costs, invest in new
technologies at scale and provide Australia has more doctors than the
optimal healthcare within an evolving, OECD average and Adams says high
digitally-enabled work environment. competition is a driving interest in
Now, the model appears to be gaining consolidation.
momentum among specialists.
“One of the strongest drivers is an
“We’re seeing more aggregation of oversupply in certain specialities,
specialists, particularly in areas like which causes more specialty groups to
ophthalmology, radiology and psychiatry, merge and probably more corporate
4 Healthcare sector: Beyond 2021
The growth of aggregated specialist practices
Aggregated practice: the model of the future
ownership to come into play,” he
says. “There’s also the drive to reduce
Aggregated practices can leverage
overheads – it’s not so much about their size to implement wide-scale,
increasing revenue.”
quality improvement measures, such as
Adams expects the combination of
short-stay facilities with specialist
electronic medical record systems
group roll-ups to be “the model
that will fly”.
to enhance coordination of care.
“It reduces the personal excursion, Melbourne Institute: Applied Economic
provides a better exit mechanism for and Social Research at the University
the specialist, and a greater throughput of Melbourne, notes that a potential
within the short-stay hospitals, with the drawback for patients is higher fees
doctors being associated as owners charged by aggregated groups.
and part of the corporate structure,”
he says. “We are currently doing some research
into the drivers of fees charged
Benefits and pitfalls by specialists and we’re finding
that specialists who are a part of a
Aggregated practices can leverage company, rather than another business
their size to implement wide-scale, arrangement, are more likely to charge
quality improvement measures, such higher prices.”
as electronic medical record systems,
to enhance coordination of care. This Despite potential drawbacks, Adams
presents benefits for practitioners and notes that, when executed well,
patients. However, the model also has aggregation can serve the interests of
potential downsides. medical practitioners, allied healthcare
specialists and patients, alike.
“Approaches to surgery may be very
different among practitioners, which can “It’s very early days in Australia, but
cause conflict,” says Adams. “Owners I think it will gain momentum more
may also be competing with each other, and more.”
despite the collegiate environment.”
Professor Anthony Scott, who leads
the Health and Healthcare theme at the
5 Healthcare sector: Beyond 2021
The growth of aggregated specialist practices
Aggregated practice: the model of the future
Case study:
The Toowoomba Clinic
How a team effort in Queensland is delivering
treatment and driving down costs.
The Toowoomba Clinic is a 27-bed called Heal All Pty Ltd; Heal All Service
mental health facility formed by Industries, which leases consulting
Richard Lavack and a team of rooms; and The Toowoomba Clinic.
mental health specialists.
“Depending on how much each investor
It opened in October 2020 and, in put in, they received a percentage of
addition to hospital beds, it has shares in Heal All Pty Ltd and they are
consulting rooms, which can be the same shares that they have in The
leased to other practitioners. Toowoomba Clinic,” says Lavack. “The
Toowoomba Clinic creates the revenue
Lavack and his wife, Dr Andrea to pay off the mortgage.”
Boros-Lavack, were running private
practices in Toowoomba and Caloundra
and struggled to get patients into local “Many patients were having to go to
hospitals due to a shortage of beds. Brisbane, Caloundra or the Gold Coast to get
“Many patients were having to go to into hospital and we could see a need here.”
Brisbane, Caloundra or the Gold Coast
to get into hospital and we could see a Richard Lavack, Director, The Toowoomba Clinic
need here,” he says.
Lavack adds that The Toowoomba
“We had to get a group of investors Clinic gives patients easier access to
together to have a certain percentage care. “For patients who can’t afford to
of the bill before a bank could approve see a psychiatrist in person, or to travel
the loan. We had trouble finding a bank long distances for an appointment, our
who would fund us, but eventually we psychiatrists use telehealth, which is bulk
came to Westpac and that’s how we billed. If a patient requires referral to
got it to happen.” hospital, our practice has mental health
nurses that monitor and care for them
Image: supplied
The business comprises three entities: until their hospital admission, with no
a self-managed superannuation fund additional cost.”
6 Healthcare sector: Beyond 2021
The growth of aggregated specialist practices
Telehealth and the digital upswing
TELEHEALTH BY NUMBERS, OCTOBER 20201
16.4 million
Total number of reported
The future in practice
medicare benefits schedule
(MBS) consultations.
How aggregation powers up technology innovation. 4.1 million
Total number of reported
telehealth consultations:
The COVID-19 pandemic has accelerated easier and increase time for actual care
92% 8%
the uptake of digital health technologies of the patients in front of us, rather than
across Australia. messing around with clunky systems
or work-arounds that we now use to
by phone by video
Electronic prescriptions have been communicate.”
fast-tracked and attitudes toward data-
36.3 million
sharing are evolving as digital health Innovation on the horizon
records become more ubiquitous.
In 2018, the global digital health market
Total number of telehealth consultations
More than 90 per cent of Australian was valued at around US$86.4 billion.
since COVID-19 (March–October 2020).
public hospitals and 53 per cent of By 2025, it is estimated to increase to
private hospitals with inpatient facilities US$505.4 billion.
were using the My Health Record system
as of 30 June 2020. IN OCTOBER 2020 THERE WERE:
“We are seeing aggregated practices
The greatest game-changer for digital
health in Australia, however, has been lean into these models where there
the uptake of telehealth in response to
the pandemic. In June, 2020 4.7 million
is enough scale for them to spend
telehealth consultations were conducted
across the country, with just over 28 per
money on interoperability and save 11.8m 2.4m 1.0m
cent of them listed under the Australian money on resources.” General
practitioner
Specialist
consultations.
Mental health
consultations.
Medicare Benefits Schedule.
Nick Therkelsen-Terry, CEO, Max Kelsen consultations.
Australian Medical Association Vice
President, Dr Chris Moy says that further
uptake of digital health may encourage
Nick Therkelsen-Terry, CEO of
Max Kelsen, an Australian artificial 28%
by telehealth.
18%
by telehealth.
32%
by telehealth.
interoperability of clinical systems intelligence and machine-learning
between different providers. solutions company, says aggregation
of specialist groups provides the scale SOURCE: 1. Snoswell, C.L., Caffery, L.J., Hobson, G., Taylor, M.L., Haydon, H.M.,
“This will enable them to talk with each to invest in innovative technologies. Thomas, E., Smith, A.C. Centre for Online Health, The University of Queensland.
Telehealth and coronavirus: Medicare Benefits Schedule (MBS) activity in
other and would make communication Australia. Published May 19, 2020.
7 Healthcare sector: Beyond 2021
The growth of aggregated specialist practices
Telehealth and the digital upswing
“If you’re a company looking to bring critical care path of patients. “But, it only
new products to market, you’ve typically makes sense if the person entering the
got to ask a clinician to put their hand in information at the front desk isn’t a fixed
their pocket to pay for it, or convince the cost for you,” he says.
health minister to add it to the PBS,” he
says. “But the economies of scale with “Where we are seeing people leaning into
aggregated groups make investment these models is in aggregated practices,
much more attractive.” private hospitals and pathology
providers where there’s enough scale for
them to spend money on interoperability
“Smart medical practices and save money on resources.”
will be making decisions
based on data.”
Katrina Otto, Managing Director,
Train IT Medical
Katrina Otto, Managing Director and
Owner of medical software training
company Train IT Medical, says
innovations in data analytics look set to
transform practice management.
“It’s the way of the future,” she says.
“Data analytics dashboards can analyse
ratios in doctor’s waiting rooms, waiting
times, cost per patient per day. Smart
medical practices will be making
decisions based on data.”
Meanwhile, data sharing between
medical providers is in its infancy, but
Therkelsen-Terry says that signs of
growth are starting to appear, with the
emergence of platform players who are
connecting more of the parties in the
8 Healthcare sector: Beyond 2021
The growth of aggregated specialist practices
Aggregated practice: the model of the future
Case study:
East Sydney Private Hospital
Short-stay may deliver better outcomes for all.
Peter Kalish, an ear, nose and throat the much shorter stay and no need to
(ENT) surgeon, built East Sydney Private pay for rehab, it is prepared to pay the
Hospital with a group of private investors surgeon and anaesthetist a little more to
in 2014. compensate them for not charging an
out-of-pocket cost. So, it works well for
In August of 2020, Medibank Private took everyone concerned.”
a 49 per cent minority shareholding and
provided an initial investment of
AUD 8.8 million to fund the capital “The objective of Medibank Private is to
investment and operational costs
required for the hospital to scale its try and reduce the costs to members, as
new short-stay model of care.
well as to the health system in general.”
“The objective of Medibank Private is Peter Kalish, founder, East Sydney Private Hospital
to try and reduce the costs to members,
as well as to the health system in
general,” he says. The hospital has five theatres, 32 beds
and a close observation unit. It specialises
Kalish explains that the short-stay in orthopaedics, spinal surgery, plastic
program utilises the Early Rehabilitation surgery, ophthalmology, eye surgery
After Surgery (ERAS) program, so and ENT. “Normally, we do just under
patients may be up and moving within 500 procedures in a month, and we hope
hours of surgery and sent home the to increase that by at least 10 per cent,”
following day, with in-home support says Kalish.
and no need to spend time in a
rehabilitation facility. “Our objective is to take another level
of the building and Medibank Private is
“Medibank Private has signed an very keen to support this. We’re looking
agreement with the participating at going into cardiology and urology,
surgeons and anaesthetists that they will which would have been difficult for
Image: supplied
not charge the patient an out-of-pocket me on my own, or certainly even with
fee,” explains Kalish. “And, because of private investors.”
9 Healthcare sector: Beyond 2021The growth of aggregated specialist practices
Aggregated healthcare groups: see how they run
Taking advice
on practicalities
Successful operations are created
with foresight and support.
Approaches to aggregation vary. Funding options
Planning and set up require advice from
experts including accountants, banks, The right balance of debt and equity
lawyers, specialist advisers and practice is vital, especially in the current
management consultants. economic environment.
“Aggregation models can be difficult to “What COVID is teaching us is that
execute, largely because specialists are businesses that are overburdened by
a referred network and being part of too much debt are really struggling,
a group doesn’t necessarily mean an whereas those with strong cashflow who
increase in referrals or economies of have been more conservative on debt
scale sufficient enough to justify groups are doing much better,” says McCann.
to be formed,” says Carl Adams.
“Aggregated groups often want to release
Assessment of integration risks and some of their equity for further investment,
cultural alignment are important in but that’s got to be replaced by something,
partnerships. Corporate structures may and it’s either private equity or its debt,”
be more attractive for specialists who adds McCann. “If you add too much
wish to control a broader healthcare debt, problems arise when there are
value chain, says Mac Stark, Relationship income shocks.”
Director, Health and Social Services,
Commercial Banking Queensland While healthcare may be of interest to
at Westpac. private equity, Stark observes it is
often focused on singular modalities
“A patient could potentially interact with – such as general practice, dental or
the same business on various fronts diagnostics – rather than on the integration
throughout one treatment plan, including of value chains, where multiple types of
through allied health components and practitioners come together to create
diagnostics, so there can be an incentive opportunities for shared infrastructure
for specialists to control and own that and for greater scale.
value chain,” he says.
10 Healthcare sector: Beyond 2021The growth of aggregated specialist practices
Conclusion
Is aggregation the
right way forward?
Why now may be the time to
explore a new business model.
Healthcare has been the defining theme
of 2020 globally and the pandemic has
If aggregation is the way ahead,
practitioners must carefully assess
Need to know more?
highlighted weaknesses in professional integration risks, invest in sound practice This information is general in nature and has been
practice business models. management and bring sufficient prepared without taking your objectives, needs
leverage to the structure to avoid and overall financial situation into account. For this
Amid the many challenges, these over-gearing. reason, you should consider the appropriateness of
extraordinary times have provided the information to your own circumstances and, if
opportunities and accelerated processes. “At Westpac, we’re interested in necessary, seek appropriate professional advice.
supporting aggregated ventures with a
The lessons from a crisis are not to commercial justification and a patient- If you have any questions or would like to
be wasted, so now is the time to first approach,” says Stark. “This balance know more about the information contained
strategise and make plans towards is vital, because the patient outcome in this report, please contact the author:
successful business operations in is what gives a business longevity,
2021, and beyond. sustainability and, ultimately, demand.”
Louise McCann
National Head of Healthcare
“At Westpac, we’re interested M: +61 466 945 685
E: louise.mccann@westpac.com.au
in supporting aggregated
ventures with a commercial We’re here to help.
justification and a patient- www.westpac.com.au/healthcare
first approach”
Things you should know: This information does not take your personal
Mac Stark, Relationship Director, objectives, circumstances or needs into account. Consider its appropriateness
to these factors before acting on it. Read the disclosure documents for your
Health and Social Services, Westpac selected product or service, including the Terms and Conditions or Product
Commercial Banking Queensland Disclosure Statement, before deciding. Unless otherwise specified, the
products and services are available only in Australia from Westpac Banking
Corporation ABN 33 007 457 141 AFSL and Australian credit licence 233714.
© Westpac Banking Corporation ABN 33 007 457 141 AFSL and Australian
credit licence 233714.
The Westpac Group, 275 Kent Street, Sydney, NSW 2000, AUSTRALIA.
11 Healthcare sector: Beyond 2021You can also read
