Dr. Schaeffer is enjoying a year-long sabbatical following the sale of his practice. Photo: Jack Schaeffer, OD

It was time.

Jack Schaeffer, OD, of Birmingham, AL, built the Schaeffer Eye Center to encompass more than 18 locations in Birmingham. After practicing optometry for more than 30 years, Dr. Schaeffer was faced with deciding what would come next for his practice. He had to consider what was best for his family—his three children were also practicing with him—and for him, both personally and professionally.

 “I wanted the Schaeffer Eye Center and my children to be part of something that had a larger organizational platform to handle day-to-day operations and negotiate with vision care and managed care companies,” he says. “I wanted a social media platform that was more robust. And I wanted a company that understood how to be profitable in optical in an environment dominated by managed vision care.”

After extensively researching his options, Dr. Schaeffer ultimately decided to sell his fleet of practices to a private equity (PE) company.

“People had been trying to buy the Schaeffer Eye Center for the past 10 years,” he says. “It was time. There was enough initiative on my part that this may be the best route for everybody.”

For some private practice ODs, the once-traditional route of bringing on an associate who would one day buy the practice is becoming outdated. Instead, the field is experiencing a shift; many younger ODs prefer the freedom of being an employee to the responsibility and cost of owning a practice.

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Adding to this equation are a decline in reimbursement rates, the explosion of the telemedicine platform and a surge in electronic health record and staff management demands, all of which leave private practice ODs with even more to consider as they plan ahead and look toward retirement.

“The threats are greater on the profession today,” says Paul Karpecki, OD, of Lexington, KY. “There are a lot more regulations and headaches than there were 15 years ago.”

More and more ODs are finding themselves at a crossroads. Who better to help direct them than their fellow colleagues? This article presents advice a few ODs have to offer on the best path forward when strategically planning for the future and considering PE options.

PE Made This Doctor’s “Legacy Exit” Possible

When private equity came calling, Dr. Glazier was sure of one thing: he had to retain the legacy of his family’s second-generation practice. Dr. Glazier had merged his private practice with his father’s, and together they had worked hard to build a loyal patient base that they were not willing to give up. 

At 51, Dr. Glazier was far from ready to retire. Nonetheless, he was starting to think about an exit strategy, and his young associates could not afford to buy his practice. Based on where he practiced in Maryland, this left him with one unappealing but viable option: sell to a chain, something he wanted to avoid at all costs.

“I did not want to rebrand,” he says. “Chains come in and change the software and throw things into the office, and it is hard for staff.” Longtime patients also find the transition jarring when they enter a now-unfamiliar practice, and don’t always stay. “The main reason people come to see me is because I am an independent. And in the marketplace, there are a lot of what I call ‘independent, loyalist patients.’ These are people who do not want to go to a chain.”

The PE option piqued Dr. Glazier’s interest because he knew his practice would, for the most part, remain the same and he could stay on as a clinician and a consultant.

“It sounded like I could remain in my practice and join something bigger,” he says. “I call it a ‘legacy exit’ because the practice name, vision and purpose is kept intact. The look and feel is kept intact. The medical side is improved, and the optical side does not have to be low-end to be profitable.”

Dr. Glazier did not know if an opportunity like this would present itself again, so he decided to go for it. He sold his practice on a Friday. The following Monday, he went into his office, and for the first time in his 25-year career, he was just an OD. It has been almost six months, and so far, so good.

“What I have noticed from my new sale now that I am only a clinician is, wow, it is kind of cool to just see patients and have my head fully in the exam lane,” he says. “As a business owner, I had one foot out the door during the exam, thinking about my business, and one foot in the room, thinking about the patient.”

Dr. Glazier was able to trade in his business responsibilities and focus solely on patient care.

“It took a while for the weight to be lifted off my shoulders, but even on day one, I realized, ‘I think I am going to get used to this,’” he says.

Since the sale, Dr. Glazier has taken on a business development role to ensure he plays a part in the continued success of the practice. He says the office now has more resources and runs more efficiently. Best of all, the PE company came through with all the promises they made. From this experience, Dr. Glazier has learned that PE is not bad for private practice optometry like many believe.

“I remember when people thought the autorefractor was a threat to optometry, that it was going to refract everyone and there would be no use for ODs,” he says. “These things get blown up, and people tend to see the worst and get scared. Since then, I have seen many of these so-called ‘threats’ come and go, and optometry has survived, even thrived.”

Plan Your Exit Strategy

The day an optometrist decides to open a practice is also the day they should decide how to sell it, says practice management consultant Gary Gerber, OD, of Franklin Lakes, NJ.

“It is Business 101 but not commonly considered in optometry,” he says. “The best businesses are built with the owner having a plan of how to leave them.”

Under this mindset, ODs have more options and better chances of leaving on their own terms, Dr. Gerber notes. They may be able to sell their practice to another OD or a PE company, but their spectrum of choices only becomes visible when they plan early enough to see it, Dr. Gerber adds.

Alan Glazier, OD, of Rockville, MD, says if an optometrist is considering selling, they need to decide on the best time to sell and take advantage of sale opportunities.

“Positioning yourself to sell can take from five years on up, and that can depend on where you are in the maturity of your practice,” he says. 

PE as a Major Player

When the time is right, ODs should not shy away from taking the PE route, as it has become much more popular in the last three to five years for several reasons, according to Dr. Gerber. 

“I believe it is because the demographics of practitioners have changed; more are looking to sell their practices,” he says. “Private equity has also discovered there is a tremendous upside in the retail optical side of our industry, partially due to us shifting our focus to medical eye care.”  

The rise of PE buyouts in optometry is also due, in part, to the fact that too much money is sitting on the sidelines with PE funds, causing those companies to look for other areas to invest in that are growing at annual rates of 5% to 7% (e.g., eye care), Dr. Karpecki notes.

“If you look at PE, this has already been done in veterinarian medicine and dentistry,” he says. “If you think about eye care, it is not too far from other medical areas.”

Fear is another reason for the rise in private equity, says Bill Potter, OD, of Freehold, NJ. 

“Even successful practices wonder what the future may hold,” he says. “If you take a doctor who is 50 or older, PE offers a chance to take care of their family and retirement. But there are obviously some risks there.”

Practitioners who are selling risk their quality of life and work schedule, but Dr. Potter says if a deal is done properly, the doctor should have nothing to worry about.

Dr. Karpecki calls the rise of PE a “serendipity,” with PE companies looking for good investments at one end and private practitioners who are dealing with additional regulations and staff management demands at the other.

Is PE Right For You?

Dr. Schaeffer offers these tips to help decide whether PE makes sense for you:

• Make sure the PE company has a proven and experienced management team and the financial backing to help maintain the business side of the practice and cover all bases. 

• Make sure the offer fits your needs because PE agreements come in many shapes and sizes, and one size does not fit all.

• Make sure the PE company has the same philosophical outlook about eye care today and in the future and the same vision for your practice as you do.

• Make sure the PE company stays true to its word, lives up to your expectations and delivers on its promises.

What to Consider When PE Comes Calling

Dr. Gerber says the PE model encompasses buying a practice that presents significant opportunities, building it up and selling it for a profit, all of which could take about five years, he notes.

“If the opportunities exist for PE, they certainly exist for the current doctor/owner, who is usually too close to the practice to see them,” Dr. Gerber says. “So, if doctors have, or can access, business acumen, they can do the same things PE would do by themselves, keep the revenue from the five extra years of working and then sell the practice at a higher multiple. At that point, regardless of the buyer, doctors now have a practice that is worth more and five extra years of income.”

In this scenario, the only downside is that doctors will need to commit more time and resources to their practices rather than to their retirements. Dr. Gerber says this may be worth it for those who are ready to focus more on the business side of their practices.

The timing of a doctor’s decision to sell is important, Dr. Gerber says. He recommends doctors first consult with a certified public accountant, tax attorney and financial planner. Generally, the closer a doctor is to retirement, the more sense selling their practice makes, Dr. Gerber adds.

“That being said, not all PE companies are the same, and of course, not all deals are the same,” he says. 

For ODs considering a PE option, Dr. Gerber says the decision is no different than any other business deal: you need to do your homework and ask the right experts for help.

A big positive of PE is that offers are often significantly more than young optometry school graduates are willing to pay for buy-ins, Dr. Potter says.

“The corporate resources could completely blow away what the young graduate is capable of,” he says. “The young graduate wants to put up some money and maybe work for a few years and be a partner, whereas a venture capital company may come in with seven figures, and that is hard to turn down.”

Dr. Gerber warns doctors who opt to sell and stay on as employees that they must recognize they are no longer calling the shots and working for themselves; they now have a boss. For this to work, doctors must get along with their new boss and feel comfortable with the direction the PE company takes their practice, Dr. Gerber says.

Doctors who sell to PE companies and continue to practice, however, do relinquish some control. Dr. Potter admits.

“The doctor who has built up this wonderful private practice, who has been a pioneer, is now going to give some of that up,” he says. “They are going to give up control to the corporate office. Some doctors can do that, and some cannot.”

Those optometrists who are willing to change gears and accommodate new arrangements must be prepared for whatever a private equity company may impose, whether it be different materials, work hours or patient care regulations, Dr. Potter says.

Other doctors, however, may not be comfortable with the adjustments a PE company is interested in making. While some companies may embrace and cultivate the unique aspects of the practices they acquire, others may make changes by incorporating less personalized care or changing the name, Dr. Karpecki notes.

On the flip side, some changes may be welcome. Dr. Karpecki says doctors will often still have a seat at the table and may be able to do away with unwanted duties—such as hiring, firing, paying employees, managing accounts receivable, insurance credentialing, billing and coding—and concentrate on being doctors.

The key is determining what role you will play if you choose to stay on as an employee rather than an employer.

 “You need to consider the question, ‘Can I participate in the future growth of the PE company, or is it just a sale?’” Dr. Karpecki says.

PE is a Choice, But Not the First

The disadvantages of a private equity buyout outweighed the advantages for Chad Fleming, OD of Wichita, Kansas, who says the many drawbacks have deterred him from accepting several PE offers. Dr. Fleming shared his views in a recent Review of Optometric Business article, “Why (So Far) I’ve Said No to Private Equity,” the content of which is summarized here.1 

While proposed deals are financially attractive upfront, they lack holistic benefits, says Dr. Fleming, who runs a four-location, seven-doctor, 40-staff member practice that has been around for more than 70 years. He adds that he is not just concerned about the financial side; he does not want the quality of patient care to suffer by handing the reins over to a large conglomerate that operates like a chain.

PE Pitches Come in Many Forms
Dr. Fleming has been approached twice to sell to PE. He says offers often highlight how much more money owners could receive for their practices by taking the PE route. This, however, is only true if a practice already has a high profit margin, Dr. Fleming notes.

Dr. Fleming says that some private equity offers may even play up a sale as an opportunity for network marketing or a pyramid structure, meaning you could have the chance to buy out other offices to build a stronger foundation and acquire more money. Other offers may aim to trap sellers by making them feel like PE is their only option when they want to sell, according to Dr. Fleming.

The Cons Outweigh the Pros
Some PE companies prefer having current practice owners stay on to continue running the offices they acquire. Dr. Fleming takes issue with this because if he was asked to occupy a leadership role of any type, he says he would want OD shareholders and himself to be the beneficiaries. He adds that he would also want to make decisions based on what is best for his patients, which may not always be what is best for the company’s bottom line.

By selling to PE, Dr. Fleming says practices lose the profitability of a dividend-paying investment. But the biggest disadvantage is losing the freedom of being your own boss and making your own decisions for the betterment of your practice and your patients.

While selling to PE does not necessarily mean patients will receive lower quality of care, Dr. Fleming says, “it is much more difficult to organically grow the practice through patient care when the leaders of the practice are not personally involved day in and day out.”

Dr. Fleming goes on to note that the only cases in which he would consider selling to PE are if he found a trusted buyer who would treat patients first and profits second or if he was ready to retire and could not find anyone else to buy his practice. 

There are doctors who would rather sell their practices for less to fellow ODs in an effort to maintain quality care, according to Dr. Fleming, who believes decisions like these say a lot about a doctor and prove that money is not the only thing that matters.

1. Fleming C. Review of Optometric Business. Why (so far) I’ve said no to private equity. reviewob.com/why-so-far-ive-said-no-to-private-equity/. Accessed September 25, 2018. Published September 19, 2018. 

Fear of the Unknown

Some ODs are selling to private equity now, thinking buyers will be more scarce in the future. This trend, however, may not bode well for the future of independent, private practice optometry.

“Doctors think if they sell their practice, they may get more for it than it is worth, but there are always drawbacks and strings attached,” says veteran optometrist Frank Fontana, of Saint Louis, MO, who at 96, says his lengthy curriculum vitae is a written history of the evolution of private practice. “I have seen more and more unhappy faces after they sell to PE. It is different than selling to an OD or a group practice.”

On the other hand, other healthcare modalities were warned that PE would come in and kill the industry, but that has not happened, Dr. Glazier says.

“I think it is just fearmongering and people scared of the unknown, and they tend to want to think of the worst case scenarios,” he says. “But if it was bad for optometry, I would not have done it.”

Dr. Glazier believes PE is valuable for optometry because the ventures create medical positions and opportunities for students and young ODs—who may otherwise have to take positions at companies that offer free eye exams, are more optical than medical or are run by front office managers rather than practitioners—to practice to the full extent of their education and licensure.

The biggest changes Dr. Schaeffer has seen after selling his practice to a PE company are a new management team, a more effective and efficient software system and a larger focus on training.

 “Our doctors are practicing optometry as they always have,” Dr. Schaeffer says. “I do not think they are seeing any difference in the mode of a true primary care practice. That is the key.”