Hi, my name is Kevin Bonner and I'm here with a expert panel and tonight we have a collaboration between Anna and AOSSM and both myself as well as Dr. Jeff Dugas from Alabama will be moderating tonight's webinar and it's really a collaboration between Anna and AOSSM and I would like to thank Jim Stone who's actually had the idea for actually doing this last year so I'd like to thank Jim for his idea on this, I thought it was a great idea. So tonight we're going to try to get through this in an hour, we can go a little bit over but there's a lot of information here we're going to try to get through. So the first thing I would like to do before we introduce our panel, this is actually a non-CME webinar and it's actually brought to you in support by Aligned Orthopedic Partners as well as U.S. Orthopedic Partners so we'd like to thank them for their support for sponsoring this. And so again, both myself and Dr. Jeff Dugas will be moderating tonight but I would like to ask each of the panel members to introduce themselves and then also with any disclosures relevant to private equity. So maybe Mike if you want to get started. Sure, Mike McCaslin, I'm with USP Somerset CPAs, we're now CBiz Somerset CPAs, I've spent 42 years in the business, I spend 90% of my time with orthopedic surgeons, I was one of four original founders of the OrthoForum which is now OrthoForum and OrthoConnect, two of us Glenn Sumner and myself remain. I'm on the pro-private practice side of orthopedic physicians and physicians in general. Our firm has certainly participated in representing any clients that went down the path of private equity but I'm generally going to be the alternate voice when it comes to private equity discussions. Thank you. Thanks Mike, Louis McIntyre, orthopedic surgeon, practiced for 30 years. I am the Chief Quality Officer for U.S. Orthopedic Partners which is a private equity backed management service organization. I'm Stu Melvin, it's been in practice for 12 years, I'm with Washington Orthopedics and Sports Medicine, I'm on the board of Allied Orthopedic Partners. My name is Paul Sethe, I'm a sports medicine orthopedic surgeon in Greenwich, Connecticut. Amazingly, I've been in practice for 20 years. I also sit on the board of directors of Spire Orthopedic Department and Partners. We are an orthopedic group of 150 orthopedic surgeons right now, six groups between Massachusetts, New York and Connecticut. Hi and I'm Gary Hirschman, I guess the only non-physician here other than Michael. I'm a healthcare transactions attorney with the national firm Epstein, Becker & Green. I've been a healthcare transactions lawyer for over 33 years and in the last 10 years my practice has almost been entirely dedicated to representing physician groups including dozens of orthopedic groups in their process of exploring and aligning with and doing transactions with private equity platforms, hospitals and some big national healthcare companies. Next, just a reminder, you can submit questions and if you do just hit on the chat graphic and select Dr. Stuart Melvin and then Stu is going to actually go through the questions. We're going to hopefully get through a few at the end and Stu is going to vet those questions so please submit them and submit to Stu as you go through. So I'm going to introduce my colleague and friend for God, what Jeff, 25 or 28 years we're I guess the old guys just finishing 25 years of practice here. So it's a pleasure, I've known Jeff for a long time, he's a great guy, he's a great surgeon obviously and he's a very bright guy. So Jeff, maybe if you want to get started here. Thanks Kev, it's great to see everyone and I would say the same thing, Kevin and I have known each other since residency. I think the first thing you got to understand is how we got here, we're not afraid to tell the story of how we got here and I think we at Andrews Sports Medicine in Birmingham saw consolidation happening and we saw physician practice transactions happening, there were some local consolidation efforts and we were part of that, we were going in that direction of consolidating in Alabama with some other practices. And then we were approached by all these different private equity groups and we said no to all of them, we weren't even interested in talking to them until I got a call from Larry Field at Mississippi Sports Medicine and he said, Jeff, you really need to sit down and look at this, do it as a favor for me. And I was like, okay, well just out of friends and being colleagues, I said sure, we'll listen even though we figured for sure we would say no as we had in the past and our practice is very big, we're growing, we're successful, we're doing well on our own. But it became pretty obvious that if we were going to continue that, consolidation is happening and that became the kind of mantra for this among the practice and ultimately if we thought consolidation was happening, we were going to have to choose what form of consolidation we were going to be a part of or what we were going to subject our partners to and so we ultimately chose to do this and it was a unanimous vote among 25 physicians and our CEO. We basically told our CEO, we're not doing this unless you agree to it and she, who is very well known and very, I would say one of the most talented people I've ever met, she said, look, we have to do this, this is a good thing. So as you can see, there's a lot of platforms out there and these things have grown over time over the last six years, there's a whole bunch of them and that should tell you that these things are moving in that direction and we're part of USOP, you can see on the bottom of the screen us and a couple of practices in Alabama, Mississippi, Louisiana, now in Arkansas and probably moving into Texas. So there's definitely an uptick in interest in this and that's something, that's why we're here to talk and we're here to talk about our experience and what it's looked like, but also to hear the opinions of why is this not right for people because it's not right for everybody. So I appreciate Kevin, you know, bringing me in on this and then we'll continue to have the discussion. Maybe we could talk briefly just regarding, you know, Gary, who's done a number of these deals as well as Lou and everybody in this panel has a lot of experience with this. I know Mike is more anti-private equity, but it's very important to hear what Mike has to say as we go through this tonight, because as Jeff said, this is not for everybody. We had a very similar experience actually, you know, we were called multiple times over the years by private equity groups and quite frankly, for probably over a year, year and a half, we didn't even answer the phone or call them back. And then after colleagues and friends throughout the country who, you know, these were not practices in duress. These were practices actually doing very, very well. Some of the most, you know, well-run practices and most successful surgeons in the nation were actually doing this. And they said, similar to what Jeff said, hey, you guys should really look at it. We said no forever as well, but as it turned out that in the end, we decided to do it for the reasons that Jeff said. So, you know, maybe Lou, if you want to make some comments regarding the reasons you're seeing some of the things on the screen, you know, why surgeons are sort of changing their tune in that five years ago, they would have maybe never called you back and now they're actually very, very interested. Sure. So thanks, Kevin. And thanks for inviting me. I practiced in many different environments. I was in part of a mid-size orthopedic group with ancillary services. I was a hospital employee. I was a solo practitioner. And I think that many of us on this call and the majority of orthopedic surgeons, I think, in the country would agree that that mid-size orthopedic group that's able to leverage size to have ancillaries is, I think, the best practice environment for both orthopedic surgeons and their patients. It gives them incredible amounts of autonomy and quality control and access to increased income with, you know, grabbing onto more of the pie of the orthopedic puzzle. So you know, that being said, that model is under tremendous, tremendous stress. And the reason for that is, we all know this, right? Negative reimbursement trends that have been going on for 30 years. We've lost something like, in some cases, 60% of our value on surgical cases. We topple that. You put on top of that the inflation and the pandemic. And then the regulatory environment, which is very adversarial toward medical practice in general. And the compliance and other aspects of running a practice are becoming really onerous. And in addition to that, the hospital systems, especially in some parts of the country, become incredibly strong. And they're buying up all the internists and all the practices. And you know, where are you getting your patients from is being cut off. And the hospitals are not your friend. And they will run over any kind of private practice, regardless of what they tell you. And then you have the insurers, which are consolidated. And in some markets, like Jeff's market in Alabama, where Blue Cross Blue Shield is 85% of the market. So you have significant asymmetries regarding that small, isolated practice that they need to be addressed with some kind of scale. So how you develop that scale, I think, is what we're all trying to get to. And private equity is one way to do that. Thank you. And then, Gary, real quickly, if you can just briefly talk about this regarding some of these empires that are developing right now in health care. Yeah, so as Lou said, the hospitals are not your friend, because they've acquired primary care physicians for 20 years now, since the late 90s. And more recently, they've been bringing in specialists, including orthopedic surgeons. So we're seeing in a lot of markets, down on the right, these large hospital systems in the green with these megasystems and doctors, and are keeping everything within from their primary care doctors. We're also seeing Optum on the left-hand side of this with, I think it's up to 70,000 physicians now. They keep adding the largest medical groups that are almost all multi-specialty. And if they weren't multi-specialty, they've made them multi-specialty since they've acquired them. And then you have other players like Walgreens, which is the majority owner of Village MD, which has Summit Medical Group and various other groups around the country. And again, they're consolidating primary care physicians and bringing specialists in. And that's what just about everybody else is doing. So all of that is substantial competition. If you haven't felt it in your market yet, you got to trust people. It's coming, but most of the doctors we work with are feeling this pressure or see the writing on the wall that it's starting to happen. But the future is everything's outpatient care. As I think Mike even referenced that the hospitals, people aren't going to go to hospitals for something that can be done in a surgery center or imaging center or medical office. So this is just going to, I started this slide about seven years ago and now it barely fits on one page because of all of the consolidation. So you need to see this is the future is going to be a monster in five years, so that you're going to be competing against it. So as you see, as everyone said, there's sort of these responses and obviously you have different groups, right? You have the academic group, you have hospital groups, and there's various different options as younger physicians or orthopedic surgeons are finishing residency and their fellowships. And the question is going to be, are you going to go more towards your solution as organic growth and mergers, hospital employment, which has surprisingly taken off quite a bit in the last decade as everybody knows, PSAs with the hospital. And again, private equity is something that quite frankly, we didn't even really talk about five or six years ago, but this has really become the hot topic. We were just in Boston last week and Gary was there with a symposium and it was extremely popular because everybody's very interested in this topic. So what we're going to try to get through tonight is for some of you who don't even know what private equity is, we'll just really quickly go through it as well as some of the definitions. So why are orthopedists interested in doing this now? We're going to ask Lou and everyone to go through, what's the anatomy of a PE deal? A lot of people sort of talk about it, but don't really, until you get into it, really understand the transaction and what the numbers, what they mean and what's getting bought and what a scrape is. So we're going to go through that. So hopefully it's understandable. We're going to talk about the challenges and concerns to PE deals. Why do people think this is the beginning of the end and it's the worst thing that can happen to medicine? So we're going to discuss that and we're going to rely on Mike for a lot of his points regarding this issue. And then frequently asked questions to healthcare attorneys. Gary has some great questions that always come up. And then we'll talk to the panel regarding just everyone's experience so far. So we're going to talk about what is private equity and sort of why are they interested in us? Maybe Mike, do you want to take this real briefly and just in your mind, what is private equity and why are they interested? And maybe Luke can chime in and before we get to the next section. Well, yeah. I think they're interested in orthopedics because of all of the vertical investments available inside the practice that produce revenue in addition to the physician's personal productivity. So you have imaging, DME, physical therapy, ambulatory surgery centers, some practices still have their specialty hospitals. You have growth in the outpatient business, which is going to lead to each practice adding on to their bucket of OR rooms. And so you're seeing more surgery centers built to accommodate this. So in spite of some of the challenges, you still have a growing business opportunity and a growing population that's feeding that. And yes, you can still make money in Medicare and some of the other things. And they're learning how to do joints and spine in their surgery center. So there's a whole new bucket of case volume coming to feed their ancillaries. So in spite of decreasing reimbursements, it's still a growing business with growing income sources. Okay. And then the next thing, I'm going to go to Dr. Paul Satby. And Paul, we're at meetings all the time, right? And people are saying, you know, what are you doing? Private equity? Is it a Ponzi scheme? You know, we hear this all the time. So Paul, and then I'm going to go to Stu after I ask Paul. Paul, in your mind, why are orthopedists doing this? You know, why did you guys do it? You know, you're a tremendously successful surgeon. Your group is very successful. Why are we doing this now versus we didn't think about it five or six years ago? What's been your experience, Paul? Kevin, thanks for inviting me and having me on this panel. Before I go any further forward, those are two smart guys next to Dr. Andrews. I'm not sure who they are. It looks like college days. Maybe a linebacker. But let me not digress. Look, if I say it simply, we did this, and I think people should consider it, in order to stay competitive, in order to maintain the physician-patient relationship, the mechanism of how we see patients and deliver care, and let that be under physician control. And it seems like an oxymoron or a line to myself that, wait a minute, I sold to private equity, how am I in control? I didn't really sell anything to private equity. I created a company, and that company is owned by a combination of physicians and private equity backers. 70% of it is owned by the physicians. So Lou really alluded to it. The reality is that we're in this sort of negative rate world, right? Rates are not increasing. They're static. And somehow, someway, we've lost control of medicine. We let rates. How did acromioplasty get taken away from us? Suddenly it was good for 20 years, and now it doesn't exist. And this arbitrary bundling of our code. So these powerful insurers are trying to pay us less, and in the setting of reality, we have changes in employment wages. We have to pay for new EMRs. So our margins are contracting. So we need points of leverage. We need to stay competitive. We need to scale up so that some of the things that we need to do to advertise, to have the most efficient EMRs, we can compete with the hospitals. That's where capital, that's where capital investment, and that's where consolidation really help us a lot. You know, the elephant in the room at the end of the day also is that, look, if I built a business, if I made a bagel store or whatever it was, and at the end of the day, I went to sell my 20 or 30 years of hard work in creating this business, would I sell it for just my accounts receivable? Is that all my life's labors amounted to? And I don't think so. That's not true in any other industry. So why should it be true in ours? So really, I think those are the simple bullet points. Good. And then just, again, just some of those points. We're not going to go through all of these, but really the top three reasons, you know, benefits of larger corporate infrastructure for growth, future risks and uncertainties in a medical practice, and then monetizing, as Paul said, the true value of a medical practice. So I'm going to go to Stu. Stu, you know, we all have different experiences. You know, honestly, you're one of the young guys here. So, Stu, tell us, you know, your experience. I'm sure you heard a lot of negative things before you did it. Why don't you go through the rationale for why you decided and your group decided to do this? And, you know, again, you're one of the younger surgeons here, and we hear it all the time, and we're going to address this. Hey, this is great for the older guys who want to get out, but it's a bad deal for the younger guys. So maybe, Stu, if you can go through some of those issues regarding, you know, what attracted you to ultimately do this, and then specifically to address from a standpoint of the younger surgeon. Is it a bad deal for the younger surgeon, since you are one of those younger surgeons? Thank you. Yeah, so I'm going to echo, you know, basically what's been said. I mean, the issues that are being discussed are issues for mid-career, senior, and young physicians. They're all, you know, we're all facing these challenges. And so for us, it kind of ran the spectrum. We had the same issues with pressure from payers. There were some issues with our survey center that we were going to be able to solve. Through private equity, and then growth of the ancillaries to buffer the decrease in rates for what we actually do. And I think it's important for the younger and mid-career surgeons, and we haven't gotten into sort of the anatomy of the deal yet, so this will be a little bit more relevant later, but to really look at both sort of aspects of the deal and your alternatives. Obviously, we consider the status quo, we considered other options in our market, but as a young surgeon, mid-career surgeon, you've got to really understand what the growth strategy is that's being presented, how are they going to execute on it, the sophisticated business leadership that we have now that we didn't have in place as a small or mid-size practice also is very important, and not just focus on the initial terms of the first deal. Not that that's not important, and we'll get into it a little bit later, but as younger and mid-career surgeons, we probably have a little bit more at risk. We have a long time horizon. There's a lot of uncertainty. I think that probably we need to be compensated for that, maybe disproportionately than some of the senior surgeons. It's not a lifetime achievement award. The young surgeons are going to be counted on and mid-career surgeons to actually execute the plan. There are different ways. Later, we'll talk about how deal proceeds are split internally and different methods. There's no right way to do it, but for us, it was all the same issues. I think the same issues are facing the younger surgeons as much as they are the mid and senior surgeons, but I think it also is important to have some specific goals that private equity can hopefully execute for you that you don't think you can do on your own. Hey, Kevin, I'd like to add to that if I can. I think that as opposed to some previous platform movement like dental platforms or other private equity roll-ups, for lack of a better term, some of those findings that the younger guys didn't do as well as the older guys, that probably was true. I think that what I've seen across the orthopedic platforms that exist out there, and I think there's, I don't know, somebody else could probably say there's probably 16 or 18 of them now, they seem to be geared in a way that it's good for recruitment and growth, that they're interested in growth. How are we going to grow in the private equity platform world if we can't recruit young physicians? I think that the private equity platforms now understand that, and that has seemed to be pervasive across all the orthopedic private equity platforms that are out there. I think the younger guys, at least what I'm seeing, is the younger guys are sometimes doing better than the older guys. The older guys are getting paid for what they did, but they're not doing anything going forward. They don't have a runway to do more towards the end of their career. It actually favors the younger physicians in a way, because they have a much longer runway for growth. This whole thing is a purchase of growth, of future earnings. It really does, in a way, favor the younger partners, and that's the way ours was structured. I think that the platforms are seeing that. If they didn't do that, no one would be able to grow, and I think the whole thing would die. I do think it's been a little bit of a change in just the way private equity functions, as opposed to previous professional roll-ups. Why don't we get into the anatomy of the deal, just so everybody understands, and then we'll get into some specific issues regarding goodwill, and how do you divide things up? I'm going to ask Lou McIntyre to help go through this, since probably nobody understands it better than he does. Boy, that's really dangerous for the country, then, if I'm the one who really understands this. Before I get into this, I'd like to say that when we started doing this three years ago at USOP, I think that the main value was certainly the valuation of the practice, and the cash payouts, and the equity in the management service organization. Now, I think the value is that, plus the infrastructure of the MSO, which we built, that is dedicated to the growth of every practice. IT, HR, revenue cycle management, compliance, quality, all these things. There's a dedicated team. We have 17 people, employees, that are dedicated to every day. What they do is try to make sure that the practices don't just thrive, but the whole organization thrives. When you're a busy practicing orthopedic surgeon, all you can do is be a busy practicing orthopedic surgeon. All the other stuff that you do to try to maximize your practice takes time out of doing that. Developing that infrastructure, I think, is a significant valuation, in addition to these things we're going to talk about. One of the nice things about this, as Paul alluded to, is that what private equity does is values your practice as a business. The valuation is based on EBITDA, earnings before interest tax, depreciation, and amortization. Now, if anybody has owned an ASC, they're probably familiar with those terms. Basically, that's profit. The total value is called the total enterprise value. That's derived by a multiplication of EBITDA, the profit, times some multiple. In orthopedics, it could be anywhere from 7 to 13. Then that valuation is distributed in two tranches, one as cash upfront, and one as investment in the new company or the MSO. The percentages can be different, but that's usually the model. Then that business can be sold multiple times in what are alluded to as liquidity events or second bites, third bites, etc. Go to the next one. The EBITDA, I practiced medicine for 30 years. I was 20 years in a private practice. Every year, at the end of the year, we had no money because we distributed it all to the partners. We really had no profit. There needs to be a way to create that EBITDA. The way that private equity does it is they take part of your income as a percentage and use that to create the EBITDA. Now, it could be 10%, it could be 20, 30, 40. The higher it gets, the tougher it gets to do these deals, but it's some percentage of your income. Then the strategy is to, since you are going to be taking an income reduction, is to repair that through growth. The private equity company has to have a plan to grow your practice, and not just at 2%, 3%. You want to grow it 5%. Then the additional value, the real value, especially for the younger surgeon, are those subsequent liquidity events where you could see anywhere from maybe a 3% to 4% return on your investment in the stock that you have in your own company. This is a strategic of it. The MSO exists as a company. It's owned by the surgeon partners and the PE partners. At the very beginning, the PE guys pretty much own everything as you bring more surgeons in. Paul's practice is owned 70% by the surgeons now. We're about, I think, 55% by the surgeons. Then under the MSO are each of the practices which still exist as independent entities. I don't want to interrupt you, but I think you're showing such an important slide here. This diagram just helps people. When you go to talk about a second bite and what changes, it's just so important for everyone to know that the company that you work for and that you created is your MSO. You said it, your infrastructure and your operating rules are all in your MSO. That never changes. That's not a mutable thing. I don't want to interrupt you, but this is just such a nice graphic depiction of how business transacts. We've tried to design a model that's minimally disruptive and allows you to keep as much autonomy as you can. Now, is that going to change moving forward? It might, especially with current market forces, which are a little bit of a headwind. For all intents and purposes now, these independent practice entities live underneath the umbrella of the MSO. Next slide. Luke, similar to what Paul said, can you comment? A lot of people say, well, you might like who you're working for with your first deal with private equity, but when you get a second or third bite, what happens if you could just explain with your contract that's originally signed, how that goes into perpetuity and it doesn't necessarily change every single time you sign a contract. A lot of young surgeons and all the surgeons are concerned about that. Each practice has an agreement with the MSO to provide orthopedic services. Then every orthopedic surgeon has an employment agreement with the practice, not with the MSO, but with the practice. All that documentation survives any equity event. Your contracts don't change from buyer to buyer. The buyer is actually buying that whole thing. Certainly, orthopedic surgeons have shoes. If somebody came in to buy an MSO and the orthopedic surgeons didn't want to do it, it probably wouldn't go too well. Those contracts survive, which is really important. You have some continuity and some consistency from buyer to buyer. It's a simple thing. I'm not really a finance guy. That's typical of my practice anyway. You take your revenue, you minus your expenses, and then you get your income, and that goes to the partners. Pretty easy. That practice income is divided in a sale into two buckets. Let's say 30% of the earnings go to the EBITDA. That's a potential scrape or income reduction that provides that EBITDA. Then 70% goes to a partner. If your income was 100 grand before this transaction, it's going to be $700,000 starting after the transaction. Those earnings are then multiplied by some multiple, and then you get that total practice valuation. Here's an example of a practice with total revenue of about $16.8 million. After expenses, direct and overhead, they have $8.3 million left for compensation to the partners. You take 30% of that, which is $2,490,000, and then 70% of that goes to the partners. What that means is that moving forward, the compensation percentage is going to be about 34.6%. That's $5.8 million over $16.8 million. That will be contractually explained in the documentation. Next slide. This is brought out in your typical spreadsheet. You guys are used to seeing this kind of thing in your own practice. You get your net revenue of each physician, which is going to be different. Their direct expenses and overhead allocation are going to be different. They're going to have a certain percentage of the practice income. That's not going to change. In this model, which is what most of our practices have done, is that they still divide the income based on productivity, so that each doctor still gets to about 70% of what they were producing before. Now, you can make any adjustments for this that you want inside of your practice for doctors that are ramping up, or for maybe docs who don't, let's say you have a pediatric surgeon that doesn't make so much money, you want to reward that surgeon. Maybe you can adjust that going forward. It's also important to make sure that the practice saves some equity moving forward for future partners, so that you can continue to recruit new partners. Next slide. This is just, I think, what the proceeds would look like the first time around. You take that $2.4 million, you multiply it by eight, you get a total valuation of $19 million, almost $20 million, 70% of that. Almost $14 million goes to the partners, and they distribute that in any way, shape, or form they like to. Usually, it's based on some type of productivity model. Then they get almost $6 million in equity. They own that in the MSO. Then on a second transaction, what will happen, let's say it's the average transactions, second transaction is about 3.2%. This model is four. You get then $24 million. Upfront proceeds would go to the docs of $19 million, with then rollover equity in the new MSO of about $5 million. They would want you to be invested in the second equity event too, right? Because everybody's rowing in the same boat then. Now, let's say you're at the end of your career. Well, you might want to take all cash. That'd be fine, because that'd free up equity for some of the younger ones. Total, I think the next bucket goes to, this is what the total proceeds would be from two events based on that $16 million income or total revenue of that practice, $33 million of upfront proceeds in cash, and then $10 million in rollover equity total from both events. Thanks, Lou. That was great. Let's stop here for a minute. Just a couple of different points. I think one thing is I'd like to ask Gary, and then I want to ask Mike a question. Hey, Gary, when it comes to, this is a point of consternation with some groups, you get all this money upfront in these proceeds. The question is often, well, do you just get this money and the group decides how you split it up? Can you go into Goodwill and exactly from your standpoint, you've done a number of these deals, how exactly that works regarding how the groups divide up the money when it comes up to the upfront proceeds and then the rollover equity? How exactly, Gary, does that work? Because quite frankly, before we did it, we had no idea what Goodwill meant. If you can explain some of those things. The key here is what form of entity is your practice? Are you a limited liability company or are you a corporation? On a limited liability company, you could be elect to be taxed as a partnership, or you could be elect to be taxed as a S corp or corporation. If you're a limited liability company that's taxed as a partnership, there's the most flexibility in how you whack up the proceeds. I think what I'm getting at is in a lot of groups, like let's say there's 10 partners and they each own 10%. They don't want to whack up the proceeds 10% each, because if everyone's taking a 30% reduction in their revenue, a doctor who might be making $2 million is giving up 600,000, where a doctor who's making $1 million is only giving up 300,000, and so forth if it's along that continuum. Most groups want almost every orthopedic group that's like a productivity-based model, which most are, want to split things based on what they're contributing, their scrape, which is based on the higher the income, the bigger the scrape, but there are tax issues with that. If you don't want to split equally based on ownership percentage, assuming ownership percentage is equal, which it is in most cases, and you want to split differently, that needs to be in your operating agreement, or you need to amend your operating agreement to say that as early on before you even start the process as possible. If you're a corporation or an S corporation, whether you're a C corporation or an S corporation, and there's differences there, but in either case, if it's still on 10% across the board, there's more challenges, and there's the most challenges if you're an S corp, because there's very strict rules that the IRS has that financial rights have to equate. The financial rights have to, on a sale transaction, have to be whacked up based on ownership percentage or any dividends or distributions. Bonusing people out based on productivity during the year is one thing, but on a transaction called capital proceeds or sale proceeds, it's different. The way you get around that with an S corp, and we also do this with C corps, is especially for an S corp, you need to look at a different methodology for doing that, and personal goodwill is one way to look at that if your doctors are not bound by non-competes. That's a very good option. If your doctors are bound by non-competes, it limits the options you have, but if you're not bound by non-competes, and there's a bunch of states that prohibit it, and some groups even in states that allow it don't have non-competes, you could value each doctor's personal goodwill. It's done by an independent valuation consultant, and for the most part, it tracks the more productive doctors have more goodwill because their reputation and experience is what's resulting in their greater compensation, revenues and compensation. You really need to look at this at the very beginning of the process. I agree with what folks have said, this is not right for everybody, but I really think that before you say it's not right for you, that you look into it and get the details. It still may not be right for you, but you might be surprised. If you think you're going to move forward, definitely consult your accountant and attorney, your corporate attorney to address this as early on in the process as possible so that you're not surprised at the end. One thing I want to add about the tax treatment of this model is that the cash is taxed at a capital gains rate, which is favorable, and the equity is not taxed at all until future events. It is tax favorable in some regards, as opposed to ordinary income. Right. If I could just add one thing, the personal goodwill is also long-term capital gains. That's important to understand that that gets you in the right place. If you can't use personal goodwill, people can only be differentiated based on employment bonuses and other mechanisms. I'm sorry, Mike. We've solved the S Corp problem by doing an internal redemption of stock to get the ownership to match the allocation of agreed upon sales price. The only point I want to make is the emotions get a little charged when the first discussion over this is not going to be equal because the scrapes not equal and there are going to be people that think they were going into it with the idea that I own the same amount I should sell the same amount and Gary hit it on the head. The ultimate allocation typically is driven by who takes the biggest scrape, and therefore, they end up with a bigger piece of equity since they're putting more in. And so that that's, you know, that's a huge issue. The question is, is this driven by senior doctors? If it is, that scrape conversation and the length of time with which you are going to remain employed to participate in the scrape to feed the income going forward will end up limiting those proceeds. It doesn't mean that they still won't be interested in that, but there is a re a sell amongst the partners in an escort to get the stock ownership to match what you agree upon on an allocation that we've been able to utilize and had signed off on the attorneys that my partners have been involved in on projects. Hey, Kevin, it's Jeff. It's important to say that, you know, one of the things that private equity is not is it's not a pyramid. And people that are considering this, at least in our world and I think it's true in yours as well. Don't benefit directly from other practices coming in, in terms of you're not working for the people that are already there and paying them. The scrape isn't going to them and they're not benefiting directly from your work. Nobody's sponging off the work that's done from the new practice coming into a private equity deal. It's an acquisition type of model, but this isn't a pyramid where the people that are in do better. And the more people they get in, the more money comes in their pocket. You're basically joining a bigger practice. So you're becoming partners. I now have 150 partners, similar to what Paul has in USOP or however many physicians we have, whereas before I had 20 partners. Now I've got 100 partners or however many it is, but we're partners. And I don't benefit from the work that's done at MSMOC in Mississippi. I'm not getting any of the clinical revenue from them, but the group as a whole is growing and the value of the group is growing. That's how the whole group does well. It's not a pyramid. That's been very interesting for us is that we've seen a lot of collaboration across groups. Now that we're partners, sharing ideas, working together outside of our practices under the umbrella. That's been really interesting to see grow. Yeah, I agree. The administrators are really, they talk to each other. They have weekly phone calls of all the administrators within the platform meet weekly. They're sharing ideas and best practices. They're sharing vendor information. And so they're really, the collaboration between the administrators has been one of the best parts of this. Right. Kevin, I don't want to digress off your slides. I just want to echo one thing that Jeff's saying. There's this sort of mentation, at least amongst orthopedic surgeons who are all alpha individuals, that I want to be the platform. I want to be the initiator. That's the most risk, right? That's the hardest job to start because you have to create, as Lou referred to, an established infrastructure with an RCM and an IT team. I mean, by being first in, you're going to spend the most money to develop those things and you're going to spend the most time and take the most risk. The established organizations that have already taken that risk are dealing with vetted capital partners. So it's just, it's an interesting sort of point where maybe us wanting to be the first and the best isn't always the necessary best option. Right. And that is reflected in the one thing that might be a little different for groups that come on later on is stock price. So the stock price may change in the MSO and that may be different for different players. Kevin, can I add one more thing to Lou's example? On the upfront proceeds. And so this will not, you guys will understand the anti-guy making sure that he's saying this. The upfront proceeds are a payday advance. That you have to do your analysis by saying, I'm giving up this much comp for the upfront payment. So there's a net effect there and your real gain is the tax arbitrage play between ordinary income and capital gain because that's great with without any repair last for the five year term or whatever the term of your contract is. So you have to calculate the compensation foregone compared to the proceeds received to determine what's the net benefit on day one where the real exit value comes if you get to the second bite. Presuming that there's not an additional scrape that buyer two wants to make their deal work. But I want to be careful of thinking that I'm keeping my salary and getting all this money too. That's correct. You're taking a reduction. Right. To your point, though, that's a great point, Mike, which leads into, you know, before anybody does this, most of the groups will do a modeling projection in terms of where you will land based on your initial payout based on the tax advantages. And just to address that, Mike, maybe you can, maybe Lou, you kind of Gary can or even Stu, perhaps, you know, if you look at modeling, you know, a lot of times from a tax advantage standpoint, you're going to wind up better for at least 12 to 20 years based on this projection for most groups. So maybe, Lou, if you want to address that real quick and then maybe Mike and Stu. Sure, sure. So our, you know, we model it very conservatively. Right. And we model it at a 3% growth. And with the tax advantage taken into account. And what we say is that it's about six years that you're completely predicted, you're protected with the payout from, say, being underwater. Now that's without a second sale. If you do a second sale within three to five years, then that protects you out about 15, 16 years. So, and that's conservative, but I think it's reasonable because, you know, nobody knows the future. And, you know, I think that point also illustrates the importance of second sales in the real value equation of this model. Right. It's the cash up front is great. You know, I think the value that we provide on the infrastructure side is great. But I think that, especially for younger people, it's the potential for sales down the road that are really monetarily, I mean financially, the value. Stu, can you talk about that for a minute, just in terms of, you know, when I'm sure you did an analysis, we did, you know, from a tax advantage standpoint, like Lou said, what were your projections? Don't give specifics, but sort of ballparks, what you're hearing now, projections in terms of how much better off you'll be and for how long with a lot of these deals. Even if you don't get a second bite, second bite is going to be very important. It's obviously significant upside, but forget the second bite. When you guys discussed it and talked about it, and you did your modeling and talking to other colleagues now, what are, with some of the modeling, how many years are most groups or surgeons better off now doing it based on the tax advantages versus if they didn't do this at all? Yeah, so most groups or probably every group would do a break-even analysis based on the terms they've negotiated. It's really dependent and can vary widely. Obviously, it's dependent a lot on the multiple. If you have a bigger multiple, you're getting a larger upfront payment that's buying you more years before you break even, and then you attack a tax advantage onto that. Again, depending on the multiples, most of the time, you're probably looking at 10 to 14 years for the break-even analysis to happen before you would need a positive second bite to actually do better. Yeah, it really depends on the upfront payment and the multiple that you negotiated. Hey, Gary, a real quick comment so we can move on. You've done a lot of these deals. What's the year's projection for break-even? Have you seen over the last few years? Yes, I've seen the investment bankers run different models, and I've seen anywhere from 12 to 20 years. I don't run them. One of the things you have to think about is the ordinary income that if you didn't scrape is a higher tax rate than that upfront money you get, which is long-term capital gains. The other thing that I think is silly about those projections is that they assume your compensation if you stay independent is going to remain constant. The reason most groups are doing this is because it's been going down, and they see it going down because of reimbursement decreases and expense increases. It's longer. If you look at it that way, and you really put the risk on the continuation of your same comp, I think a lot of doctors have made less each of the last couple of years. You need to think about that, but I just want to add one more thing real quick. We're all talking about the money, and the money has to be right, but you can't be doing this for the money. You have to be doing this because you think that you're going to be better off and be in a much more successful practice for all the reasons that have been laid out the last 40 minutes or so. I just think that if you think this is just about money, it's really about future, the future of the practice and the future of your ability to maintain or increase your compensation. Let's move on here. There are obviously a lot of concerns. There are a lot of naysayers regarding, is this a good idea? There are a lot of challenges. Mike, let me give you the floor because obviously you're very negative towards this, and you're a very smart guy. Can you go through with everyone your major concerns regarding these PE deals, and just from both a younger physician standpoint, but just in general, really? Well, my first is the investment thesis that we should be willing to, as an outsider, invest in a business that is 100% dependent on human capital. We're not a technology business. We're not a manufacturing business with all this technology that creates efficiency. You are still a business that no matter what ancillaries you have, it only works when the physicians work. You can only make more money, most likely. I've been involved in payer discussions and negotiations, and some of those work and some of those don't. How much more output do you have available to increase profits? There's a whole group of people coming in that have a lifestyle issue versus I'm going to work and grind up like some other people have. When I look at successful companies like Apple and Microsoft, and they've been successful when the leader goes away, it's because it's not a human capital business. In this day and age, you're relying on physicians as human capital who may need to have more output to make it work. You're relying on staff that's hard to get, and if you get them, keep them, and they have to do all your revenue cycle and everything. You're really investing in people and saying, I'm going to put all this money in and make sure the people work, and I think that's a risky proposition. I'm just concerned on the thesis. It's the same thing in the CPA business. It's the same thing in the lawyer business. The same thing in any personal service business, and the basics is those businesses work when the providers work, and if those providers don't want to work, you don't make money. Two, it's popular to talk about economies of scale. Well, I have access to the best orthopedic data set in the country, and I see the data for more than a handful, almost two handfuls of 100, 150-plus size orthopedic groups. They have the same full-time equivalent staff as the small groups, as the big groups. They have the same square footage per full-time physician. There's very limited economies of scale in the medical practice environment. We've traded, as we put technology in for EHRs, we've eliminated, filed people on medical records to electronic medical records and replaced those with 0.72 mid-level providers per orthopedic surgeon. It's still human-driven, and there's not true economies of scale. You have to do it on the revenue side. The young physicians we deal with and that we talk with in practices. Most of the young physicians we see are negotiating their employment agreements with private practice groups that have an exit clause on their covenant not to compete if they sell to private equity. Again, you're going to say, well, of course, Mike, you're going to say this. The groups we have exposure to that are not happy with it have not been able to recruit a young doctor into a private equity group because they don't get a chance to buy into the group. They don't have the same access to the surgery center. They may have the same access to the real estate. They're missing the long-term investment opportunity that all those assets provided because it was predominantly monetized on the first bite with that prepayment. It may or may not happen on the second. Then the last is I see the challenges you all described, and I get to work with some of the best private practice C-suites in the country. I've never thought talent was a problem because I see it everywhere. We recruit it for groups. When I look at that and I see what they do, I'm looking at groups that are making money every year over the prior year. I'm not quite into some of the issues. Every time we have a group and we talk about, well, the hospital's got all these primary care. When we dig into the data, less than 50% of their business comes from hospital-based primary care. Even a lot of it still does because most of the private practice groups, and you guys were all private, have out-competed hospital-employed orthopedic surgeons every day of their life. Most of the groups, when you look in the data, don't have to fear the hospital-employed orthopedic surgeons nor the gobbling up of primary care. They've survived all this time with that. I'm not sure that's a valid. Reimbursement is a concern. My biggest fear is just, gosh. Since I'm older than all you guys, I was around in the 90s when Vicor, MedPartners, Specialty Care Network, OrthoLink, all of this happened in the 90s. I was doing a program for AAOS. We did it in the spring and we did it in the fall. We had one whole day dedicated to the PPMCs, which is the same kind of thing, but it's now looking differently in the ortho space. In the spring, our half day was dedicated. By the time we got to the fall program, every single one of those went bankrupt. Someone mentioned 16. I counted 30 players in the orthopedic space trying to acquire groups. I don't see 30 second buyers. Will there be some consolidation of private equity players to try to make something happen? My last point, I worry about where can you squeeze the second set of profits if it's not on additional scrape? If private equity one was such an expert, and there's some really talented people in these private equity firms. I've seen just as many talented people in private practice, but if they were so good and got this much squeezed out, where the heck is the second buyer going to get profits? What kind of pressure is going to be put to drive that profits for their return? Those are my concerns. You don't have to agree with them. It's my experience and exposure watching this. I've lived inside orthopedic groups. I get to see a couple hundred of them every year. I get to see some of the biggest ones and the things they're doing and how well run they are. I'm biased from that exposure. Sure. Those are all good points, Mike. I think part of this is trying to read the tea leaves, because let's face it, I think most of us have done very, very well. We're very fortunate, but just trying to read the tea leaves, and especially even for our younger partners going forward, let's face it. We're profiting on limited margins and inflation has gone up tremendously. If you look, there's been double digit growth in inflation for salaries within our practices in the last couple of years. It's not just decreased reimbursement, it's increasing cost of managing your practice and inflation. That's the concern. It's a challenge. I agree completely that's a challenge. I don't know that private equity solves it. Doctors fear borrowing, but the private equity deals, mostly 100% leveraged. There may be some equity now, but you're certainly reading about some of the players that are on the verge of bankruptcy with debt. They can't get refinanced in other specialties. I'm not going to say it's going to happen in ortho. I'm just feared there'll be some winners and there'll be some losers, because I don't think everybody's going to win in this with all the people trying to get in the ortho space. Again, I come back and say, gosh, I look at the targeted returns they have now, which have come down because of the cost of capital. This is talking to people that are involved in platforms or heavily. Well, our targeted return on the second bite has been reduced because people won't pay what we want for it, because they have to borrow the money to do that. Then I start saying, well, gosh, could everybody done as well in the stock market as they could have done in a private equity? I'm just talking about on the investment side. Again, right now, you're in the exchange of comp. One of the things we tell people, and again, my partner is here to do this, do not spend the money when they tell you what they're going to give you. One, it's probably going to change from the original amount. And two, I can't tell me because we get, well, I can't pay my alimony now, I forgot to roll that in or my salary reduction doesn't maintain my lifestyle. Well, OK, if you don't spend the money, plan on digging into that savings to pull back into your lifestyle to keep it the way it was. So there's all types of things missed because a lot of groups get caught up in the deal and the money. And from an advisory, I say, put the money in the bank, don't spend it. It's not for spending, it's for security or this thing all shakes out. And the people that spend it are like, oh, my. And there's probably that's probably the correlation of some that are unhappy in deals is because they spend it and all of a sudden they're like, well, it didn't do what I thought. Well, no, it did what you thought. You didn't do what you should have. Right, right. Just to move things along, I think one of all of our concerns and one of my concerns, honestly, when we started doing this was the point you made bringing on the younger partners. So I think the original group, they do pretty well. They have to manage their money appropriately. But I think part of this is the challenge of bringing on new younger partners who did not participate initially. So, Paul and Jeff, what do you think about that regarding that challenge and how have you dealt with that? And has that been an issue? Because clearly for some there's a stigma amongst young doctors about private equity. There's no question. So how have you confronted that with them and how have you addressed that? I'll start. When we got this deal, we had two physicians that we had already recruited and were gonna start with us. And since that time, we've recruited two others. These are surgeons. We created a bucket of the first buy, the first purchase amount in equity in a separate hold co of shares. We created a bucket of shares that we were able to attract younger physicians and award them those shares. They got the profits interest on the shares. We got the cash of the shares were worth just around numbers of $1,000. When we first got them and the fair market value the shares went up to $2,000 when they came into the practice. Ultimately, if the shares went up to $3,000, we got the $1,000. They get the profits interest on the shares. That's just the way we set it up in our operating agreement. So they then own those shares going forward and the shares can be, and they get equity. So they have equity in the company going forward. They don't have to wait for the third bite or the second bite. And we thought that was important otherwise we'd never be able to recruit people. So I think there's multiple ways to do it. And obviously that's important, but our feeling was the practice will die if we can't recruit younger physicians. So that was very much on the front of our minds as we did the deal. And I think it should be in everybody's mind as they do the deal, if they do it. So we were very much prioritizing the younger physicians and being able to recruit. Right, and one point on that, Jeff, is that the tax ramifications of that are really important, right? If you bring somebody on and just pay them, right, pay ordinary income on that. Right, exactly. If they are granted shares, there's no tax ramification to it. So this was a brilliant way for practice to make sure that they could move forward and recruit. Absolutely. Jeff, you said it exactly right. Just to sort of say it again, there's twofold. One, in order to recruit new people, we have to pay them market. What is market? Well, historically, hospitals always paid a whole heck of a lot more than the private practice, especially in those first couple of years. But now with the capital backing, we can actually come closer to meeting those same initial rates. But then the second part is spot on. You have to offer the younger person the ability to participate in an equity spot vis-a-vis profit's interest, shares or whatever it may be, because you want them, look, we all want to be aligned in the same way. So Mike's points are really valid and really clearly resonate. Shoot, some of them make me nervous. Gosh, I hope you're not, right? I hope history doesn't repeat itself. And I hope that we'll do things differently. But young surgeons are the lifeline and they're the future of the business and must be treated with respect and the ability to recruit and make them and retain them. I think Mike's point about what happens down the road with the second group, the second PE company that comes in and buys, where are they gonna squeeze, how are they gonna squeeze the lemon to get juice out of it? Well, I think that's where the ability of scale to push payers. And we can talk about how we have not been effective at that as a profession at pushing payers around, but ultimately that's gotta be one of the ways that scale and large groups of physicians that are aligned in principle and interest get together and say, we're not gonna take this. We're gonna go outside of this and we're gonna push for better and not just let you keep handing us these declines in reimbursement. The only way to do that is with a large number of physicians aligned on the same page. It's the only way it's gonna happen. Jeff, I wanna add one thing to that. I have two things to that. First is I have a concern about how much they will let you all sell of your carried interest. Yeah. Okay, because I want you in hook, line and sinker. So I'm worried that the second bite of the apple has been a magnet that is gonna be a lot less in cash because of what the second buyer needs. My next point is that I think by the second or third bite, we're gonna be out of the fee-for-service business and into the subcapitation pop health business. And my concern about, and I think that's where we need to go because I think fee-for-service is a disaster, okay? You all control every single decision for your patient, but you're not in, and every cost, you actually could control every cost. You're not in charge of the dollar. And so the end game is being having all of the MSK money flow to you and then you decide how it's spending, you get what's left over. The problem with that model is it's a long-term model construct, build management risk. And I don't think the first buyer, the second buyer and the third buyer are in it for the length of time it's gonna take to get to the appropriate model that is the winning model for you all. And that's another concern because I think the fee-for-service battle to have that scale, probably, I'm not a lawyer, so Gary can beat me up on this. That scale may put you in the eyes of the Office of the Inspector General or the Federal Trade Commission, such as what's going on in Texas with an action against one of the private equity entities under the same concept that they have been price fixing and using their scale. So I think that's a concern with the current model. So my end game in all of this, and again, I get to the top of some really sophisticated groups about it, and I've actually sat in a call with a payer about this, is a capitation pop health model that you construct and control and is not something somebody hands to you. And that is the winning model for you all. And I just don't think that will be a private equity opportunity because I think it's too long of an investment with too much risk. And so there's gonna have to be a different pathway to that end game. Yeah, I would agree with that, but I would say that pick your PE partner. We're already on that track, right? So we already have one of the largest value-based care programs in the country. We do 3,000 outpatient total joints and about 1,000 spines and bundle payment programs migrating toward that position where we're going to manage the orthopedic spend. In addition, we're contracting with direct to employer. We have three direct to employer payer contracts. This is all based on our ability to collect data, not just economic, but also quality data, patient reported outcomes. So yeah, we're positioning ourselves for that. We're not there yet without a doubt, but I think that the idea of being able to leverage scale to pressure the insurance companies, that's gonna work. It's gonna work a couple of times, but I think in the end, we're gonna have to wrestle from them control of the dollar. Because if we keep going on the CPT coding route, we're gonna go to zero. We manage the patients better than anybody. And especially in an outpatient setting, it's the lowest cost, safest and least complicated costly and with high satisfaction and outcomes of any way to do it. And that's because we manage it. So we are setting ourselves up for that now. And I agree completely. And that's why I love working with orthopedic surgeons because I know you guys and how you manage care and I've been living it. And I just, and I think with the payers, I don't think we can, if we're gonna stay in a fee for service world, I don't think our strategy is leverage. I think our strategy is here's what we're gonna save you. And you're gonna save more than what you're gonna pay us to manage these bundles and whatever else you need us to manage. And I think we gotta have the benefit to them that we're showing them versus size and scale. And I think in their money that they're going to. Yeah, that's what scales. I was talking to Brian Cole when he managed and when he merged Midwest Orthopedics with Ortho Illinois and said, congratulations. He said, now we have to do something big. That's the something big. It's changing the way we do things to improve care, improve quality, decrease costs. Before we move on, Stu, did you have a comment real quick? I know you were trying to get in there. Yeah, I was gonna say briefly, I think that we're always talking about private equity is sort of the next bite. And probably that is the way that it's gonna go at least for the second bite. But I can see the strategic jumping in here at some point, the Optums, the Amazons, and that may be where this goes. And obviously they can do a lot, potentially more than a private equity. They're gonna have more of a long-term view of it. So it may not all in, which is private equity after private equity. Can I just add something, Kevin? Yes. I think there's some misconceptions about second bites based on a few comments I heard. And if you look at how it's happened in other specialties like ophthalmology and dermatology and gastroenterology, first of all, there's nothing squeezed out of the existing doctors in a second bite. What a second bite is, the first investor did a lot, grew the MSO, the company, and doesn't wanna invest more in further expanding to other groups, like taking that MSO. And purchasing and partnering with more groups. So the new investor comes in and invests more money to grow the platform. And one of the investments they do is in data analytics and all the other high-tech things you need to do to succeed in value-based care. The other thing is someone raised a question about, I don't know how much cash you'll be able to get out. Well, again, if you look at all these other second bites and third bites in other sectors and including, we had a panelist at Boston who was an orthopedist with Summit Medical Group. And it's the same thing. Like there's three different models to look at this. If you start with 500,000 rollover equity and it grows three times to 1.5 million, okay? They will either say, continue to roll your 500 and take off the extra chips that you, that extra million. They might say cash out 50% or what they do in a bunch of these deals too is say, listen, pick between 25 and 75%. And as long as not everybody, a lot of the younger doctors pick rolling more because they see the success and increase in value. And so a lot of times they give you an option under a certain sliding scale. So that's the way it works. It's not like, oh, you're not gonna get any cash out. You'll always get cash out. And usually it's at least 50% or the growth in the value. So just wanna set those things straight. And then Gary, why don't we go right to you here? Cause we're gonna have to wrap it up soon. Just let's go over a couple of common questions that you get asked. Specifically the fact about, are they gonna make you work harder? Contract issues. So why don't you just address a few things and you and I have talked about it before. Just common questions that you get asked because you do so many of these deals that get brought up again and again and again for those who are not familiar. The first one is, are you gonna have to work harder? Are they gonna crack a whip to make you work harder? The answer is no. They just want you to continue consistent productivity. They don't want you to slow down, but they're not requiring you to increase your productivity. Some younger doctors, as others said, do because they wanna make more money and they're still ramping up, but there's no requirement to do that. Number two, do you get less vacation and lower benefits? The answer is no. Everything is consistent with past practice. If you got six weeks vacation before and a certain benefit plan level, it's everything has to be consistent with past practice. Might not be the same health benefit plan, but it'll be substantially similar level of benefits, same vacation. That's what they valued the practice on is what you're doing now. The third one is, do they tell you how to practice medicine? All of you could probably say, no, they don't. And by the way, all of these things we put in the contracts consistent with past practice, vacation, benefits, and the clinical autonomy. The fourth question you've kind of addressed before, but let me just highlight it. Is this just for the senior doctors and founders? If it is, it's gonna go nowhere. It's not gonna work if that's the answer. So the answer has to be no, this is not just about the senior doctors cashing out. It's gotta be good for early career, mid career and late career doctors. Otherwise it's just not gonna work and I'm gonna tell you don't do it. And it's gotta work for everybody and you have to make sure that you do your diligence to make sure it works for everybody. But when you look at those slides earlier, there've been over a hundred deals. It was like 18 platforms and over a hundred groups have done this and they've figured out that it does work for physicians and it can work if it's set up right for physicians at all stages of their career. And finally, we put in the contracts, their commitment to pay competitive salaries to still recruit the same level of quality doctors as the group has consistently done and to provide equity plans to align them, equity in the MSO. So those I think are the top kind of five questions I'm always asked. Gary, one misconception that I've heard is that if you own an ASC that you have to roll the ASC into the deal and you can talk to this, but I can as well. And I know Jeff can, you do not have to do that. If you own an ASC, the private equity firm may come to you and want it and want you to sell right now, but you do not have to do that. You can keep that completely out of the private equity deal. So in most of the deals, if the group, which is kind of rare, a lot larger groups, it's not. If the group owns an ASC, generally there will be some buy-in. If the group's doctors own a hundred percent, usually the private equity will want to buy in, like let's say around 30%, not majority 30%, give or take, because they want the doctors to continue to be aligned and make extra money on the ASC. What was the other question, Kevin? The point was- Oh, if it's sporadic, if different doctors own in different ASCs, then yes. There's no, generally there's no, and I think a lot of smaller midsize groups, if doctors own in different ASCs, some own in this one, some own in that one, and it's not all, you know, owned solely by the doctors in the orthopedic group, then generally there's no requirement to sell. That's what I've seen, I'm sorry. Yeah, and I'll just add to that. We have seen a group that was structured like that, where, and the deal never happened, but there was communication that they wanted to try to create a roll-up entity where the docs contributed their units and they owned a piece of it, but that was gonna be a bridge a far, far away. But that was on their discussions as part of their deal that never happened. Okay. Hey, Stu, did we get any questions that you wanna ask? I, you know, I don't know if I'm doing it right, but I don't see anything in the chat, so I don't know if I'm just not privy to it or whether there were no questions. Okay, all right. Hey, Kevin, I'll make one comment that just to kind of cover the base of, you know, how to think that this hasn't been a bait and switch, and I can't speak to all the platforms or what everybody's experience has been, so please don't take this as a global comment across all private equity, but the people that bought our practice came in in a minimally disruptive model and said, you know, basically, we don't wanna change how you do your day-to-day. Through, you know, going on two years, my day-to-day life has not changed. How we run our practice, the decisions we make, nothing has really changed, and I can't say that that's the way it'll be for everybody, but I think that's in how you structure it, how the documents are written, how your legal documents are, but our control of the practice and the things that we do every day has not changed. One iota in two years, we have changed to a single insurance company, and, you know, in terms of benefits packages, we're looking at doing a single EMR across the platform, but things like that just make sense, and we were told that those things could be in play when we started. Some of them have happened, some of them haven't yet, but other than that, nothing has changed on a day-to-day practice standpoint. Right. How about, Paul, how about you? You've been involved for a while. Yeah, we're in our fourth year. I don't wanna say nothing has changed. We changed our EMR. We were going to change our EMR in any regard, and that's just sort of a religious experience, just, you know, and challenging, but I don't know that that's got anything to do with the PE platform. I think ideally, most platforms would love one or maybe two EMRs maximally, depending upon the size of it, but like Jeff said, my day-to-day, my ability to see patients, my ability to treat them the way I think is most appropriate, my indications for surgery, the number of days I work, the vacation days I take, none of that has changed in any meaningful way. Good, Stu, how about you? Echo those statements. I walked in the day after the deal and it looked exactly the same. You know, there's been some back office things, the consolidation, health plans, malpractice insurance, payroll services, but nothing patient-facing has changed at all. Right, so we talked about the questions, and one more time, I just wanted to thank both Aligned Orthopedic Partners as well as US Orthopedic Partners. Just to say that no one made a profit off of this, it was just the cost of actually putting this on, so we wanted to thank both AOP as well as USOP. Just quick pitches for the ANA meeting in Boston, which will be in May. It'll be a great place to be. Boston's beautiful in May. And then also some upcoming ANA courses. And then for AOSSM, there's a review course that's coming up, and just putting a pitch in for that. And then basically the self-assessment exam, SAE, that's available from AOSSM as well. So just as a wrap up, I just wanted to thank everybody for their time and expertise. I wanted to thank Jeff for helping me put this together, but I wanna thank every panel member for contributing significantly. Private equity is one of those things that's very polarizing, I think, but I think that it's something that clearly everybody's interested in because so many groups have either done it or are talking about it. And it's certainly, I'm sure, not good for everybody, but the purpose of this evening was to actually make you more aware so that you can at least ask the right questions and determine in the end what's the best path for you and your group. So I wanted to thank everybody for your participation. And if you could please watch out for the survey and send that in, we really value your input. So thank you very much, and we appreciate it. And everybody have a good night.

orthopedic surgeons

private equity investments

medical field

anatomy of a deal

fair distribution of proceeds

physicians

career stages

workload expectations

clinical autonomy

ownership of surgery centers

due diligence

patient care

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