PRIVATE EQUITY IN OPHTHALMOLOGICAL PRACTICES

Four years ago, Brendan Moriarty, MA (Cantab), MB, B Chir, FRCS FRCOphth, MD, opened the Prospect Eye Clinic, a state-of-theart laser and surgery centre in Altrincham, Cheshire, near Manchester, UK. This summer, he sold Prospect to Optegra, a privately held firm that operates five specialist ophthalmic hospitals and numerous clinics in the UK, and five eye surgery centres in Germany. As is typical with Optegra acquisitions, Dr Moriarty will continue as a consultant. Four days a week at Prospect, he will do laser surgery and see patients. One day a week he will operate at Optegra Manchester Eye Hospital, where he has introduced the Implantable Miniature Telescope (IMT), for end-stage macular degeneration. “It is a delight to be operating in a dedicated eye facility using disposable equipment and thereby avoiding TASS. Previously, private eye surgery largely took place in theatres which were shared with orthopaedics, ENT etc. This was not ideal,†he said.

The arrangement makes sense for many reasons, Dr Moriarty says. It provides access to the latest high-tech diagnostic and treatment equipment – without a huge upfront investment. Highly trained technicians and low-vision optometric services at the hospital will allow introduction of IMT implantation and support other intraocular surgery. Optegra was recently awarded AQP status (any qualified provider) which enables contracting with the UK National Health Service, bringing private-sector efficiency and capital investment at a time of shrinking public resources. Coverage by other Optegra-affiliated surgeons will allow Dr Moriarty to return to working abroad with ORBIS and other charities, he explains. Optegra supports all specialities of ophthalmology as well as research and training programmes.

Investment

For Optegra, investing for the long run is the key to success, says Tim Clover, who heads London-based Moonray Healthcare, the private equity firm that owns Optegra and other health-related businesses. He presented on the role of private capital in ophthalmology at last year’s ESCRS Practice Development Weekend in Dublin, Ireland. Mr Clover will also be presenting at the Practice Development Workshops during the XXX ESCRS Congress in Milan, Italy. Mr Clover notes that Moonray has no minority investors or debt financing, so it faces no outside pressure for short-term gains. All of its financing is cash from Fidelity, a private company seeking longterm sustainable growth. Ophthalmology fits the bill perfectly, he says.

“Healthcare is driven by ageing demographics. In ophthalmology, we believe there will be not only demographic but also technological growth. One area is presbyopia and another is AMD,†Mr Clover says. But high-tech comes at a high cost that few ophthalmologists can afford on their own, Mr Clover adds. At the same time, there’s plenty of downward pressure on payments. As a result, sustaining future operations will require increasing efficiency and maximising utilisation of capital equipment. Optegra’s model of developing eye hospitals that include every speciality help provide the volume needed to support investments in a broad range of technologies, Mr Clover says. “No singlesurgeon practice can provide all the different lasers and diagnostic equipment required by modern ophthalmology – SLT, OCT, femtosecond lasers. At the very minimum you need seven or eight surgeons to be able to use them effectively.†Optegra shoots for about 20 surgeons at each hospital and has about 70 independent practitioners using its facilities. One advantage of scale is the ability to develop and mass market branded services, such as Clarivu, Optegra’s refractive lens exchange programme that is nationally advertised in the UK.

Another advantage is buying supplies in bulk at a discount. Optegra operates a technology assessment panel that includes affiliated surgeons and a medical director that evaluates new technologies and products. The best are introduced throughout the firm’s facilities. The firm also supports a not-for-profit research arm, Optegra Eye Sciences, which supports basic research in ophthalmology. When acquiring practices, Optegra buys all practice assets, sometimes including real estate. Generally, the selling surgeons remain as independent contractors, Mr Clover says. The process takes time as the company is looking for established practices in higher population areas that have potential to grow. “We have yet to acquire a business that people are stepping away from. Usually the owners become key contributors.†This commitment was a major consideration for Dr Moriarty, he says.

Loss of autonomy?

But as benign as a private equity partner may appear, partnering with one does entail a loss of autonomy and possibly accepting a sales-focused corporate ethos that makes some surgeons uncomfortable, says James O’Reilly MB, BCh, BAO, MMedSc (Hons) FRCOphth, EBOD, who practices in Kilkenny and Waterford, Ireland. Corporations have nearly taken over laser refractive surgery, squeezing out most independents, he notes. With providers like Optegra branching out into glaucoma, cataract surgery and medical retina, Dr O’Reilly anticipates fierce corporate competition for national health contracts for these services as well. “Practices need capital and to some extent Optegra is pointing out this deficiency,†says Dr O’Reilly, who also attended Mr Clover’s presentation at last year’s ESCRS Practice Development Weekend. But he believes that the capital needs of a successful integrated practice may not be as great in future. “A lot of technology has or is reaching a plateau, including phaco, excimer lasers and femtosecond lasers. SCHWIND has developed lasers that are less expensive to service, and the capital cost will be less in the future. OCT was very expensive, but it is becoming more affordable,†Dr O’Reilly says. Drawing inspiration from Irish farmers who in the early 20th century organised to form farmer-owned regional co-operative companies that have since grown to become international food giants, such as Kerry Foods, Dr O’Reilly suggests that ophthalmologists need to contract with business experts to build and market fullservice practices. “If we want to remain independent we need to develop innovative ways of working together.â€