HEALTHCARE SECTOR: BEYOND 2021 The growth of aggregated specialist practices 1 Healthcare sector: Beyond 2021 The growth of aggregated specialist practices Welcome New synergies for specialists in aggregated models Perhaps no sector has been more dynamic than healthcare in recent times. Even before COVID-19 put healthcare In this report, ‘Reset for growth: What’s These are exciting times. Despite the on the frontline of a once-in-a-century the prognosis for aggregated specialist shocks and diversions of the past 12 global emergency, the industry was practices?’, Westpac Commercial Bank months, 2021 is widely touted as a major already being profoundly reshaped by takes a close look at the evolution of opportunity for a rethink across all digital disruption and the emergence this trend and its drivers, from increased sectors, and Westpac is delighted to be of an array of new technologies. competition in some specialisations to working with many specialists to support its potential to power up tech innovation their aspirations for moving into private Simultaneously, the healthcare sector is – allowing specialists to share costs for practices, building private day surgeries Louise McCann confronting massive growth in demand leading-edge equipment, better data and short-stay hospitals. National Head of Healthcare for services to meet the needs of analysis and to meet patients’ post- Westpac Commercial Bank Australia’s inexorably ageing population. pandemic expectations for telehealth, Our special thanks to the healthcare Add to these, the pressures of rising for instance. commentators and Westpac customers healthcare costs, both for patients who have shared their compelling and practitioners and, like a perfect insights on the pages that follow. storm, the confluence of these trends is Like a perfect storm, prompting many progressive providers a confluence of trends is I hope you enjoy reading the report to actively explore new operating models. and look forward to your feedback. prompting progressive A standout is the concept of aggregated practice – formerly the province of GPs providers to actively explore and allied health groups – which is now being embraced by growing numbers of new operating models. specialist practitioners across the country. Aggregated groups inevitably look to The emergence of smaller, specialist-led, economies of scale. But funding these private short-stay hospitals, in particular, capital-intensive projects is complex as is redefining how specialist modalities individual investors, private equity, banks can work together to deliver better and doctors themselves seek certainty patient outcomes and more efficient of returns from the wide range of models use of healthcare resources. now emerging. 2 Healthcare sector: Beyond 2021 The growth of aggregated specialist practices Introduction Reimagining the medical practice Why the collective approach to healthcare is gaining momentum. The global pandemic has created an healthcare, says that while aggregation unprecedented public health emergency is more advanced in the US market, new and placed additional pressure on opportunities are emerging in Australia. a system already under strain from an ageing population, an increasing The consolidation of private incidence of chronic disease and growing customer expectations for medical practices … may present more personalised, digital, integrated care experiences. a smart model for the future. Some of these challenges have exposed “It is becoming increasingly attractive weaknesses in traditional models of for good clinicians to engage on this operation and, like a number of other basis due to unneccessary duplication of industries this year, many healthcare technology, increasing subspecialisation, specialists are reassessing their business to encourage cross referrals and the approach. The consolidation of private multidisciplinary approach to disease medical practices, via group investment, management. Health insurance is also acquisition of smaller practices, or offering greater incentives to specialists acquisition by corporates, may to minimise patient gaps where clinicians present a smart model for the future. take responsibility for the total episode Aggregation may alleviate high costs of care, ” Adams says. for sole practitioners, while facilitating the provision of high-tech equipment, This report examines the drivers, services and systems to deliver better advantages and challenges of the health outcomes and more efficient specialist aggregation model and practice management. includes case studies of healthcare professionals who have successfully Carl Adams, Managing Director of SMS come together to deliver integrated Healthcare and Industry Advisor in specialist care to the benefit of their Mergers and Acquisitions for Australian patients and their businesses. 3 Healthcare sector: Beyond 2021 The growth of aggregated specialist practices Aggregated practice: the model of the future Promoting greater efficiency and better outcomes The trend that gained traction for GPs is now being adopted by specialists. Aggregation of healthcare is a well- where practices or practitioners are established business model in countries coming together with the same goal like the US. to create consistent clinical care with greater efficiency and shared services,” The trend accelerated in 2010 with the says Louise McCann, National Head of introduction of the nation’s Affordable Healthcare, Westpac Commercial Banking. Care Act (ACA), widely known as Obamacare, which created incentives for providers to coordinate care and “One of the strongest drivers is an oversupply adjusted Medicare payments to make mergers a smart financial option. in certain specialities, which causes more In 2018, analytics company Definitive specialty groups to merge and probably more Healthcare tracked 803 healthcare mergers and acquisitions and corporate ownership to come into play.” 858 affiliation and partnership Carl Adams, Managing Director, SMS Healthcare announcements across the US. and Industry Advisor in Mergers and Acquisitions in Australian healthcare In Australia, the aggregation trend has been led by general practitioners taking advantage of opportunities to Joining the competition share overhead costs, invest in new technologies at scale and provide Australia has more doctors than the optimal healthcare within an evolving, OECD average and Adams says high digitally-enabled work environment. competition is a driving interest in Now, the model appears to be gaining consolidation. momentum among specialists. “One of the strongest drivers is an “We’re seeing more aggregation of oversupply in certain specialities, specialists, particularly in areas like which causes more specialty groups to ophthalmology, radiology and psychiatry, merge and probably more corporate 4 Healthcare sector: Beyond 2021 The growth of aggregated specialist practices Aggregated practice: the model of the future ownership to come into play,” he Aggregated practices can leverage says. “There’s also the drive to reduce overheads – it’s not so much about their size to implement wide-scale, increasing revenue.” quality improvement measures, such as Adams expects the combination of short-stay facilities with specialist electronic medical record systems group roll-ups to be “the model to enhance coordination of care. that will fly”. “It reduces the personal excursion, Melbourne Institute: Applied Economic provides a better exit mechanism for and Social Research at the University the specialist, and a greater throughput of Melbourne, notes that a potential within the short-stay hospitals, with the drawback for patients is higher fees doctors being associated as owners charged by aggregated groups. and part of the corporate structure,” he says. “We are currently doing some research into the drivers of fees charged Benefits and pitfalls by specialists and we’re finding that specialists who are a part of a Aggregated practices can leverage company, rather than another business their size to implement wide-scale, arrangement, are more likely to charge quality improvement measures, such higher prices.” as electronic medical record systems, to enhance coordination of care. This Despite potential drawbacks, Adams presents benefits for practitioners and notes that, when executed well, patients. However, the model also has aggregation can serve the interests of potential downsides. medical practitioners, allied healthcare specialists and patients, alike. “Approaches to surgery may be very different among practitioners, which can “It’s very early days in Australia, but cause conflict,” says Adams. “Owners I think it will gain momentum more may also be competing with each other, and more.” despite the collegiate environment.” Professor Anthony Scott, who leads the Health and Healthcare theme at the 5 Healthcare sector: Beyond 2021 The growth of aggregated specialist practices Aggregated practice: the model of the future Case study: The Toowoomba Clinic How a team effort in Queensland is delivering treatment and driving down costs. The Toowoomba Clinic is a 27-bed called Heal All Pty Ltd; Heal All Service mental health facility formed by Industries, which leases consulting Richard Lavack and a team of rooms; and The Toowoomba Clinic. mental health specialists. “Depending on how much each investor It opened in October 2020 and, in put in, they received a percentage of addition to hospital beds, it has shares in Heal All Pty Ltd and they are consulting rooms, which can be the same