The interview below is part of a McGuireWoods series featuring interviews with C-suite leadership of private equity-backed portfolio companies. To recommend a leader for a future interview, email Holly Buckley at hbuckley@mcguirewoods.com or Tim Fry at tfry@mcguirewoods.com.
Q: One of the key principles Growth Orthopedics highlights is physician independence. Can you talk about what physician independence means and why it is so important?
Peter McCann: Growth Ortho's model is keeping private practices private through investment. Orthopedic surgeons tend to be independent and autonomous. They don't want to lose that look and feeling, so we've designed Growth Ortho to allow them to keep their independence, keep all the decision-making at the practice level and run their practice as they would have prior to any partnership with us.
I've been in healthcare operations for 30-plus years, mostly on the provider side. The past 10 years, I've done private equity-backed managed service organizations (MSOs) in six different subspecialties. There's a distinctive look and feel by specialty, and a different attitude by physician. In orthopedics, the physicians usually do well for themselves financially. They just want to find a way to remain independent in private practice.
I like to say the best delivery of healthcare in the local marketplace for 40 years has been the private practice physician. If you take that away, you're losing the best delivery of healthcare for putting patients first.
The industry is changing dramatically, so how do you allow physicians to keep that look, feel and independence with investments so they can compete against all the other factors in the marketplace? You have health systems and various insurance models as competing forces trying to squeeze physicians out of the marketplace, and by doing so, they're squeezing out the best delivery of healthcare to the local market. That's why we want to keep practices independent.
Q: What opportunities do physician practices have when they partner with an MSO like Growth Orthopedics, and how does this ultimately help patients?
PM: We believe in keeping healthcare local. For everything from the front desk to the people who collect the bills to every other aspect that touches the office, Growth Ortho believes in keeping that regionally located. We're not outsourcing to a call center somewhere else. Physicians are going to a practice where they know the people from the front desk on.
Where practices need help is growing outside what they've already created. They've built a great practice for 30-plus years, but now they're facing all these competitive forces. They may need to build a surgery center. They may need to open additional satellite offices or create physical therapy locations. They may need to bring in new physicians. All that requires business planning, capital and resources, much of which physicians are hesitant to pursue and even less likely to pursue now than they were 20 years ago because of all the competition.
At Growth Ortho, we spend most of our time with practices helping them grow — putting resources together and helping our practices finance growth with a business plan that makes sense. The goal is for physicians to be able to help their patients. That's what we want them to concentrate on, and we'll take care of everything else.
Q: What is your growth mindset for Growth Orthopedics? What has your strategy been and why?
PM: We leave practices fully independent in the front and back office with support as needed to help keep overhead and profit aligned. The reason we do that is because we believe if these are working well, why should we have to eliminate any of the parts? Other MSOs will do that because they'll claim they are achieving efficiencies that help drive down costs. That's usually not the case. If you look at every dollar one can spend in growing a practice, it can generate up to $15 in the future. Every dollar spent consolidating systems or people will cost the dollar without many short-term benefits.
Our mindset is to invest time and effort into the growth plan and help practices operationally where they need it. We have a logical approach where we run all our growth plans based on data. We have access to all the Medicare payer data from a practice's region. We understand where patients are and where current CPT codes are being billed, whether it's through the health system or other physicians, and then we plot a plan to grow accordingly. We have a lot of the technology and business acumen that practices probably wouldn't have if they didn't partner with a group like Growth Ortho.
Q: What are some current challenges you are working through, and how are you approaching them?
PM: Probably the biggest challenge for every business in America, and specifically in healthcare, is the labor shortage and the driving costs associated with labor. Different than other businesses, healthcare providers can't raise prices to make up for labor components, so we must make sure we are hiring and retaining the right healthcare individuals for our practices. That's our biggest challenge.
As a private equity partnership that we formed with our national MSO, we have levers we can initiate that other private businesses don't, such as key employees having equity in Growth Ortho. That gives us the ability to hire and retain longer-term employees and fill open seats. We bring our entire recruiting process to our teams that most local practices lack. We can come into their organization, do a compensation analysis and then focus on filling the funnel of needed individuals for the practice.
In traditional private practices, if someone leaves, you put out an ad and start to hire. We're continuously recruiting the right people for those positions and offering some benefits other independent private practices cannot.
Q: What are you most proud of achieving this past year?
PM: Our mission in 2023 was to continue to build upon our core operating structure and mission. We don't deviate from our plan in terms of the practices we partner with. We will only partner with well-established, well-run practices. We're not out there trying to buy up anyone and everyone. Even in a challenging year like 2023, we stuck to that plan, and 2024 is looking to be a tremendous year for us.
About Peter McCann
Peter McCann is the chief executive officer of Growth Orthopedics, a national managed service organization focused on keeping private orthopedic groups independent and privately managed. Prior to joining Growth Orthopedics, McCann enjoyed a 30-year career in healthcare with a specific focus on physician practices. He has held senior leadership positions in Henry Schein, Compass One Healthcare and Darby Healthcare, along with managing his own physician consulting firm. For the past 10 years, McCann has worked with large physician groups of varied specialty to design their plan with private equity investors.
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