Sponsors circle urology-centric Integrated Medical Professionals

  • Owned by 67 physician partners, ~$200 mln revenue
  • CMS commitment to site-neutral payments, other rule changes trigger sales process
  • Few sponsors in urology to date: Audax, J.W. Childs

Integrated Medical Professionals, the largest urology-centric multispecialty group in the country, is seeking a PE partner as it looks to scale nationally, Buyouts has learned.

Cross Keys Capital is providing financial advice to the Melville, New York, medical group, according to sources familiar with the matter.

The sponsor-focused sales process is in its second round, they said.

Formed in 2006 by 31 physicians from 13 different practices, IMP’s network today encompasses more than 100 clinicians across about 50 sites in the greater New York metropolitan area.

The physician-owned company is jointly owned by 67 partners.

The urology-focused group has various subspecialties and operates the largest radiation-oncology practice in New York.

IMP generates about $200 million in revenue, according to one of the sources.

While healthcare investors have deployed large sums in physician specialties ranging from dermatology to physical therapy, urology has remained largely untouched by the PE community.

With a small handful of additional urology groups said to be considering sales, IMP is expected to serve as a bellwether for future dealmaking.

Regulatory changes

Chairman and CEO Deepak Kapoor, a practicing physician, confirmed that IMP is in the middle of its sales process. Kapoor declined to specify details on the auction.

He said his company has been developing a scalable platform infrastructure for almost three years now.

“Until the passage of the Bipartisan Budget Act in November 2015 we didn’t know if independent physicians could survive,” Kapoor said. “Since then, there have been a number of different [regulatory] changes that have really shifted the future cost structure [of care].”

What ultimately triggered IMP’s decision to seek PE investment earlier this year was the Centers for Medicare & Medicaid Services confirming its commitment to site-neutral payments, Kapoor said. “Those things that were headwinds are now tailwinds.”

Under current regulation, the government and patients typically pay more for the same care offered in hospital-owned outpatient settings than in stand-alone surgery centers.

CMS earlier in November made good on its pledge to reduce those payment differences through a final rule on site-neutral payments.

The agency has also been working to scale back its controversial 340B drug pricing program.

Under the 340B program, drugmakers were required to offer steep reductions on certain prescribed drugs to safety-net hospitals, those that serve high numbers of uninsured or Medicaid patients.

CMS implemented cuts to 340B pricing earlier in the year, and this month said it planned to extend those cuts to hospitals’ outpatient clinics that are currently exempt. The policy change is scheduled to take effect in January 2019.

Simply put, Kapoor said, “it levels the playing field.”

Critics of the program have argued that 340B-eligible facilities have generated windfall profits exploiting the rule. They do this by purchasing independent specialty physician groups and then billing patients of these groups under enhanced hospital rates for pharmaceuticals acquired at steep discounts.

This puts competing independent groups at a fundamental disadvantage, Kapoor said. For example, the average discount offered by safety-net hospital-backed groups that IMP competed with was typically 40 percent-plus, Kapoor said.

The changes immediately create an opportunity for groups like IMP, Kapoor explained, as hospitals under the new model will have more difficulty retaining physicians as contracts expire.

“Now they no longer have the capacity to have taxpayer-subsidized fee-schedule advantages to incentivize them,” Kapoor said. “Hospitals have been gobbling up market share by acquiring physicians and they won’t be able to anymore.”

While the physician group will always be urology-centric, Kapoor said, IMP will look to expand nationally in and beyond its subspecialties, including into any surgical discipline that has contact with patients ultimately requiring cancer treatment.

While few investors have targeted the urology specialty thus far, Boston’s J.W. Childs Associates in September formed Urology Management Associates together with New Jersey Urology.

Other participants include Audax Private Equity, which owns Mid-Atlantic urology group Chesapeake Urology Associates.

Urology Group, a Midwest-concentrated provider of treatment for urological and reproductive conditions, retained Provident Healthcare Partners more than a year ago to advise on a sales process, Buyouts reported. The group has yet to announce a transaction.

Action Item: Contact IMP at +1 516-931-0041