Physical Therapy Insider

REHAB INSIDER • January 2017 Vol.1 No.1

• The aging population is growing; • Business is very scalable; • There are few barriers to entering the market; • Start-up cost to build a new clinic is minimal; • There are 3-5 regional companies in each state; and • Public rehab companies are performing strongly. Over the past two years the acquirers have completed over 50 acquisitions totaling over 300 clinics, and that does not include the recent merger of Accelerated with Athletico, or the acquisition of Physiotherapy Associates by Select Medical. So what does this mean to privately held companies across the United States? Our belief is that it’s time to decide how you will grow. And the two choices are to either grow with a partner, or grow on your own. Let’s explore these two options. Growing with a partner is likely a decision to relinquish control of your company, either to a large strategic acquirer or a private equity group. In the current climate a number of structures are being applied to these transactions, ranging from a 51% to a 100% buy-out or an acquisition. We’re seeing a large number of “partnership” deals in which the acquiring company is buying less than 100% of the business, and essentially partnering with the former owner. This creates extremely competitive conditions as your competitors may now be backed by a large company with a major incentive to grow while still owning a portion of their business. Having served in the rehabilitation industry for over 25 years, our company is seeing better deals and structures in the current market than throughout the history of outpatient rehabilitation. The decision to grow on your own involves developing a strategy that will allow your company to stay competitive and thrive. Both options rely on the common denominator of growth because if you’re not growing in your market, you become extremely vulnerable to this new competition. Remember, you have the local relationships and you know your local physicians, and with proper planning many privately held companies are thriving and growing in extremely competitive markets. So, this is a great time to consider having your practice properly valued and assessed to determine which strategy makes the most sense for you. 6 Physical therapy INSIDER OCCUPATIONAL therapy INSIDER INSIDETRACK Make no mistake: The outpatient rehabilitation industry is at war Paul Martin is president of Martin Healthcare Advisors, Mt. Laurel, N.J. By Paul Martin, MPT, CSCS How Will you Expand in 2017? Things are happening in the rehabilitation industry that will change the face of it forever. And it’s important for the future success of your practice that you become fully aware of the events so you can properly plan. Based on these dramatic changes, it’s time to decide. How will you grow? There are currently more than 20 large public and private equity backed companies aggressively moving into every market in the United States, conducting one or more acquisitions, and then growing organically with new start-up clinics, programs and referral sources. And that’s why we’re claiming that in the outpatient rehabilitation industry, we are, in fact, at war! By no means am I implying that these large companies are in any way bad. Many have been extremely successful and are serving their patients and markets with high-level services. But it brings a new level of competition BY THE NUMBERS 20 12 2 JANUARY 2017  |  REHAB INSIDER into your market. How did all this start? During the 2008 recession, private equity groups began studying healthcare as a market to invest. This choice was based on industries that tend to fare well through recessionary times. This analysis drilled down to healthcare, and eventually to the outpatient rehabilitation market. By 2011, we began to notice large investments being made by private equity in outpatient rehabilitation companies. A few of these investments showed tremendous growth and significant returns to investors. Success breeds success, and since 2011, private equity groups have flooded the rehabilitation industry and have become shrewd rehabilitation investors. Currently, among the 20 largest outpatient rehab companies in the country, 12 are backed by private equity and two are public. Our company’s research causes us to believe that a few more will be backed by private equity soon. So why does private equity have such a tremendous thirst for the rehabilitation market? It’s based on the thesis developed around the rehabilitation industry dating back to 2008. The major elements of that thesis still hold true today: • Outpatient rehabilitation is a $30+ billion industry with strong growth prospects; • There is relatively stable reimbursement compared with other healthcare service sectors; • It is a fragmented industry; Speech-Language INSIDER Among the largest outpatient rehab companies in the country, are backed by private equity, and are public.


REHAB INSIDER • January 2017 Vol.1 No.1
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