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Private equity turns to physicians after courting ASCs for years

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Private equity firms have long used ASCs as investment vehicles, which they have wrapped into larger portfolios and marketed to pension funds and other big institutional investors. But across the market, those institutions are reaching their capacity for such investments.

Enter the physician.

Private equity firms, especially those that are publicly traded, are creating new kinds of investment portfolios aimed at people with $1 million to $5 million in investable assets, The Wall Street Journal reported June 7. Those worth at least $1 million held nearly $80 trillion globally in investable assets in 2020, and private equity firms want more of that total than the current clip of 5 percent invested with them.

With 56 percent of physicians owning a net worth of at least $1 million in 2021, they are squarely within private equity’s target audience for the new line of investment portfolios. It is an alignment that appears to be growing, too; in 2020, only 50 percent of physicians owned $1 million or more, according to Medscape’s 2021 Physician Wealth and Debt Report.

Only 41 percent were millionaires in 2018. Much of that 15 percent increase from 2018 to 2022 comes in the form of idle cash, according to physician wealth management adviser Joel Greenwald, MD.

“I’ve seen clients accumulate cash, which has added to their net worth,” Dr. Greenwald told Medscape. “They cut back on spending because they were worried about big declines in income and also because there was simply less to spend money on.”

Private equity groups want to manage that cash via portfolio offerings that ideally grow physician investors’ balances. There is no time limit on these products, meaning management fees can be collected indefinitely — an attractive prospect for private equity shareholders.

The majority of physicians across healthcare now find themselves high-priority potential wealth management clients, and many are flush with enough cash to consider the idea.

But for ASC physician-owners, the catbird seat just got cozier: private equity wants in on both sides of the ledger.

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