By Dana Jacoby
The orthopedic sector, which deals with musculoskeletal disorders, is one of the largest in the USA, with over one-third of Americans receiving orthopedic care in 2021. As a result, it has increasingly become the focus of private equity investment firms. This shift reflects a broader trend of private equity investment in healthcare, and is reshaping how musculoskeletal services are delivered.
But what drives this trend, and what are its implications for patients and providers? Here we explore the rise of private equity in the musculoskeletal and orthopedics space, highlighting the benefits and addressing potential concerns.
Why Private Equity is Investing in Orthopedics
Orthopedics has become a prime focus for private equity investment in medical practices, and is now one of the leading areas of PE ownership across all medical specialisms. It is attracting investors due to several key factors:
- Aging Population: The growing number of elderly individuals in the population significantly increases the demand for orthopedic services. The ever-increasing demand makes it a lucrative opportunity.
- Physician Supply Issues: Nearly 60% of orthopedic surgeons are approaching retirement age, and supply of physicians is not meeting patient demand. This makes orthopedics again an increasingly lucrative sector, but also means there is a critical need to expand operations and enhance capabilities, which PE investment can support.
- Market Potential: Orthopedics offers opportunities for scaling services and improving efficiency in care delivery through technological advancements—individual practices may struggle to implement this alone, so are keen to partner with private equity firms for capital injection.
This trend reflects a strategic response to the evolving healthcare landscape, where private equity investment in medical practices aligns with the increasing needs of the industry and patients.
Benefits of Private Equity in Orthopedics
Investments from private equity healthcare firms bring several advantages to the orthopedics sector:
Capital for Expansion and Innovation:Essential for upgrading technology and expanding patient services. The influx of capital allows for the acquisition of advanced medical equipment and the expansion of facilities, addressing the growing demand for orthopedic care.
Enhanced Operational Efficiency:Strategic management can lead to cost reductions while maintaining high-quality care. Private equity firms bring in their expertise in operational management, optimizing processes and reducing unnecessary expenditures without compromising patient care.
Advancement in Treatment Options:Facilitates the adoption of innovative treatment methods, benefiting patient outcomes. This includes funding clinical trials and research projects that explore new treatment methods and surgical techniques, which can lead to more effective treatment options for musculoskeletal conditions.
Supporting Specialist Training & Development:By providing resources for specialized training programs, private equity can help address the gap in skilled orthopedic professionals. This will ensure a steady pipeline of trained orthopedic surgeons and specialists to meet the rising demand.
Addressing Potential Concerns
While the trends of private equity buying orthopedic practices bring many positives, it also raises questions about its impact on patient care and healthcare provider autonomy, with some fearing they would lose their voices in key decision making processes, or that patient care would decrease due to focus on profit.
However, in a survey conducted by Vector Medical Group on orthopedic surgeons who entered into partnership with PE firms, over 85% of responding surgeons said that their practice has been “As Expected” or “Better than Expected”.
The Future of Private Equity in Musculoskeletal Care
Investment by private equity in orthopedics practices marks a pivotal shift in healthcare, offering both opportunities and challenges for patients and providers. To ensure a positive outcome for all, it’s vital that private equity firms prioritize patient welfare alongside their financial aims.