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Mergers & Acquisitions

247 Consolidation and Worsening Patient Experience in Third Party IVF. Eloise Drane.

 
 

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Everyone wants to grow their third party IVF program, but are we neglecting patient experience in the process?

This week on Inside Reproductive Health, Eloise Drane, 3 time gestational carrier, MBA, and founder of Family Inceptions, shares her honest take on how responsiveness and individualized care have declined, even as demand has stabilized post-2021.

Drawing from 17 years of experience running her own surrogacy agency, Eloise offers a kind but direct update on:

  • Why patient experience is harder than ever to deliver (and how to improve it)

  • How consolidation impacts intended parents and surrogacy wait times

  • The challenges of startups and in-house agency models in IVF networks

  • What she’s looking for in a surrogacy agency before considering merging or acquiring

  • Why the “same workflows” just won’t cut it for gestational carrier cycles

If your practice or network is looking to scale GC IVF—and actually retain intended parents—this is a must-listen.


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  • Eloise Drane (00:03)

    It's not about whether consolidation is right or wrong. what it feels like to the people at the center of it. And when care stops feeling personal, that's when things start to break down.

    Again, I'm not against consolidation. I understand the direction the field is going, but when it starts to chip away at the patient experience, we have to stop and look at that honestly.

    Griffin Jones (00:37)

    Everyone wants to do more third party IVF cycles with gestational carriers, don't they? We all want better patient experience, right? The way my guest sees it, patient experience, particularly with regard to responsiveness and individualized attention, has gotten worse, not better in the last five years, and has only continued to worsen even though most clinics aren't seeing the same boom they saw in 2021 and 22. Eloise Drane is a three-time gestational carrier and MBA.

    and the owner of Family Inceptions, a surrogacy agency she's operated for 17 years. Eloise talks about what consolidation of fertility clinics has meant for intended parents of third party IVF, wait times for GC cycles, response times for intended parents, problems caused by startup surrogacy agencies, challenges faced by fertility networks that try to bring their own surrogacy agency in-house, and what quality she's looking for in other surrogacy agencies.

    that she may or may not buy or merge with. If you're looking to sell your practice or fertility business or merge with another, talk to MidCap Advisors. Even if you're 10 years away from selling your business, but especially if you're within five, just give them a call because they're relationship people. Dr. Brijinder Minhas and Richard Groberg have worked in this field and done multiple deals. Robert Goodman, Scott Yoder have helped multiple fertility centers sell their business. That's midcapadvisors.com

    An excellent patient experience is colossally hard to achieve in this field. You have so many moving parts in your workflow. You're dealing with variability in real human beings during the most stressful period of their life. I have to acknowledge how hard this feat of having a truly excellent patient experience is. Otherwise, we won't be able to be honest when it isn't being achieved. And this is an honest take. For those of you that

    want to increase your IVF cycles with gestational carrier, and especially for those of you that want to improve your clinic or your network's patient experience, listen to this kind, but direct update on the state of patient experience from Eloise Drane

    Griffin Jones (03:07)

    Ms. Drane Eloise, welcome to the Inside Reproductive Health podcast.

    Eloise Drane (03:12)

    Thank you for having me, Griffin. I appreciate it.

    Griffin Jones (03:15)

    been a long time coming is consolidation, helping or hurting third party IVF.

    Eloise Drane (03:23)

    So honestly, what I'm seeing right now is this big shift in how third party is being handled, especially with consolidation. More clinics are starting to bring these services in-house, and I get it. The space is growing. There's more capital coming in, and it's largely unregulated. So it makes sense that people are exploring new models, but it's not really working.

    that way in practice. know, agencies were created for a reason. This work is complex. There's so much that goes into these journeys that you don't see on paper. And when it's not handled the right way, people feel it the most, or the people that are feeling it the most are the ones that are going through the process. And third party isn't something you just tack on. It's its own world. And when it's not treated that way, the experience falls short.

    Griffin Jones (04:15)

    Is that their reasoning for doing it though? Do you think that, okay, it's not something we tack on and if it's in an external agency, maybe we're viewing that as being tacked on and we want to bring it in house so that we can control costs, we can control the experience. Do you think that's part of their rationale? And if it is, what isn't living up into the way it's actually executed?

    Eloise Drane (04:39)

    Well, honestly, I don't know if it's not about whether consolidation is right or wrong. It's about what it feels like to the people at the center of it. And when care stops feeling personal, that's when things start to break down. And what I feel is off with the consolidation is how it's being presented because the networks are talking about a lot about how focused they are on patient care, how their systems are more connected and efficient.

    And I get why that's the message. And it sounds good, but especially in third party, it's just not what we're seeing. This isn't, this isn't a plug and play kind of field. These journeys are personal and complicated. And what's actually happening is that the care is being affected because of short staffing or the process of managing cases has changed. It's not always clear who's handling what.

    and that creates gaps. So it's commonplace now that GCs medical records or even getting a GC scheduled for an appointment takes months. And it's not that I'm passing blame, it's just that the system isn't holding up the way it needs to. And when that happens, people go through this process, people going through this process are the ones that are feeling it the most.

    Again, I'm not against consolidation. I understand the direction the field is going, but when it starts to chip away at the patient experience, we have to stop and look at that honestly.

    Griffin Jones (06:09)

    Tell me more about how it's chipping away at the patient experience. It sounds like in some cases there might not be enough staff. sounds like it could be really, it could take a long time to even get an appointment. Tell me more about what's happening to the patient experience in your view.

    Eloise Drane (06:25)

    So prior to, and I know we kind of do everything pre-COVID, post-COVID, And pre-COVID, it did not take months and months and months to get surrogates medical records reviewed. And for these intended parents that are coming in and someone has told them that they have to use a gestational carrier,

    Griffin Jones (06:32)

    Yep.

    Eloise Drane (06:50)

    or they already knew that they'd have to do gestational or surrogacy, they're ready to go. There's already a shortage on the surrogate side. And that's not anyone to blame, but there is a shortage on the surrogate side. And so...

    When you add on to the shortage of the surrogate side and then you get to the fertility clinic side, you finally found your surrogate, however you found it, whether it's through the an agency, whether it's through you found them independently, what have you. The last thing you want to hear is I'm ready to go, but now I have to wait two, three months. and also getting charged to have medical records reviewed.

    for my candidate, but I'm sitting here waiting. And then when we finally get the medical records reviewed, now we have to wait several more months just to get her a consult so she can speak to a doctor to review the medical records with her. And then once we get that done, then that's when we can go ahead and schedule an appointment for her medical screening.

    Griffin Jones (07:56)

    When you break up pre-COVID and post-COVID like this, you said it wasn't like this prior to COVID. Are you saying it's still like this now in, we're recording in Q2 of 2025? I could see in, it's worse. So I could see in 21 or 22 when practices had really long wait lists, volumes were up everywhere and everybody had wait lists. But people don't really have those kind of wait lists anymore.

    Eloise Drane (08:08)

    it's worse. yes.

    Worse. Worse.

    Griffin Jones (08:23)

    relative to what they did two or three years ago. And you're saying it's worse than Q2 2025. Tell me more about that.

    Eloise Drane (08:30)

    Yes.

    So as I mentioned, just trying to get appointments. And it's not just appointments. Let's be honest here. It's support. We've had multiple cases in which trying to reach out to fertility clinics to get a response, whether it's us, whether it's the surrogate, whether it's the intended parents.

    that are trying to get information from fertility clinics, it's sometimes it's damn near impossible. We've had clinic where,

    through their portal, no response, through email, no response, phone calls, no response. Can't get anybody to respond back to an email. You send out multiple requests. You still don't get anything. They tell you go through their portal. They don't respond to the portal. It's like, what exactly do you expect people to do? Because you are the medical provider. You're the one that's providing the care. And

    You're saying you're providing care. You're saying that you're creating these networks because it's supposed to make things more efficient and it's supposed to help things along the way. You're adding these portals to help the flow of the process become more efficient. But all it is is adding a bottleneck because you have staff that don't necessarily have the time to sit there.

    and go through the portal request, or if they do go through the portal request, they put a response in and then they leave, what if there's follow up? What if there's issues? What if there's concerns? This space is so unpredictable. You don't know. I've been in this space now for over 20 years. And I've personally been a surrogate three times. I've personally been a donor six times.

    And I can tell you every single journey was completely different from the next one. So.

    Griffin Jones (10:24)

    I knew you were hardcore, Eloise,

    but I didn't know that you were a surrogate three times.

    Eloise Drane (10:28)

    Yes, I was a surrogate three times. delivered twins the first time, a boy the second time, and a girl the third time. And every single one was a

    Griffin Jones (10:35)

    Did you work with the same fertility

    clinic each of those three times?

    Eloise Drane (10:38)

    No, I worked with different fertility clinics.

    Griffin Jones (10:41)

    three different clinics?

    Three very similar experiences with regard to the clinic or were those experiences very different from one another?

    Eloise Drane (10:51)

    So, correction, so I worked with two clinics for two of the journeys and then another clinic for another journey. And I would say even the clinic experience was different. They were years apart, so things definitely had changed in that timeframe. But the journeys itself was as different as you and I are different. There's no one, two journeys that's the same.

    Therefore, there's not a process that you can just plug in and think that it's going to work out and it's going to be the same because it's not. Because what we're dealing with are human beings. We're not dealing with just names in a system. So you can't...

    Griffin Jones (11:29)

    think all of

    us nod our head and say, yeah, that makes sense. They're all different. But then we don't think about it too much of how they're different. What specifics can you recall, either from going through it yourself or from managing all these cases? Help somebody that doesn't understand or doesn't think too deeply about it the specifics of what makes one case different from another.

    Eloise Drane (11:51)

    Are you human?

    Griffin Jones (11:52)

    hope so.

    Eloise Drane (11:53)

    Okay. It's different. Think about it. Every single person in the universe is a unique person. So just because she's a woman and she's going to, she's agreed to be a surrogate doesn't mean she has the same feelings. Doesn't mean she has the same wants. Doesn't mean she has the same desires. Just because an intended parent has gone through infertility doesn't mean that they hold that space of what they've endured previously as someone else who did it.

    or who did just because somebody is a same sex couple doesn't mean that they're not going to have the same angst as somebody who's gone through infertility. Just because someone is a same sex couple doesn't mean that they're going to have any needs or, know, they might just say, okay, you know, I already knew that I was always going to have the situation. So for me, it's no big deal, but you can't go in assuming anything because when you assume you always turn around.

    and it comes and bites you in your ass. I hope I can swear under our shelf.

    Griffin Jones (12:54)

    Is it the patient

    concierge-ness that is so involved? Is that what you're saying here? that because people, they need so much handholding and so much, like they need responsiveness and...

    Eloise Drane (13:01)

    The full journey.

    Hello everybody.

    Not everybody needs hold handing. Not everybody needs the responsiveness, but everybody needs the care. Everybody needs the empathy. Everybody needs to think you care about their process, about what they're going through, about their journey, just as much as you care about the next one. No one is more important than the next one.

    When you are trying to reach a fertility clinic because you've ran out of medication and you need to get a refill and they tell you put the information in a portal. Great. I've done that. That was five days ago. No one's responded to my portal. Send me an email. Great. I've done that. No one has responded to the email. call me. Great. I've done that.

    No one is returning my phone calls. Okay, well, let's get the parents involved. Okay, the parents can't get ahold of anybody. Well, the agencies also have been trying, but the patient is the surrogate and the parents, not necessarily the agency. So you're sometimes at the mercy of whomever. So again, it's not because it's every single case.

    But the problem is that we cannot keep thinking that you, as they're putting it, that patient care is the most biggest priority and people are making sure that the patient care is what they're focused on. I'm seeing different on boots on the ground.

    In theory, that's what you might be focusing on. In theory, it might be, you know, that click bait that you're using. But I've been boots on the ground. The agency, my agency is 17 years old and I can tell you it's worse now than it was previously. And it's only getting worse. And I'm not gonna only pass blame on clinics. There are a lot of agencies that have started in the past five to eight years.

    all, you know, I started my agency because I'm going to do better than the next one because I didn't have a great experience and so forth and so on. And quite honestly have no business starting an agency because they don't know what they're doing. They've actually are causing more problems for the industry. They're causing more problems for fertility clinics. And again, I understand why clinics are doing things the way they're doing them. But

    My concern is that because you're doing them or because you have more patients coming into your practice or because your numbers are increasing and your P and L is going up, doesn't mean that the patient care is still there because what we're seeing is the opposite. Last year, just in, I don't know, a couple of months, we had numerous intended parents across the country asking for

    if we could recommend them to different fertility clinics because of the experience that they were having with the clinic that they were at. Not necessarily medical, but because they felt unsupported. They couldn't even get a phone call back.

    Griffin Jones (16:23)

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    people that have different types of businesses in the fertility space. They've represented multiple fertility clinics. The successful transaction isn't just maximizing financial gain. It incorporates a lot of the qualitative aspects. MidCap advisors is highly experienced in optimizing results on all sides of the tables. They've been owners, operators, buyers, sellers. This personal shared expertise makes MidCap uniquely qualified.

    to understand fertility clinic business owners situation. They develop long lasting personal relationships with their clients founded on incorporating their extensive industry research, their entrepreneurial expertise with their clients goals. If you're in the fertility space, you think I might want to sell my business in the next three years, five years, 10 years, call the folks at MidCap. We'll link to their contact information.

    in the show notes of this episode in the email where it goes out and just start the conversation because they don't charge anything for that. So reach out to Bob Goodman, Virginia Minhas, Richard Groberg, any of those folks from MidCap Advisors. Otherwise, it sounds like it's gotten worse in the past few years. Do you think, is it the portals, do they make it worse or are they just not better? So is it just the case that, you know, it was supposed to make

    this back and forth with the email going away? was supposed to make the phone tag go away and it didn't and it's just the same? Or have the portals actually made things worse in your view?

    Eloise Drane (18:23)

    I don't know if I can say the portals have made it worse.

    I think that the portals obviously are there to serve a purpose. And I don't necessarily think it's a bad thing. I just think that you need to actually have someone though they're checking those portals on a consistent basis. Because if that's how you're telling people to communicate and you want to keep the communication.

    streamlined and efficient. Great. That's wonderful. I think a portal then is perfect. And that's exactly what this should be doing. But is it really working? Because then if that's the case, how come we keep having intended parents complaining about the portal or the surrogate complaining about the portal that they've put information in the portal and nobody responds? So it's I don't blame it. The portal. Who was supposed to be managing the portal?

    Griffin Jones (19:17)

    It hasn't taken away the people issue behind it. Should the portal be automated in that sense? Are there areas where the portal can be automated? Or in your view, is there too much going on in third party that it can't be automated?

    Eloise Drane (19:20)

    Come

    I mean, I don't know if it can be automated or not. I'm sure it probably could be. And I'm sure that there's probably things that, you know, scheduling an appointment or something minor that doesn't need a human response can probably be automated for sure. But when you're going through something, when you need a question, when you have a question regarding medication and it's timed,

    and you're a donor and you're about to take a trigger shot and you're supposed to take it at, you know, nine oh four PM and you're reaching out because you have a question and you've sent it and you're waiting on this response from a portal that you sent at, I don't know, 12 PM and here it is five PM and you still haven't received a response and it's six PM and you know you're on crunch. What are you going to do?

    Griffin Jones (20:25)

    In your view, are one of these categories better than the others between independent practices, network operated practices, and academic institution practices? Are they all in the same boat or among those three, one or two of them tend to be better about patient experience?

    Eloise Drane (20:44)

    I can't say one or the other. they all have great points and they all have faults as we all do. I'm not going to sit here and make it seem like, where the end all be all and we're perfect and we don't have issues. We all do. It's, it's a business. There are going to be issues throughout the business. The issue is not about whether a network is better or an independent.

    one is better or you know one through a university it's better. It is about patient care. Do you have the proper staff who's experienced, who understands and who is responsive to that patient in order to be able to address their concerns? And their concerns isn't always about what medication I need, what my schedule is, what the issue is. Sometimes their concern is emotional. Sometimes their concern is

    I am literally biting at the bits because I just took my blood test and I'm waiting to find out if I'm pregnant or not and it happens to be on a Friday and I am waiting to see if there's results because you guys keep telling me do not take blood home test. So I didn't and now I'm waiting and

    It's now six o'clock on Friday. I took that blood test at 8 a.m. I never got a response. So Saturday no one called me. Sunday no one called me. Monday morning I'm still waiting. I'm calling. No one can respond to me because they're seeing patients right now. We've returned phone calls after 4 p.m. So from 8 a.m. on Friday morning when I took my blood test till 4 p.m. on Monday

    And this is not just a made up story. These are actual real life stories that we're talking about.

    Griffin Jones (22:31)

    And

    you're not just thinking of one example either. This has happened multiple times at multiple different places.

    Eloise Drane (22:33)

    Correct! Multiple times.

    Correct. Across the country.

    Griffin Jones (22:40)

    Did that get worse in your view in like a big spike? Like obviously COVID was probably a big spike, but you said even after 21, 22, it's only gotten worse. Have there been other big spikes or is this been more like a, just a solid trajectory of, it's getting less responsive, it's getting less organized? What's that been like?

    Eloise Drane (23:05)

    Oh no, I don't think it was a spike, but it has been gradually getting worse and worse. For sure. It definitely has been getting worse and worse. And you know, if it was just me saying it and just like, well, you know, I mean, we're the only ones really experiencing it. Fine. be it. But we're not, um, you know, just like doctors talk to other doctors, the agency owners talk to other agency owners.

    And we are not, you know, or should I say I am not the only one experiencing this. This is across the country, across the board. And it's not just agencies who are talking about it. It's the actual patients, the surrogates, the donors, the parents. They're the ones coming in, having conversations with us about

    these experiences that they are having. And the only thing that we can do is encourage them to go back to the fertility clinic and have conversations. And I do have to say that when intended parents have gone back and they've spoken specifically to the RE, things change. Not in all cases, but often once they do speak to the RE and say, hey, this has been happening, this has been going on, this is whatever, things change. Sometimes for

    a short while. Sometimes, you know, it fixed the problem. But unfortunately, that's not always the case. And I don't necessarily want to sit here and just pass blame on the staff either, because it's not always on the staff either.

    The industry, it's great that it's growing and expanding. And shoot, when I was surrogate the first time, wasn't nobody talking about surrogacy? It was a taboo thing. I literally had clients and I wish I was exaggerating, but I had clients who used to get the fake pregnant belly so that no one knew that they were working with a surrogate. They didn't want anybody to know that. That wasn't something that they wanted anybody to know. Now it's out, it's free for all.

    It's wonderful. And that is amazing. I'm happy that that has happened. But at the same time, we cannot forget the reason why we decided to become professionals in this space. When we raised our hand and said we wanted to do this and help somebody build a family, we take on that responsibility. And quite frankly, I feel like this space, this industry, the professionals in the industry, we are letting the people that we're supposed to be taking care of, we're not.

    Griffin Jones (25:34)

    I would expect you to be able to get an answer from a clinic if time has really gone past the time where somebody should have gotten a response. That's pretty frequent, but often you'd expect like, well, they're gonna pick up the phone for the agency or they're gonna put you on their list to call back faster. Did it used to be like that?

    Eloise Drane (25:43)

    No.

    It used to be.

    It used to be, but now, I mean, even to get access to a portal, we're told that agencies, they don't provide access to agencies on the portal list, just to the patient.

    Griffin Jones (26:05)

    So you are in the dark, you don't know what's going on. When patients have then come to you and said, we're not digging this, we wanna go to another clinic, who do you recommend? What do you do?

    Eloise Drane (26:08)

    Sometimes, yes.

    Well, we first find out if there's anything that we can do to help the situation at their current fertility clinic. And we do try to reach out to the clinic and like, hey, can we move this along? Can we, is there anything that can be done? And if the answer is no, then we give them recommendations of clinics that we know do have patient care and do.

    follow up and do community. mean, it's basic communication, basic. Just respond, respond in a timely manner. I mean, these weren't patients of mine, but friend of ours did IVF and it was the transfer was successful and that about nine or 10 weeks along went in for an ultrasound. There was no heartbeat.

    And it wasn't an RE who did the ultrasound. It was one of the nurses. The RE was unavailable. So they were told that someone would give them a call. That was like on a Thursday.

    Wednesday of the following week, no one had still called them. And she now knows, obviously, there's no heartbeat. She's miscarrying and no phone call, not a response on a portal, not an email, not a phone call. They kept calling. They kept leaving messages, nothing, to the point where she ended up in the hospital with an infection. So these are not

    This is not again something on a P &L that we need to be so concerned about. These are people's lives that we're dealing with. And again, it's not that I'm necessarily blaming staff, but at the end of the day, we all have a responsibility to do what we say we're going to do. And again, basic communication. If you say you're going to do something, then do it.

    Griffin Jones (28:12)

    I think what you are, what you're on right now is the epicenter of the patient experience issue, this issue of responsiveness. maybe I'm wrong about this. I might be wrong. I'm making it up without data. It seems to me like it might even be more important than bedside manner. And I think bedside manner is hugely important. Don't get me wrong. But this responsive, this responsiveness issue is one that operations.

    Eloise Drane (28:30)

    Mmm.

    Griffin Jones (28:37)

    can solve, right? Like there's only so much you can solve with the bedside manner to an extent. You can do some, you can do operational support, you can do training, you can match people with different personality types, but responsiveness, this is something that we're supposed to be addressing right now. It's been the complaint since I've been in the field since 2014. It sounds like from you and others that it's only been getting worse, not better despite these systems. We have a lot of systems that

    can address it or at least parts of it, but you still need the people to execute those systems and those systems really, really need to be properly implemented and they need to be checked frequently to make sure they're working because it sounds like they're not and the stakes are really high in this situation that you just described especially.

    Eloise Drane (29:22)

    Yes, the stakes are really high.

    Yes, the stakes are really high. But in addition to that, now you're adding in third party. So you've introduced a surrogate or a donor or both. And you as the clinic are now offering full service management. So you are barely communicating on the clinical side.

    But now I'm expecting you to communicate throughout the entire journey. And throughout the entire journey, it's not just I get somebody pregnant and then we help them at the end once the baby is coming. Because there's so many nuances throughout a surrogacy journey that you cannot predict. And what may something might look like it's going to be a simple, smooth journey ends up being disastrous.

    But you want to bring in third party services in-house because again, you feel that the efficiency or, you know, there's no regulation. So why not? We can do it better. We can assist the parents. We can make it more cost effective. But are you? Because just because you can't quantify somebody's emotional experience and you can't put a dollar figure to it,

    doesn't mean that you're doing better because you saved them $5,000 or $10,000 or whatever the case might be. At the end of the day, they are still human and everybody, including yourself, you have a child. There's nothing you wouldn't do for your child. So you mean to tell me that you're going to be okay with you half-assed God.

    information when you were going through the process on the clinical side. And now you're supposed to be being managed throughout the entire journey where you don't know anything of this process. You're trusting somebody else to take care of the most precious thing in your entire life to you. And you can barely get communication. just put a response, put an email or put a message in a portal and we'll get back to you. Are you kidding me right now?

    Griffin Jones (31:30)

    Does this ever make you feel like you need to do some consolidation? Like you mentioned a lot of those me too agencies, meaning like, we're agencies now too, that they can be causing problems. Would you ever think, well, you've got a little bit of book of business. Let me buy you or let me, maybe there are a couple of other independent surrogacy agencies. know what? They're solid. I need to merge with them, become partners with them. Do you ever think about that?

    maybe we need to consolidate over here on this side to match that scale so that we have more of a force when we're trying to get a hold of these folks or trying to advocate for the patients.

    Eloise Drane (32:10)

    Yes, I have, I do. And it's still something I still think about. But at the same time, I want to make sure that when it's done, it's done right and it's not half-assed. And there are agencies out there who are phenomenal agencies, who have been in this business for a very long time, who actually does really care.

    about the surrogate, parents, and ultimately the child that we are bringing into this world together. So yes, I definitely do think that there is possibilities for that. Am I ready for that right now? No. Because I want to, again, make sure that whoever you go to bed with, if you so to speak, that you're on the same accord.

    Getting into a network with other agencies is a marriage and you need to make sure that that is going to be a good marriage. And, you know, for a lot of people, you've started these agencies from nothing and you've built it and you've grown it. You've seen it grow to where it is. One, you don't want to just give it away, but two, you also want to make sure that you are equally yoked with that person.

    or that group or that other company that's coming in and making sure that you have the same values and that you can see the future together. Are you always going to see eye to eye? Absolutely not. My husband can tell you that. We've been together for 25 years and he'll always tell you that, no, we don't ever see eye to eye. However, we're willing to compromise. So, well, he's willing to compromise. I just keep going as I go. So here's that.

    Griffin Jones (33:51)

    Well said. My wife says the same thing. And I bet you see eye to eye occasionally. It sounds like you know what the must-haves for that type of partnership would be. and it could be just the opposite of some of the bad examples. You said many of these newer pop-up agencies have been causing problems. What type of problems did they cause?

    Eloise Drane (34:11)

    Yeah.

    So just because somebody has a uterus doesn't mean they qualify to be a surrogate. And unfortunately, some of these agencies don't know that or they don't care. And they are not properly screening candidates as they should. They're getting medical records, matching them to an intended parent and saying, here you go, they're ready to go.

    And then leaving it up to these fertility clinics to review the medical records and kind of be the bad guy and says, no, sorry, she doesn't qualify. When in reality, all of that should be done way before an attendant parent gets matched to a surrogate. And these agencies that are starting, they really do not understand the magnitude of the decisions that they are making when they tell somebody,

    Yes, you can be a surrogate. And I have heard, known of agencies that will get medical records, fudge medical records, you know, because again, for them it's, well, she wants to be a surrogate and I really want to help her. Well, that's great.

    She wants to be a surrogate, she doesn't qualify to be a surrogate. That's why there's qualifications involved, because it's not for everyone. I shoot, I wish that I could be a pilot and get on my own plane. But one, I'm afraid of heights. So I mean, I'll get on a plane, but I'm not going to be a pilot.

    But two, it's just reality is there's some things for you and there are some things that are not for you, regardless of whether you want them or not.

    Griffin Jones (35:52)

    What are the upstream consequences to clinics of putting an unqualified surrogate through the process?

    Eloise Drane (36:01)

    that this woman could literally cause harm to herself, cause harm to this child or both. And then of course in turn cause harm to these intended parents. We're not playing with toys. These are life or death situations. We're playing with human lives. Like this is not a joke. It's not something that you can just think like you can come in and it's not gonna be a big deal. You are taking on a humongous responsibility.

    And we have a responsibility to the parents, we have a responsibility to the surrogates, and ultimately we have a responsibility to the children we're helping to bring into this world. And we have a responsibility to try to give them the best opportunity to have a healthy outcome when they are born. Is it always going to be the case? No. Can we play God? No. No one is trying to sit here and play God. But at the same time, we, when we say yes,

    we're willing to do this, we have a responsibility to make sure that we follow the guidelines and the directions that are set forth so that we can give them the best opportunity that they can have.

    Griffin Jones (37:09)

    Doctors have a responsibility as clinicians. Business owners have a responsibility to their business. They have a responsibility to work with the best partners and get the best outcomes, especially when it comes to the time of their exit. MidCap Advisors is a persistent, reliable partner. They provide you with industry insights. They provide you with strategies to maximize value.

    They've been experts in mergers and acquisitions. They provide professional resources for optimizing these very complex transactions. They're very proud of the end-to-end service model that they provide and they will meet with you. They will talk with you. They won't charge you anything for that consult. You'll get to meet some of these folks. Maybe you them at the meeting, Dr. Virginia Minhas, Bob Goodman, Richard Groberg. Maybe some of these names are familiar to you in these faces. They'll provide you with

    business analytics, they'll help you discover more of your own. They've worked on industry-leading valuations and achieve those for their clients. They have a six-step transaction roadmap. You might ask them about that for a little bit of more information. They have a very high transaction close rate. They've got a big referral rate from previous clinics that have worked in the space that are very happy to speak on their behalf. And they've also represented clinics

    who've transacted with them multiple times because they did such a good job the first time that they come back to them. So if you're even thinking, maybe it's 10 years down the road, five years down the road, especially if it's any less than that, these are people that you want to talk to. So we'll put their contact information in the show notes and you'll be able to find them in other places to click on. But it's MidCap Advisors. Go to midcapadvisors.com. Whether you're talking to Richard Groberg, Dr. Minhas or Bob Goodman.

    Let them know that you heard about them on Inside Reproductive Health and check out MidCap advisors. Otherwise, who do you think is, what are the examples that really good agencies have done? So you said, we're not the only really good agency out there, but you've been doing this a long time and you know what's good and you know what's phoning it in. What are those things that the agencies that do a really, really good job and have earned their stripes in this space? What are the specific things that they're doing?

    Eloise Drane (39:24)

    So first, they are bringing in candidates, requesting their medical records, are reviewing their medical records or have physicians that are medical professional reviewing their medical records. They're doing background checks, they're doing full psychological screening on the candidate as well as her partner. They...

    are doing an evaluation on her, understanding what her lifestyle is, understanding what her background is, understanding what her motivation is. They, I mean, for us, we also do a home visit on all of the surrogates that we work with. And they're preparing her, not just.

    we're checking off these boxes, but they're also having conversations with her to make sure she fully understands what it is that she's getting herself into. Because we all know, every pregnancy as a woman, you put your life at risk, whether you're caring for yourself or somebody else. Unfortunately, the...

    Maternity care in this country, I think, has definitely declined from years past, especially for certain demographics. And it is where we really need to be careful on who we accept into the program, how we vet them, how we prepare them, how we ensure that they really are good candidates.

    And a lot of these agencies that have been doing this for quite some time, who have painstakingly gone through various experiences that you can't just fake it till you make it type of thing, they are doing the right work because they know and they've experienced like, well, if I don't, this is what could potentially happen. And so therefore,

    They are making sure that they are providing the intended parents with a good candidate to give them the best opportunity to be able to have a healthy child.

    Griffin Jones (41:29)

    These folks, want to improve patient experience. Maybe they say they are more than they're actually currently successfully achieving that, but I know that it's important to them, meaning the practice owners, the network folks, the operations people, know that it's important to them to improve patient experience. I definitely know that it's important to them to get as many of these third party cycles as they can do done because they like money, they need it too, like the rest of us.

    They don't want to just lose patience because after it already takes so long to even find a surrogate, now there's a couple months of even being able to get your treatment started. They definitely don't want that happening. So let's say I'm one of these network CEOs and we have our big annual meeting and all my docs are there, my third party coordinators are there, and I hire you, I pay you, Eloise Drehan, to come in and consult my team.

    What do you want them thinking about? What do you want them preparing for for the future?

    Eloise Drane (42:30)

    Really it is, what I would want them to do is realize that third party is layered. This is not just IVF with a few extra extras. It's its own thing. And it's a whole different experience. Emotionally, logistically, all of it. And there's no one size fits all. Every journey is different. And what works for one case might completely fall apart from another. And it's not predictable.

    And if you want to take on the responsibility of saying, we're going to add third party services to our business model, OK. Who is there that has the experience and the understanding of this process that is working on your team? And don't just tell me, well, we hired somebody because she's been a surrogate before.

    That means nothing. She's had her one experience. And I know a lot of people will say, well, you were a surrogate and you started an agency or there's many of other people who are just surrogates and started an agency. But yeah, many of them though, including myself, I started an agency after working in corporate America for 15 years and having an MBA and being in business and

    Then I started an agency and also when I started an agency 17 years ago, it's vastly different than what it is right now. So you can't just start an agency just because you've been a surrogate one time and you think you're qualified or you can't be hiring somebody that's been a surrogate one time and think that she understands the

    magnitude of people's different emotional beings. Because you're dealing with a lot of different personalities, different experiences, people from all different walks of life coming in and you have to handle all of it. You have to be able to manage all of it. That's why all of my team that are client facing are licensed social workers. Yes, some of them have been surrogates before, but

    They also have to have the professional experience. It's great to also have the personal experience as well, but you have to be able to know what you're doing. You're not, again, playing with toys.

    Griffin Jones (44:52)

    Louis Jane, I enjoy following you on social media. Two or three years, people can fake the funk for. 17 years has a way of weeding out the phonies from the real. And I'm glad that you were fair, you were kind about what's going on, but I'm glad that you didn't pull any punches. I wouldn't have expected you to, but you were as authentic here as you've been on social media, and people need to hear about it because...

    We're aiming for a target. We've got to be honest when we're not hitting a target. And we need to be hearing from the people with a lot of experience that have been in the weeds. And so we're going to also include information about your firm, Family Inceptions, and we'll tag you in all of those places. I hope that people reach out, and I look forward to having you back on the program.

    Eloise Drane (45:39)

    Well, I appreciate Griffin. And there's one last thing I actually want to say too. I think that if we don't start making changes, just like the adoption world back in the days where the government had to step in and come and regulate, what's going to prevent it from happening here? And that is the last thing I want happening is government stepping in to regulate anything in this space.

    Griffin Jones (46:03)

    very well said. Thank you, Eloise.

    Eloise Drane (46:05)

    Thank you.

    Griffin Jones (46:06)

    All right.

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246 M&A Strategies For Small Fertility Practices, Before It's Too Late. Dr. Brijinder Minhas, Robert Goodman, Richard Groberg

 
 

Today’s episode is paid content from our feature sponsor, who helps Inside Reproductive Health to deliver information for free, to you! Here, the Advertiser has editorial control. Feature sponsorship is not an endorsement, and does not necessarily reflect the views of Inside Reproductive Health.


What’s your exit strategy?

For single providers and small fertility practice owners, the difference between a multi-million dollar sale and walking away with nothing often comes down to timing and preparation.

This week on Inside Reproductive Health, I sit down with Bob Goodman, Richard Groberg, and Dr. Brijinder Minhas of MidCap Advisors to discuss:

  • The current state of fertility clinic mergers & acquisitions

  • Why many fertility MSOs are preparing to sell their networks

  • When it’s too late to maximize your practice’s value

  • How selling with a competitor could radically increase your exit price

  • The biggest risks that lower your practice’s valuation

If you think you might sell your practice in the next 10-15 years, now is the time to start planning. MidCap’s team works with clinic owners to increase their valuation and secure the best possible deal—and they don’t charge fees unless you get paid.

Don’t leave money on the table. Listen now to learn how to secure your financial future.


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  • Stay informed about consolidation trends in the fertility industry

  • Perfect for independent practice owners and industry professionals--see who is still independent! 

Download it now for free – just fill out a short form on the next page and get instant access.

  • Brijinder S Minhas (00:00)

    In our field, in the fertility world, outcomes, clinical outcomes are extremely important. You know, no network, no buyer wants to take on a practice that has substandard outcomes. And so we look at that very carefully. We look at

    Personnel costs, know, personnel costs are one of the biggest costs in a practice. We look at that. Marketing costs, you know, is the marketing effective? are you getting a payback on your Are you doing enough marketing? Are you doing too much? So all of these things feed into the equation and that's, you know,

    Richard Groberg (00:29)

    may not be doing enough.

    Robert Goodman (00:32)

    Yeah.

    Brijinder S Minhas (00:37)

    that all feeds into our assessment. And we do all of that prior to being engaged by the client.

    Griffin Jones (00:54)

    Make a couple million dollars or close up shop with nothing. That can be the stakes for single providers or small practices. For some, it might simply be too late. For others, my guests point out what you might do as a small fertility practice owner or single provider to prepare for a much better financial picture with far more and far better options during the last decade of your career.

    It's Bob Goodman, Richard Groberg and Dr. Briginder Minhas. Bob was a health system operator. Richard was the chief development officer of Clinic Network and Briginder was an embryology lab director and fertility practice owner among many other things for all of them. Today, all three of them work for MidCap Advisors. Richard is a recent addition, though he's done a lot of deals in the fertility space on both sides. They give us an update on the fertility mergers and acquisitions market and

    what the fertility clinic MSOs are doing. Did you know right now many of them are preparing to sell their networks? So they share with us what they're doing to prepare. But we tailor this conversation to the small practice owner, the single provider. We talk about when it's too late for a practice owner looking to sell, when they need to start preparing to have a successful exit, how they might be able to radically improve their sale value by going to market with one of their competitors.

    how MidCap has done that multiple times and how they help competitors get their financial house in order and come together before a sell. Other factors that buyers of clinics perceive as risks that decrease the value of your practice.

    If you think you might sell your practice in even the next 10 years, even next 15 years, talk to any or all three of these gentlemen. There's no risk to you. Midcap doesn't charge any fees unless you have a payday. Take advantage of their knowledge. They are very patient, very knowledgeable, very consultative because they know it's a long-term relationship. They know all this takes time. Connect with any of them through our channels. We'll have different links.

    tell them you heard them on Inside Reproductive Health, or just ask me and I'll make a warm introduction for you. Whatever you do, don't put it off until it's too late. You worked hard to build a practice. Don't walk away with nothing, or don't walk away with hundreds of thousands of dollars or millions of dollars less than what you could have walked away with. The earlier you take some of these actions, the much greater return, so get in touch with MidCap.

    and enjoy the conversation with Robert Goodman, Richard Groberg, and Brijinder Minhas.

    Griffin Jones (03:43)

    Dr. Minhas, Mr. Groberg, Mr. Goodman, Brijinder, Richard, Bob, welcome back to the Inside Reproductive Health Podcast.

    Brijinder S Minhas (03:51)

    Thank you.

    Richard Groberg (03:51)

    Good morning.

    Griffin Jones (03:52)

    Richard,

    what's happening in the fertility marketplace with regards to mergers, acquisitions, deals? How does it look in the broader context of the market? How does it look and feel compared to how it may have two or three years ago?

    Robert Goodman (03:53)

    That's good.

    Richard Groberg (04:06)

    Well, there's still significant investor interest in backing what we call the PE back groups. It's still a well-regarded area. Having said that, a number of the PE back groups seem to be positioning for sale or trade at some point this year or perhaps next year. Between that factor and

    Thoughts about recession and interest rates are still high. There's less &A activity than there was two years ago, but there's still selective groups that are very interested in strategic acquisitions, whether it fits within their existing network or it's an area that they want to be in.

    So that still remains fine. I will say that over time, as these PE back groups either merge or trade, whoever's buying them is probably not buying them to own a static business, but to buy a business that will grow. So at some point, the growth surge of &A activity will revive again to where it was two and three years ago.

    Griffin Jones (05:06)

    For those that are still selling, there might be less activity, but for those practices that are still being bought, are they going at similar multiples to where they were two or three years ago or have we seen a drop?

    Richard Groberg (05:20)

    Back in late 22 and 23, multiples started to come back to reality. This past year for acquisitions that made sense for the buyer. In multi-doctor practices, multiples started to move back up a little bit when it made strategic sense. And since there were fewer multi-doctor practices out there anymore, the laws of supplies and demand were such that

    They started to trade back at premiums, not where they were in 22 and late 21, but still started to trade back up again.

    Griffin Jones (05:54)

    For those network groups that may be going to sell, do you think you'll see them merge with each other and some will sell to each other? Or do you think that it'll simply be their private equity partners selling to some other private equity group that might not be in the space yet?

    Richard Groberg (06:12)

    Well, if we look at the trends over the last couple of years, most of the major transactions were one group merging with another, often backed by new PE money. So I think we'll see both. The largest PE firms in the world are still looking at the fertility market, but they're also trying to rationalize where's the growth with the changing environment of fertility with more third party payers, lower reimbursement rates and more mandates.

    So I think we'll see a combination of both. But when, for example, when two groups merge, their economies of scale at the macro level of those groups. So we'll still see some of that.

    Griffin Jones (06:54)

    Are we waiting to see who goes first? Is that why we haven't seen a lot of too many of these networks sell yet, or at least those that have been trying to sell for a couple years? Is the marketplace trying to see who goes first and sets the stage for the multiple? What's happening there?

    Richard Groberg (07:11)

    I think there's some of that and I think with some deals that didn't happen last year, some of the groups are, okay, let's focus on improving performance, tightening up the ship, much like MidCap does when it's working with its clients so that when the market does start to open up again with the first transaction happening, other groups then are likely to follow.

    Yeah, I think that.

    Griffin Jones (07:37)

    Bob and Briginder, what's going on with single physician REI practices? Are they straight out of luck?

    Robert Goodman (07:43)

    I'll take that. No, they're not straight out of luck at all. Although there are some limited opportunities in some respects, when you look at the practices, you know, if it's someone who's 65 or 68 years old that says, maybe now I should do something, that's a little problematic. If you've got a relatively young or young REI, a single

    practitioner and a practice, but he or she is interested in growth, looking at new opportunities. I think then we've got somebody to work with, not on an individual basis, but to look to combine them with some others who are in the same general geographic area that are of like mind. And I think that's where we have opportunity to kind of virtually bring them together and then take them to market together.

    One of the things that we do at MidCap when we look at combining practices is that we look for economies of scale. We look for their opportunities to reduce lab costs, reduce staffing. And just as importantly to see if over time, if there's a way that we can improve reimbursement as well for them. So they're not out of luck, but you got to be very creative.

    and they have to be a lot more open to ideas that maybe they weren't open to previously.

    Richard Groberg (09:00)

    If might add, I've worked on and seen a few transactions over the last couple of years, even where a PE back group has strategic reason for acquiring a practice, either because they have enough practices and physicians in reasonable area where they can provide the support for that practice, or they're merging it into an existing practice, closing down the smaller practices lab and providing significant economies of scale to both the seller

    and the buyer in terms of both economics and work-life balance.

    Griffin Jones (09:34)

    Is that pretty much their only option? If they don't go in that route, are they pretty much looking at hoping for luck and having a younger doc come in and buy them out or just closing up and getting nothing? Is that pretty much the alternative if they don't... If they're either not a strategic choice for a network or going to market with another group close to their area?

    Brijinder S Minhas (09:55)

    Well, you know, it's been a bit of a mindset as well. And I think it's imperative that the single doc practices out there start thinking creatively, start thinking earlier on. I was just thinking about it a minute ago.

    If you're in a marketplace, you've been competitors all your lives. There comes a point when you start thinking of an exit or start thinking of a sale that it would behoove you to improve your relations with your colleagues in the marketplace. mean, even CAP, during a lab inspection, one of the questions is,

    Do you have a backup for your lab? So this is not just a backup for a lab, this is a backup for the practice. So I think start thinking about improving your relationships with your colleagues in your areas and start opening dialogue and start thinking about economies of scale. How can you come together? Where can you save? How can you improve the EBITDA?

    Richard Groberg (11:09)

    Yeah, mean, Griffin, we're working on a couple of situations at MidCap with a physician who might be five years or seven years from retirement, but a one physician practice. And if he or she doesn't find an alternative, her practice has no value at exit. But if that physician is willing to partner with an existing competitor, then...

    In addition to the economy's scale, in addition to the better productivity and work-life balance, instead of being worth zero, that physician is part of a combined business that's now more profitable and gets the multiple of a healthy multi-doctor practice at exit. So can be a tremendous win-win across the board if the physicians are open. We've seen this in other industries as well, where competitors suddenly join together.

    and then have a much better situation professionally and financially.

    Robert Goodman (12:08)

    Yeah, we've also seen the other side of it. Where there's markets where the doctors have competed against each other fiercely throughout the years and have, you know, it becomes very personal sometimes. And in some cases, especially if they're, I'd say, especially if they're a little bit older, because it's gone on for much longer. It's impossible to sometimes to crack through those old issues.

    and to have them see sort of the light that could be attained for them. so, you know, they're going to, it's not going to work for them. you know, where there's an opportunity to create a wealth strategy for themselves as a result of selling their practice, that's just, it's not going to happen. So we try as hard as we can to make them

    see the light, but it doesn't always work.

    Brijinder S Minhas (13:00)

    But with age comes wisdom as well. When you're looking at the end goal, if you can see that your competitor has a bigger lab or a better lab, we've got to realize that most of the cost is in the lab. Closing down one lab and functioning out of the larger lab

    Richard Groberg (13:03)

    Let's hope.

    Brijinder S Minhas (13:27)

    would be better in terms of outcomes, clinical outcomes. That's why the patients come to us, is to have a baby. And secondly, it also positions both practices to exit and get a much better multiple and a much better transaction value.

    Griffin Jones (13:47)

    Are you recommending that they merge together and become one business or can they go to market together without having merged?

    Robert Goodman (13:57)

    We tend to try to bring them together virtually for a variety of reasons, not the least of which is the cost. If we can virtually market them to one of the platforms or someone else for that matter, they will go through a merger and the cost of expense for that, the legal expenses and that sort of thing, but they'll do it in effect once and not twice. And so there's some economy.

    in that regard.

    Richard Groberg (14:24)

    I mean, there's a balancing act there, Griffin. If I'm a buyer and you're merging simultaneously with the transaction, then you don't know whether the cultural fit that Robert talked about will make sense and all the economies to scale are pro forma. Now, you might be able to overcome that. Whereas if they've merged and they've been working together for three months or six months, then you actually have demonstrable proof that it's working.

    and it's easier to then market to an acquirer.

    Griffin Jones (14:53)

    How do you get them to get their act together to portray this possibility to a buyer? I'm picturing the three of you guys sitting two people down and saying, no, you're going to sit down and you're going to like each other and you're to be on your best freaking behavior when these people come to meet with you. How do you do that?

    Richard Groberg (15:12)

    even in a fertility practice where physicians have been practicing together for a while, they don't necessarily all get along or do things the same way. But the advantage we have is we've got lot of gray-haired people who've got a lot of experience with &A, and Briginda and I who've actually worked in fertility practices, sold fertility practices from both sides of the table.

    So we bring an insider's perspective to what needs to get done and what the pitfalls are and the landscape and what it means if you do it right. So it takes some hand holding and yes, it takes some proper counseling. But again, we've got some gray hairs who've been there and done that.

    Robert Goodman (15:54)

    Yeah,

    and my experience has less been in the fertility space in terms of being an owner and a buyer or a seller, but I've done it in other healthcare sectors throughout the years. And in many respects, it's no different. Obviously, specifics of how does a fertility practice operate versus diagnostic imaging center or a FCT business or whatever it might be, those are obviously those.

    but the dynamics of selling and the purpose behind them and everything else, all of that is largely the same.

    Richard Groberg (16:26)

    especially when you're dealing with positions.

    Brijinder S Minhas (16:29)

    When our team goes in, know, we can look at it with a fresh pair of eyes. And just because you've been doing something for the past 20 years in a particular way, there are other ways to do it. And if the clinicians and the practice owners are agreeable to that,

    We can show them ways that eventually will help them, will improve their outcomes, and will set them on track for a good, nice transaction.

    Griffin Jones (17:04)

    Tell me about how you do that specifically. How do you bring two competitors, or people who had historically been competitors, together virtually, as you say, how do you do that specifically before you bring them to potential buyers?

    Richard Groberg (17:04)

    And also frankly,

    Robert Goodman (17:17)

    Well, we run what we call process. And so what we do is we asked for a lot of data, financial data mostly, but staffing data and whatever. And so we look at that, we ask for that data using NDA and everything else, we'll say with it from both of the practices, as as we use this too. so as we get to understand the...

    dynamics, the financial dynamics and everything else associated with a given practice and we do it simultaneously with another one, that's when we can begin to say, hey, let's look at this. Maybe here are some economies, here are some things that we can do, some adjustments we can make in this practice in and of itself and the same thing in this practice. But boy, if we can put these together and as Brijinder has mentioned, as has Richard,

    that we shut down a lab in one of them and that sort of thing. That's when we begin to sort of mold everything together. And at the same time, we try to be, not try to be, we are, we're open with both groups and they have NDAs between themselves as well. And so, everybody likes to hold things for as long as they can in terms of disclosure. so we are sensitive to that and we allow for that in the process.

    up until a certain point in which we have to say, guys, we need to share certain things among you. And so we kind of try and do it that way.

    Richard Groberg (18:45)

    It's a little bit easier though, Griffin, because...

    Brijinder S Minhas (18:45)

    And we don't want folks

    to get the idea that the only way to do this, get two groups together is to shut down the lab. No, not at all. It may be that they are miles apart in terms of just travel distances and it's sharing of staff, sharing of responsibilities. And you know.

    the age-old saying, you you can't always control your revenue, but you can always control your expenses. So bringing your expenses down improves the financial picture for the combined entity. And that's what I think we can bring to the table very easily and very quickly and effectively.

    Robert Goodman (19:29)

    Yeah.

    Richard Groberg (19:30)

    when you put two practices together like that, you're no longer going to market with a one physician practice. You have multiple physicians, so you've taken away, relieved the biggest risk for a buyer of acquiring a one physician practice. I just want to make one more comment, Robert, sorry. Is that Griffin, when two groups are actually in this discussion with us, it's because they're thinking about selling.

    Robert Goodman (19:47)

    See you.

    Richard Groberg (19:55)

    So there's a predisposition that opens them up to possibilities that they wouldn't otherwise think of because they're thinking about selling and understand that as a one physician practice, they don't have a lot of options.

    Griffin Jones (20:07)

    Brijinder you talked about reducing expenditures. And I'm wondering if there are expenditures that are more common among single doc groups or they tend to maybe waste money or have to spend more money on certain things. Richard, I'm thinking of one of the first interviews I did with you and you talked about how business owners often they'll put this expense that's really more of a personal expense on the business and that vacation that's a business trip, they'll put...

    and it shows up as an expense and that can affect their multiple because of how it looks with their EBITDA. Is that more common? Are there other expenditures that are more common among single-dot groups?

    Richard Groberg (20:45)

    Well, that's the case with most practices of any size and part of MidCap or any other investment banking group working with them. The QV analysis will figure out what those are, add those back to show true profitability. you take a one, I'll give you an example. There was a one doctor practice that I worked with a couple of years ago that was potentially merging into a multi-doctor practice. This one doctor practice was generating a million and a half dollars a year.

    of revenues, of collections, but not profitable between their lab costs, their staff costs, their marketing, insurance, all the overhead, apart from those personal expenses. And if that practice had successfully merged into the other practice and generated the same volume, it would have probably generated half a million dollars a year of profit to the combined group because

    To pick up another 100 or 200 cycles, you don't need significant incremental front desk staff, nursing staff, lab staff. You might need a little bit of incremental. You combine marketing. You don't need more insurance. So all those expenses that are duplicative get saved when you're putting two groups together into one.

    Griffin Jones (22:02)

    Are there times where you all have to have hard conversations with people because especially if they've been competitors for a long time, they're probably thinking, my group is definitely way more valuable than this guy's. And then you get into things and is it sometimes the case that even though they might be the similar size that one group just has a lot more?

    economic value than the other and you have to have hard conversations with folks.

    Richard Groberg (22:31)

    I think the better question is when do you not have to do that if you've got two competitors merging? Of course.

    Brijinder S Minhas (22:33)

    Yeah.

    Robert Goodman (22:37)

    Yeah, yeah, I mean, there is a formula. You you've mentioned EBITDA a few minutes ago. And so what we try to do in terms of valuing things is say, look, combined, you guys generate $2 million in EBITDA, but a million and half of it comes from this group and a half of a million comes from this group. And that's how things are going to be split. As odd as that sounds in terms of

    of that seems pretty straightforward in terms of value. That's still a difficult conversation.

    Richard Groberg (23:08)

    yeah, might, again, a one doctor practice that's not making much money still thinks it's worth.

    Robert Goodman (23:15)

    Right. A whole lot more.

    Richard Groberg (23:16)

    much

    more than the economics. And there are some creative ways to structure. They've got a surgery center that can be sold to a third party, non-related to the business, selling off equipment, what happens to their AR. So there's a lot of creative financial engineering that we help with.

    Griffin Jones (23:34)

    We're talking about single doc groups, can we kind of put like two doctor groups? Are they generally in the same bucket, especially if both the docs are older? Are they often in this situation? And I can think of a situation where it was a two, maybe a three doctor group and was going to sell and there was a younger doc who was an associate and one of the partners was saying,

    I don't know if we can continue with this doc. I think we might have to part ways. And I was saying, try to avoid that at all costs because that's probably gonna be the tune of a lot of money for you with regard to multiple. Is that the case? And what advice would you have for those that are maybe two docs or maybe they've gotten associate, but we're not sure if this is working out.

    Do they need to make it work out?

    Robert Goodman (24:21)

    I'd say for the most part, yeah, they probably do because one of the biggest concerns I think that any of the buyers have is who's going to take over this practice in two years or three years or whatever. And we've got to transition it over even before that. And if you bring to the table somebody, you the seller, bring that person to the table, that adds value. And I think you said that before yourself. And if you don't have that...

    It's not a showstopper. It just makes the transaction that much harder at the end of the day because they have the recruitment is is you know becomes a big factor and as you know as we all know, know the number of REIs that are available is somewhat limited and despite the fact that OBGYNs or GYNs are are coming into the mix and providing certain services you know, they're not they're not they're not REIs and and

    You know, they add value up to a point and some add value fully, but they're still not necessarily board certified REIs, most folks.

    Richard Groberg (25:21)

    Yeah, I can

    tell you from two doctor practices to four doctor practices from when I was selling practices to having recently been on the buy side. If you're not, if the transaction itself is not taking care of and locking in the younger physicians, the buyers either are going to pay a lower valuation because they're going to take care of the lower physicians or require you to. And I've seen a lot of transactions recently where

    The sellers, the buyers have required the seller to give some of the rollover equity or bonuses to the younger physicians, vesting over time to lock them in. Again, otherwise, you're buying something where your principal asset is getting ready to retire and leave after cashing out. So it's important to be able to have, lock in the next generation of leadership.

    Griffin Jones (26:10)

    Bridginder, what's the timing that doctors should begin to think about this? you'd said a bit further out, think people often think, well, I'm not gonna retire soon. But to them, they think, I'm not gonna retire within two years. And so therefore, I don't need to think about it. But it's further out that they need to start thinking about this, isn't it?

    Brijinder S Minhas (26:34)

    I would say if the thought process is that you want to retire between 65 and 70, you should start this process of start talking to folks or get your house in gear. I'd say start at 55.

    Griffin Jones (26:51)

    That's a lot of time in advance. Why so much time?

    Brijinder S Minhas (26:54)

    because it takes time. It takes time to get your mind hewn into the whole concept of, know, suddenly I'm gonna be working with other people. I'm gonna have to be more mindful of colleagues. I'm not gonna be calling all the shots. And if you've been doing that all your life, it takes time to...

    get that mindset ready. you know, even in a situation where we've got the physicians have a reasonably long runway, the buyers want five-year contracts, you know.

    And if the contract is any less, like it's three years, the valuation goes down.

    So are there others?

    Griffin Jones (27:41)

    How do

    people react to this idea when you talk to them about it? You've worked with a lot of different fertility doctors in big markets and maybe they're a single-doc group, but there's a couple other single-doc groups in that market. When you talk to them about the idea of, maybe we should also try to find someone else for you to go to market with.

    Are they familiar with this idea typically? Have they thought about it in depth typically by the time you've talked to them? Or are you dropping a bomb on them that they've hardly considered?

    Brijinder S Minhas (28:12)

    It works both ways, but I think it's, we've all three of us have been having conversations and in fact, Scott as well, conversations in the field. And slowly, I think it's really, it's catching on. It's not that much of a bombshell. I think folks are coming to the realization that this is probably one of the best ways.

    that they are gonna achieve their goal.

    Robert Goodman (28:39)

    Yeah, we've been for the last few years doing email blasts pre-ASRM, even pre-MRSI and especially in the ones pre-ASRM. We try and talk about different topics and we always talk about one of them, the single doc practices and the things to look for and the things to think about. And so we've been trying to plant that

    seed, others too, not certainly up to us. And so I think to Brijinder's point, we try and get that out there. And even in the podcast, Griffin, that you did with Brijinder and I last year, we had some discussion about this as well. So we really try and point this stuff out as early as possible that they should consider these combinations as well as

    other physician recruitment for themselves as early as possible. It's daunting to consider a single doc practice hiring another REI. It's very expensive and they don't typically have the resources to do it. And so that's, we try to soften the blow by at least having, hopefully having these people read about it and think about it.

    Richard Groberg (29:45)

    The closer they are to retirement, Griffin, or the closer they are to thinking about retirement, the more receptive they become to this idea. And I've seen this in other areas of healthcare, because if you're 10 years from retirement, the thought of partnering with your competitor isn't attractive. But if you're thinking about it and it's getting closer to reality, and you see that you've got no alternative, other than perhaps bringing in a

    a junior partner who's going to cost you money upfront and wants their equity for next to nothing, they become more more receptive to the concept because there are fewer alternative scenarios.

    Robert Goodman (30:20)

    Right,

    because the alternative, if they don't do any of those things, is close up shop and, you know, sell somebody your chart or something like that. And, you you'll get $14 and that's about it.

    Griffin Jones (30:34)

    Yeah, that was going to be my question, Bob. Do you meet with people sometimes and you're just like, I'm sorry, it's too late. I can't help you. Does that ever happen?

    Robert Goodman (30:44)

    It's happened to me even prior to coming to MidCap. I spent some time working in the dental roll-up space and I definitely found it there where there were single dentist practices out of their homes, that sort of thing. We've all seen those and maybe we've even gone to those kinds of docs. And they're 65, 68 years old and it's like,

    Okay, I'm ready to go. Now what do I do? The ship has sailed.

    Griffin Jones (31:16)

    Yeah. Donate your equipment

    to a medical brigade going down to South America. That's pretty much what you can do at this point. How far apart can clinics be and still do this strategy? Like, do they have to be within 50 miles of each other? Can a clinic in Cleveland do this with a clinic in Detroit or do they have to be much closer typically?

    Robert Goodman (31:21)

    Yeah.

    Richard Groberg (31:38)

    geography is different if you live in New York City or LA or Chicago. Ten miles is a lifetime. But in other areas where, again, I've seen situations like Brijinder mentioned before, where they're far enough away that the labs make sense to stay open. But if one practice has three physicians and it's an hour, an hour and a half drive,

    Brijinder S Minhas (31:49)

    Yeah

    Richard Groberg (32:07)

    then you suddenly have physician support so that a one doctor practice, he or she can take a vacation. If they've got a big batch, they've got help with it. And there are some economies of scale. So every situation is unique. And sometimes it makes sense to merge them. And sometimes there are enough economies to scale without merging and closing facilities that it still works.

    Griffin Jones (32:33)

    You guys, MidCap has a reputation for being very helpful. From my experience, you all are very patient. Sometimes I feel like too patient. I want to come in and tell them like, wrap this up, move stuff along. But you all have this reputation for coming in and helping people even if they're not quite sure if they're going to sell. they're thinking, well, maybe we'll think about it in a year or two. You all have this sort of MO about earning the business and just

    building relationships. And so I've seen it where you all have come in and helped people with different things, even though they might not be engaged with you or they might not be selling their practice right now. Why do you do that?

    Robert Goodman (33:16)

    Well, I've been at MidCap the longest, so maybe I can answer that a little bit. It's a little bit of the philosophy within MidCap to do that. The healthcare vertical within MidCap is just one of the verticals. And MidCap's been around a lot longer than the healthcare vertical. And so I think some of it comes out of the philosophy of the original founders.

    And some of it, I think, comes out of our other managing director who's been there longer than I have, Scott Yoder. Obviously, know you know him and hopefully the audience that is listening to this knows Scott as well. So it comes out of him as well. And I think it's done him well during his years as a banker. I think

    I think it's the right way to go because selling your practice is like selling your child. And so it's a very emotional sort of thing. I mean, there a lot of people that are definitely dollars and cents focused and that's it. But people in the fertility space are way more emotional about things, I'd say, than some others, some other areas.

    Brijinder S Minhas (34:09)

    Very emotional.

    Robert Goodman (34:25)

    So it just takes time for people to get to really get comfortable with the idea of doing this. now that being said, do we try and push hard at different times? Of course we do. Because it's sooner or later, you know, we want to get a transaction done and we want to be compensated because the approach that we take is that we only get paid when a deal closes. And so

    We try to make sure that the folks that we connect with are of the right mindset. They have the business quality as well as the financial quality that will ultimately yield a good result for us. But we've got to push them along sometimes. But it does take time. And I think people do appreciate that.

    Richard Groberg (35:08)

    There's another reason why it's important to build a relationship. Selling a healthcare practice is not like you sell your home and the day it closes, you move out. Okay. In this case, when you sell a healthcare practice, in most cases, the next morning, you wake up and go back to work. But now you're not the landlord who owns your practice. You have a partner that paid a lot of money to buy your practice. There are some things that are going to change.

    and you have to coexist. So it's not just the dollars and cents of the deal. It's also finding the right partner and the working relationship and subtleties in the terms. And I've talked about this in some of my past podcasts with you and the fact that we've got people with significant healthcare experience and Bridginder and I have been in the industry, having those relationships formed over time helps.

    work the sellers through this very complicated once in a lifetime process that's not just I'm selling my house and I'm moving out tomorrow and I never have to deal with this again.

    Griffin Jones (36:12)

    What do you do when you come in and your incentives, your interests are very aligned with the practice owner because you're not taking some sort of retainer engagement upfront, you're being paid when they get paid. So it's in your interest to make sure that they have a healthy business. What are you doing in those times before they're ready to sell to get them prepared for whatever option they might choose in the future?

    Brijinder S Minhas (36:40)

    It really depends on the individual situation, know, the needs of the of the practice. I mean, we we look at it with multiple eyes and we look at every aspect of the practice. We get a lot of data, a lot of data, financial data, clinical data, and then come up with a a so-called composite picture, a composite evaluation.

    And sometimes, and we've experienced this, the time is not right, you know. All three of us have seen it where we say, well, I think you need to wait six months or wait a year, or this needs to be fixed, or this needs to be fixed, this needs to be fixed to be in a much better situation.

    Robert Goodman (37:28)

    And sometimes those same people, Brijinder's referring to, they have, they've already set some plans in motion for growth. And so we encourage them to continue those activities and let's see how that growth plays out. Cause if it does play out in the way that they think it plays out, that just puts them in a better position, puts us in a better position to help them as well.

    Richard Groberg (37:50)

    Yeah, and Griffin, if you go back to my selling a house analogy, before practice actually goes to market, that significant work we do is like, again, when you're selling a house, you don't just put it on the market. Someone comes in and sees where there are nicks or cracks or things that need to be cleaned up or touched up or improved or or, you know, something we need to wait six months until the market's better in order to do something. But.

    Unlike some of the other groups in the industry that represent sellers, we actually have experience in the industry. You can roll up our sleeves and work with those practices to position them at the right time and with the right, again, cleanup and modifications and posturing.

    Robert Goodman (38:34)

    Yeah, and I've been talking at various conferences over the years on behalf of MidCap and always talking about getting your house in order. And typically we are using it, selling your house as an example. In some cases, it's, you know, changing out furniture or bringing the landscaper in to make some changes outside, you know, or whatever it might be. But some of it's cosmetic and a lot of it's not. Richard talked about things that are not cosmetic.

    although maybe a little bit, but some of it's not cosmic. Some of it's like, you should get that radon test done maybe beforehand or something like that to see if you've got a problem.

    Griffin Jones (39:11)

    What specific advice would each of you give to practice owners?

    Richard Groberg (39:17)

    Every situation is unique. It's just like a fertility doctor can't prescribe the treatment for a patient without blood tests and lab tests and consultation and a diagnosis. And that's part of what we do is we've got to diagnose the practice. then those specific recommendations are custom designed and tailored.

    by analyzing each practice discussion with the owners and our understanding of the markets and who potential buyers are and what they're looking for.

    Robert Goodman (39:46)

    Right.

    If you've seen one practice, you've seen one practice. They're not all the same. There's obviously a lot of similarity. so and we all draw from our experiences and whether they're from the fertility space or working with dentists and ophthalmologists and others where I've dealt with from time to time in the past or surgery centers, whatever it might be. There are so many things that you can draw from and try to work with these folks on.

    And we have the credibility, we have the experience. I've been involved with four businesses and have successfully sold at least two of them. And I mean, personally. So, we've been there, we've been C-suite guys and in large healthcare businesses and other places. So, we think we have credibility and yeah, gray hair goes along with it.

    Brijinder S Minhas (40:37)

    One, two.

    Just a couple of points, know, Griffin, you ask a very important question. In our field, in the fertility world, outcomes, clinical outcomes are extremely important. You know, no network, no buyer wants to take on a practice that has substandard outcomes. And so we look at that very carefully. We look at

    Personnel costs, know, personnel costs are one of the biggest costs in a practice. We look at that. Marketing costs, you know, is the marketing effective? Is it, are you getting a payback on your marketing? Are you doing enough marketing? Are you doing too much? So all of these things feed into the equation and that's, you know,

    Richard Groberg (41:18)

    Or are you doing enough? They may not be doing enough.

    Robert Goodman (41:23)

    Yeah.

    Brijinder S Minhas (41:27)

    that all feeds into our assessment. And we do all of that prior to being engaged by the client.

    Robert Goodman (41:35)

    Yeah, and

    you know, we've had a lot of experience with a lot of practices. And now with Richard on board, I know we're going to be able to home this even more. And although we don't try to always talk about this, you know, we have a body of data that says this is what we typically see as the percentage of revenues that you're spending on marketing. And we see some people spend way above that. We see some people.

    spend way below that. I'm just using that as one example. And so, you know, we try to understand what they're trying to accomplish with whatever it is they're doing and say to them, how is it working and how are you judging whether it's working or not? In some cases, we find that, oh, yeah, we do all this stuff and blah, blah. But so, and how do you track it? Oh, I don't think we do track it. So there's a lot of things that we try to help them with.

    Griffin Jones (42:30)

    I hope that people take advantage of this and get in touch with you. I hope they do so before it's too late. I hope they do so as they're starting to think about things and not further down the line when you could have helped them even more. We'll be putting your different ways of being able to contact you in different places and people can always ask me for an introduction. But I consider myself to be someone that's pretty middle of the road.

    pleasantly persistent when it comes to sales. You all are so much more laid back than I am. And so you're all easy to talk to. Anybody that I've introduced you to has been happy that they've had a chance to talk to you. And it's just an easy, very, very low risk. I hope that some people take advantage of you. A lot of people already have.

    And I look forward to having all three of you back on the inside reproductive health podcast. Thanks for coming on gentlemen

MidCap Advisors
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Dr. Brijinder Minhas
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Robert Goodman
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Richerd Groberg
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