Specialist
Former director at EyeCare Partners LLC
Agenda
- Key trends and developments within the US ophthalmology space, focusing on EyeCare Partners
- EyeCare Partners' growth drivers, emphasising acquisition activity and clinic consolidation trends
- Service quality overview, including adoption volumes and client satisfaction levels translating into procedural and clinician volumes
- Reimbursement pressures felt through CMS (Centers for Medicare and Medicaid Services) and commercial payers
- Competitive landscape overview, including profile differentiation among key players such as Acuity Eyecare, Vision Source and MyEyeDr and further differentiation through the evolution of independent providers
- Q4 2022 outlook, potential growth drivers, strategic assessment and potential headwinds
Questions
1.
Could you touch on the significant growth drivers for EyeCare Partners and the broader optometry practice industry? How has the increased consolidation of acquisitions contributed to the maturation of the surrounding environment?
2.
How are the optometry procedure volumes trending as of late? In October 2021, volumes were back on track vs 2020 and 2019. Have volumes started to recover post-pandemic? Are they recovering to pre-pandemic levels?
3.
Can you comment on the quality of EyeCare Partners’ service offerings across optometry and ophthalmology, specifically pointing at adoption volumes and client satisfaction?
4.
EyeCare has optometry as well as ophthalmology, it’s a hybrid business model, whereas players such as National Vision and MyEyeDr have optometry without the ophthalmologists. What are the synergies of this hybrid model and are there any disadvantages?
5.
How does EyeCare’s vertically integrated model actually drive increased procedural volumes and clinician visits? Do you think the company could achieve improved quality outcomes and wait times to increase efficiencies?
6.
Could you break down EyeCare’s optometry practices and revenue mix across the various major and ancillary service lines? Which do you expect to continue to be the significant growth driver for the company, looking at exams, frames, contact lenses and MRIs?
7.
What does EyeCare’s competitive landscape look like, touching upon key players such as Acuity Eyecare, Vision Source and MyEyeDr, as well as the other multiple new market entrants you touched upon earlier? How would you distinguish EyeCare from these players from a platform and scalability perspective?
8.
What are your expectations for the market share split across players? You mentioned EyeCare Partners has the ability to potentially capture the entire market share. What makes you say so?
9.
You said there still seems to be a lot of fragmentation and PE saturation within the marketplace, with about 15-20% of practices investor-owned and about 80% independent-owned. Can you elaborate on this split and how you expect this to unfold?
10.
What are your predictions for EyeCare’s consolidation and integration efforts when addressing gaps in service offerings? What are the considerations and synergies the company takes into account when acquiring an independent group or physicians?
11.
I’ve heard from other specialists that EyeCare is more about consolidating consolidators and is spending less time chasing smaller practices. Do you agree with this statement? What is the strategy there?
12.
What attracts a doctor or physician, or independent physician, to join a platform such as EyeCare? Could you comment on the sourcing efforts? How does the company actually find a doctor who wants to sell? Are consolidators facing much resistance or pushback from physicians around consolidating their practices? Is there any potential friction?
13.
How does EyeCare incorporate equity into acquisitions in terms of grants or corporate equity vs allowing physicians to maintain a minority stake?
14.
What EBITDA multiples does EyeCare typically pay for a practice acquisition? Is the multiple different for an optometry vs ophthalmology practice? I know these were extremely high initially, with 12-18x multiples, and went down to 4-8x in 2021. Are they still at this 4-8x EBITDA range, lower or higher?
15.
Are the individual clinics typically generating positive free cash flow at the time of acquisition?
16.
Are there any other M&A consolidation risks you’d like to highlight?
17.
What is the likelihood of another conglomerate acquiring EyeCare Partners or the company partnering with another player such as MyEyeDr or Acuity Eyecare Group? Could you speculate on the chances of this occurring as well as a possible valuation?
18.
What is EyeCare’s long-term plan in terms of IPO or a sale to a strategic? Do you predict the company taking an IPO over the next couple of years? Would this be a strategically feasible option and work better as a public equity?
19.
You said reimbursement was one of the major key points investors should be paying attention to. How would you assess the reimbursement environment for eyecare procedures? I know ophthalmology was slated for a 2% cut in 2023, on top of sequestration, and you also mentioned the density of the CPT [Current Procedural Terminology] codes within the platform as super high. Has the industry faced any specific challenges around Medicaid, Medicare and commercial payers around reimbursement?
20.
What are the upsides and downsides of an eyecare provider being owned by an insurance company, say a VSP or EyeMed vs being an independent provider, especially in terms of increasing reimbursement? What would be the impact on doctors and physicians?
21.
Can you comment on the trickle-down effect of the industry-wide labour shortages on the optometry and ophthalmology sectors respectively? How significant has the impact of increased wage pressures and lack of talent been on eyecare? When do you expect some sort of normalisation? Has eyecare been able to mitigate these staffing challenges?
22.
How would you delineate EyeCare’s geographic footprint across the US? A specialist in a previous Interview [see EyeCare Partners & the US Eyecare Practice Market – Core Business Analysis & Expansion Strategy – 21 October 2021] mentioned that nobody seems to be focusing on the west, while everyone wants to be in the northeast, southeast and central US. Do you think this has changed since 2021 and has EyeCare been trying to accelerate expansion into the west?
23.
What are your expectations around innovation in the optometry space? Are there any products or service lines that you’re particularly excited about come 2023? What are some growth opportunities EyeCare could capitalise on?
24.
Can you outline 2-3 key scenarios that might play out in the near future for EyeCare Partners and the broader eyecare space? What are some potential headwinds and tailwinds?
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