Private equity firms are suddenly buying dermatology practices — here's why

Justin Thomas sprays himself with sunscreen during the first round of the 2016 The Masters golf tournament.

Private equity firms are snapping up dermatology practices across America.

In the past two years, there have been over 200 deals involving physician practices, with about 30 of those transactions in dermatology.

Investors are attracted by profitable new cosmetic procedures offered by many dermatologists, and are placing premium values on high-performing, well-positioned practices.

Some of the recent deals have been huge.

New York-based private equity firm Harvest Partners  recently purchased Maitland, Fla.-based Advanced Dermatology & Cosmetic Surgery, the largest U.S. dermatology practice, in a deal reportedly worth more than $600 million.

Varsity Healthcare Partners sold dermatology practice Forefront Management Holdings to the private investment arm of pension fund giant Ontario Municipal Employees Retirement System in a deal worth more than $450 million.

The Wall Street Journal reported that the transaction valued Forefront, with more than $30 million in earnings before interest, taxes, depreciation and amortization (EBITDA) last year, at about 13-times EBITDA.

We can expect more deals.

That’s especially true because dermatology is a fast-growing specialization. The market is expected to increase to $13.1 billion by next year, according to a 2013 Harris Williams & Co. study.

There is a dermatologist shortage that will likely persist for years even as a growing number of medical students pick the specialization.

To private equity firms, there are several factors that make dermatology practices more attractive than other medical practices.

Demographics. By 2019, there will be 54 million Americans over the age of 65, up from 46 million-plus today, according to a report by the U.S. Department of Health and Human Services’ Administration on Aging. Skin cancer, particularly melanoma, is on the rise too, striking about 3.5 million people annually, according to the American Cancer Society.

Healthcare access. More and more Americans have access to healthcare thanks to the Affordable Care Act. About 20 million people have gained insurance coverage between the passage of the law in 2010 and early 2016, boosting demand for dermatology.

Financials. Common medical and surgical dermatology procedures are typically well reimbursed.  Additionally,  high-margin cosmetic procedures tend to be paid out of pocket by consumers and are not as reliant on discounts made to insurance providers as many other types of medical care. Notably, most dermatology work is conducted outside of hospitals and as such is not subject to the push for cost-savings underway at hospital systems.

The upsell. Many dermatology practices have a cosmetic component, offering everything from Botox, Restylane, micro-dermabrasion and laser correction, CoolSculpting (a non-surgical fat removal process), high-end skin creams and other services. Investors like the idea of training doctors to do a better job of upselling such offerings so that patients who might come to have a mole removed are likelier to sign up for more lucrative services.

Historically, physicians may have viewed the full or partial sale of their practice as the loss of independence or control.

Today, many doctors embrace the idea of being able to spend 100 percent of their time providing patient care.

The consolidation of back office functions — like billing, scheduling, and insurance contract negotiation — is a huge motivation to sell.

Some physicians with thriving practices are teaming up with investors to become consolidators, acquiring other dermatology practices and getting an equity stake in the larger entity.

Some have joined or formed multi-physician dermatology practices with several locations and additional specializations.

In the end, consolidation should be good for patients. Ultimately, it ensures that doctors spend more time with them.

Patrick Krause

businessinsider

ASDS survey: Twice as many considering cosmetic procedures

Dermatologists are key influence

ROLLING MEADOWS, Ill., July 19, 2016 /PRNewswire-USNewswire/ -- The percentage of consumers considering a cosmetic medical procedure has almost doubled since 2013, according to survey data released today by the American Society for Dermatologic Surgery (ASDS).

Nearly 60 percent of consumers now say they are considering a cosmetic treatment, up from 30 percent just three years ago, according to the ASDS Consumer Survey on Cosmetic Dermatologic Procedures.

"Cosmetic medical treatments continue to grow in popularity," said ASDS President Naomi Lawrence, M.D. "One of the keys reasons why is because patients trust their dermatologists and the advanced techniques and cutting-edge technologies that will improve their appearance."

Data from the annual ASDS survey reflects overall consumer views on cosmetic medical treatments and ratings for 10 specific procedures.

For the fourth year in a row, dermatologists ranked as the No. 1 of 14 factors influencing the decision to have a cosmetic procedure. Consumers also rated dermatologists as the physician of choice in eight of the 10 treatment categories.

Of the 11 factors influencing the selection of a practitioner, consumers rated highly the choices involving physician expertise. The specialty in which the physician is board-certified, the level of the physician's licensure and referral from a physician ranked as three of the four top factors.

"Board certification offers patients peace of mind that their dermatologist has the expertise and training to provide the care for their skin health and beauty needs," Lawrence said. "Our ASDS members are proven skin experts who are committed to meeting the needs of their patients."

In two survey questions, ASDS member dermatologists swept all 10 cosmetic treatment categories. The first question – answered by patients whose cosmetic treatments were performed by dermatologists – the majority of respondents in all categories indicated their dermatologist is an ASDS member. In the second question, the majority of prospective patients in all treatment categories said they would consider an ASDS member for their procedure.

The survey also uncovered the reasons why people are turning to cosmetic procedures, with wanting "to feel more confident" as the top reason. Next were wanting "to feel more attractive" and wanting to "look as young as I feel or better for my age."

About the Survey

Date were obtained through a blind online survey conducted from April 20 to May 1 through the web-based Survata service. The survey received 7,322 responses.

prnewswire

Care of dry and itchy skin

Atopic or allergic dermatitis is a common condition that shows up as dry skin and inflamed rashes.

A woman's history of allergy affects the odds of her child developing it within six months of birth.

From age six to 12 months, the odds are further raised if the child attends a daycare centre and his mother also has a history of allergy.

If the condition sets in after the child turns one - in what is known as late-onset atopic dermatitis - it is linked to two other factors.

One, the child may have been given probiotics when he was between nine and 12 months.

Two, he could have been given antibiotics between his birth and sixth month.

These local research findings were published online in April last year in the International Archives Of Allergy And Immunology.

There search is part of an ongoing project called Growing Up in Singapore Towards Healthy Outcomes, which was started in 2009 with about 1,200 expectant women.

It is a collaboration between the National University Health System, KK Women's and Children's Hospital and A*Star's Singapore Institute for Clinical Sciences.

Atopic dermatitis has been highlighted as a likely first step in the "atopic march", which is the progression of allergic disorders from early childhood onwards.

Dr Lynn Chiam, a dermatologist at Mount Elizabeth Novena Specialist Medical Centre, said: "In the atopic march, young patients develop atopic eczema early on, followed by a typical sequence of allergic rhinitis and asthma.

"One allergy may subside as another starts, or the allergies may overlap so that they suffer from more than one at a time. Some may persist for years, whereas others may resolve with age."

The researchers note that, because of this march, the predisposing factors for atopic dermatitis must be identified.

Professor Lee Bee Wah, one of the study's authors, said atopic dermatitis is likely to be caused by a combination of an abnormal skin barrier - often manifested as dry skin - and a propensity for the skin to get inflamed.

Those with an earlier onset of atopic dermatitis seem to be at a higher risk of developing environmental allergies, she added.

Dr Chiam, who was not involved in the study, postulated that the higher odds of getting atopic dermatitis after attending a daycare centre may be linked to the child's exposure to viruses, pollution and an altered skin hygiene.

But Prof Lee, from the department of paediatrics at the National University of Singapore's Yong Loo Lin School of Medicine, pointed out that the risk from probiotics may be confounded by the tendency of mothers to use it on their children who are already at risk of atopic dermatitis, hence giving the false impression that probiotics increases the risk of atopic dermatitis.

As for antibiotics, animal studies suggest that they alter the "good" bacteria in our body and reduce our defence against inflammatory conditions.

Antibiotics are prescribed to treat bacterial infections but viral infections are, by far, more common in children, she said.

She emphasised that the factors mentioned, including maternal history, probiotics and antibiotics, may not be direct causes of atopic dermatitis but may raise the risk of a child developing the condition.

Here are tips from Prof Lee and Dr Chiam on caring for children with atopic dermatitis:

MOISTURISE SKIN WELL

Choose a moisturiser that suits the child's skin. It should not make the skin red and should not sting .

Commercial moisturisers aim to replace the natural moisturisers that our skin produce. Choose one that contains products of filaggrin - a protein that helps to keep skin condition healthy - such as arginine, sodium pyrrolidone carboxylic acid and ceramides, to rebuild the child's natural skin barrier.

A good example is the Cetaphil Restoraderm moisturiser. An ideal body wash should also contain these filaggrin products.

DO NOT IRRITATE SKIN

Avoid excessive heat, use of harsh soaps and applications such as liniments and powders, which dry the skin. Instead, use bath oils or non- soap cleansers. After a shower, dab the skin dry instead of rubbing it .

For those whose skin condition is made worse with heat and sweat, it is important to stay in a cool environment. Avoid excessive exposure to sunlight and the use of thick woollen clothes which may further irritate the skin.

BEWARE OF INFECTED ECZEMA

Broken and oozing skin is often a sign of infected eczema. Keep fingernails short and remind children not to scratch, which will worsen the rash. Apply cold packs to reduce the itch. Atopic dermatitis is particularly prone to bacterial infection. When infection occurs, eczema often flares and it may need medical treatment.

KNOW AGGRAVATING FACTORS

Illnesses, fevers, stress, insufficient sleep and tiredness can aggravate eczema. Some of these cannot be avoided but, in these situations, skin care may have to be intensified.

Joan Chew

straitstimes