OMERS Sells Stake in Forefront Dermatology to Partners Group
Forefront provides access to patient-centric dermatological services and treatments in 22 U.S. states
Forefront's physicians and executive team will continue to remain owners of the business
As part of transaction, OMERS Private Equity will reinvest in Forefront as minority owner
OMERS Private Equity today announced that it has signed an agreement to sell its interest in Forefront Dermatology to leading global private markets firm, Partners Group, acting on behalf of its clients. As part of the transaction, OMERS as well as Forefront’s physicians and executive team will reinvest in Forefront as minority owners. Located throughout the U.S. East, Midwest, Mid-Atlantic, Southwest, Southeast and West, Forefront Dermatology is the largest physician-led single specialty group providing dermatological services in the United States and comprises over 200 dermatology practices.
“Since 2016, OMERS has proudly partnered with Forefront and has been pleased to support the business as it more than doubled the size of its geographic footprint, practice count and clinician base. We knew in 2016 that we were backing a top executive and physician leadership team with a deep ambition for growth, all while continuing to deliver access to best-in-class, patient-centric care.” said Mark Van Wart, Managing Director, OMERS Private Equity.
“We are thrilled about what we’ve accomplished through our collaboration with Scott Bremen, Dr. Betsy Wernli and the entire Forefront team,” said Michael Graham, Global Head, OMERS Private Equity. “Forefront’s growth through both organic initiatives and acquisitions during our tenure speaks for itself – as does the company’s demonstrated resilience during the COVID-19 pandemic. In addition, through this transaction, we will generate an excellent outcome for more than 525,000 members of the OMERS pension plan,” Mr. Graham added.
With a strong focus on the healthcare segment, OMERS Private Equity’s portfolio of current and past investments in the space includes: Gastro Health, Community Veterinary Partners, CBI Health Group, Paradigm Outcomes, Premise Health, National Veterinary Associates, Accelerated Rehabilitation Centers, and Great Expressions Dental.
“Working together with Mark, Mike and the other members of the OMERS team, we have made great strides in realizing our shared long-term vision for Forefront,” said Scott Bremen, Forefront CEO. “We are excited by today’s news and are looking forward to working just as closely with Partners Group, as Forefront enters this new chapter in its development,” Mr. Bremen added.
“We are appreciative to have worked with OMERS, a partner who so valued our patient-centric focus and consistently supported the advancement of our unique physician culture, while ensuring full physician autonomy at all times,” said Dr. Betsy J. Wernli, President and board-certified dermatologist, Forefront Dermatology.
The transaction is expected to close in early Q2 2022. Further financial terms will not be disclosed. OMERS and Forefront were advised by Harris Williams, Ernst & Young, Sidley Austin and McDermott Will & Emery.
Partners Group also put out a press release on this deal:
- Forefront is the largest, most diversified dermatology group practice in the US
- The Company has a differentiated patient- and physician-centric culture
- Partners Group will continue to invest in Forefront's best-in-class support infrastructure, sustaining the delivery of world-class, exceptional-quality dermatological care
Partners Group, a leading global private markets firm, has agreed, on behalf of its clients, to acquire Forefront Dermatology ("Forefront" or "the Company") from OMERS Private Equity. Forefront's physician partners and executive team will remain significant shareholders. OMERS Private Equity will also continue to invest in the Company through a minority equity stake.
Founded in 1980 and headquartered in Manitowoc, Wisconsin, Forefront has over 200 dermatology clinics across 22 states. The group practice comprises over 400 board-certified dermatologists, physician assistants, and nurse practitioners. The Company's mission is to offer patients superior access to world-class, board-certified care within their communities. In support of this, Forefront provides dermatologists with a wide range of central support services to reduce administrative burdens and allow them to focus on their patients. Forefront's physicians maintain clinical autonomy while remaining connected to an established Physician Board of Directors and board-certified dermatologist partners. Physicians provide care across all subspecialties of dermatology, from medical and surgical to cosmetic dermatology, all supported by Forefront's best-in-class dermatopathologists and dermatopathology laboratory.
Partners Group will draw on its extensive experience working with physician partners, multi-site healthcare practices, and executive teams to maintain Forefront's quality- and outcomes-focused culture, and support its differentiated patient- and physician-centric approach. Key value creation initiatives will include investing in physician leadership and ownership, improving operational excellence, and expanding Forefront's integrated dermatology ecosystem through investing in its technology, cosmetics service offering, and patient care.
Scott Bremen, Chief Executive Officer, Forefront Dermatology, comments: "Forefront always prioritizes patient care, quality, and outcomes. Our scaled central support services offering provides our board-certified dermatologists with best-in-class functional experts to reduce growing administrative burdens, which allows them to focus on patient care and quality. Partners Group has a track record of success across specialties in healthcare delivery and we feel fortunate to be partnered with a like-minded investor that puts patient care and physician support first."
Dr. Betsy J. Wernli, President and board-certified dermatologist, Forefront Dermatology, adds: "Our patient- and physician-centric culture, which includes the industry's largest group of board-certified dermatologists, differentiates our practice through its unique physician-executive leadership structure and an operating model that truly allows us, as dermatologists, to solve every problem we face as practicing physicians daily. We are excited to partner with an investor that values our culture and is eager to support the guiding principles establishing Forefront as the differentiated group practice in dermatology."
Piotr Biezychudek, Member of Management, Private Equity Health & Life, Partners Group, says: "We are proud to invest in Forefront alongside the Company's physician partners and executive team. Our highest priority is to maintain Forefront's unrivaled patient care and its reputation as a top choice for board-certified dermatologists. We are aligned in our goal of attracting and retaining the most respected dermatology specialists and advancing the field of dermatology through the development of a leading clinical research function. We are committed to continuing the long history of putting patients first, supporting dermatologists to minimize administrative constraints, improving clinical care, and driving best-in-class outcomes."
Ethan Matter, Member of Management, Private Equity Health & Life, Partners Group, adds: "From the start, we were excited about Forefront's ability to serve a patient's full spectrum of dermatological care needs due to its geographic reach, comprehensive services, and technology solutions geared toward offering top-quality, convenient, and accessible care. We are looking forward to partnering with Forefront's talented team, including dermatologists, physician assistants, nurse practitioners, and central service and clinical support staff."
Ropes & Gray and Deutsche Bank advised Partners Group.
Now, a little history. When OMERS Private Equity acquired Forefront back in 2016, Forefront was operating across 11 states, comprising community-based board certified specialists that provide best-in-class dermatology care:
In 2001, Dr. Kenneth H. Katz, President and Founder, formed Dermatology Associates of Wisconsin and subsequently expanded the group practice and dermatology services platform to over 40 clinics operating in three states. In 2014, DAW began operating under the Forefront name and accelerated its pace of expansion. Forefront now operates more than 80 clinics across 11 Midwestern and Mid-Atlantic states. Guided by Dr. Katz's physician leadership, Forefront has grown to include over 90 board-certified dermatologists and has delivered a consistent track record of clinical excellence, highlighted by exceptional patient satisfaction scores and high employee retention rates.
"We are extremely pleased to partner with OPE at this time in Forefront's evolution," said Dr. Kenneth H. Katz, President and Founder, Forefront Dermatology. "OPE brings significant resources and experience in partnering with healthcare professionals to build leading multi-site healthcare companies, and I believe they will be a valuable resource in the long-term expansion of our physician group practice. Our partnership with OPE and their long-term investment approach position us to capitalize on our platform and embark on the next phase of growth."
Under the direction of Scott Bremen, CEO, Forefront has invested heavily in its people, processes and systems, highlighted by a team of 130 skilled and dedicated employees at corporate headquarters and over 800 health care professionals and support staff across its 80 plus clinics. This support system includes a robust operational infrastructure, centralized support services and advanced information technology, which enable dermatologists to focus on delivering exceptional patient care.
"Our primary objective is to unlock the possibilities for our dermatology group practice. We value and emphasize our dermatologists' autonomy and our partnership with OPE enables us to continue to ensure that all our dermatologists have the resources and operational support to achieve their individual and group goals," said Scott Bremen, CEO, Forefront Dermatology. "The OPE team believes strongly in our vision and we look forward to partnering with them to expand and grow Forefront Dermatology."
"We are excited to work alongside Ken, Scott, existing physicians and the entire Forefront team to continue building on what is already an impressive culture, platform and strategy," said Jonathan McCarthy, Managing Director of OPE. "Having spent significant time evaluating multi-site healthcare platforms, we have seen very few with the market opportunity, vision and leadership of Forefront."
OPE has extensive experience in middle market, acquisitive, multi-site platforms, including investments in CBI Health Group, Accelerated Rehabilitation Centers (exited in 2014), Great Expressions Dental Centers, and Caliber Collision.
"Forefront is a very strong addition to our healthcare portfolio and is a perfect fit with our broader strategy of partnering with industry leaders poised for significant growth," said Michael Graham, OPE Senior Managing Director and Head of North America.
Michael Graham now leads OMERS Private Equity and he obviously knows Forefront well since he worked on the acquisition back in 2016.
Since then, Forefront has grown significantly, now operating over 200 dermatology clinics across 22 states.
Financial details of this transaction are not available but it's fair to say that OMERS Private Equity grew Forefront's operations and revenues and even though it's selling a big stake, it will reinvest to hold minority ownership.
What I find fascinating is the trend going on in private equity acquiring physician owned practices.
One 2019 study finds dermatology practices in particular have caught the attention of private equity (PE) investors, who have sought to consolidate practices and produce economic value through operational efficiencies, revenue enhancement, increased market share, and economies of scale.
You might be wondering why are so many physicians selling their practices?:
Todd is the Chief Executive Officer of VitalSkin Dermatology, a world-class dermatology and aesthetics practice management firm., Mr. Petersen has over two decades of C-suite experience, including CEO, COO, CFO, and CHRO roles. He is a growth expert with a passion for new entrepreneurial challenges, revenue growth, improving operations, and building teams and partnerships.
A growing number of dermatologists are selling their practices, with several factors driving this trend. If you currently own or are thinking of starting your own practice, understanding the current practice landscape, trends, and options can help you make the best-informed decisions for your and career.
The most prevalent reason for selling a practice is physician age. According to the American Medical Association, forty-four percent of dermatologists are aged 55 years or older. Many of these doctors have enjoyed the autonomy and independence of owning their own practice, making them skeptical and reluctant sellers. However, as they near retirement, the option to sell becomes far more attractive, driven by the desire to monetize one of their most valuable assets and to create a seamless transition for their patients and their teams.
Accelerating practice growth
While age is perhaps the most prevalent driver behind this trend, it is certainly not the only one; the modern challenges of running a dermatology practice can drive a physician to sell. Increasingly, there are a number of confident, entrepreneurial and ambitious dermatologists who have built up successful practices; retirement for these dermatologists is still in the distant future, so their age is certainly not an issue. Recently a successful dermatologist told us, “I put a lot of time into running the smartest practice possible. It takes a lot of time and attention to detail, but recently feels like I must work harder to maintain my income.”
While dermatologists in this category are still driven to grow and advance their practice, growing their practice is now more difficult than ever. It demands a significant investment in time, entails taking on additional risk, requires additional capital, necessitates new business skills, and increasingly requires a sacrifice of current income in the early stages.
Consequently, some dermatologists seek a partner who can help them accelerate the growth of their practice. Their new partner may provide additional capital to build a new practice office, to buy new equipment in order to add new services to the practice, or to help fund start-up losses when new partners or advance practice nurses are added. Selling their practice often allows them to take some chips off the table, but at the same time it allows them to continue participating in the financial upside of a larger practice with an accelerated growth model and maintain a significant leadership voice.
There is yet another group of dermatologists who are simply overwhelmed by the increasing administrative burden of running a practice. These dermatologists are still passionate about their vocation; they are driven to provide the best care for their patients and their well-being. But these physicians feel weighed down by a heavy administrative burden, including tasks like deciding what insurance networks in which to participate, negotiating provider contacts with insurance companies, dealing with authorizations and approvals, managing billings and collections, and keeping up to date with new rules and regulations. Every year, keeping up with these activities becomes more cumbersome.
The terrain for smaller practices is tricky. While the health insurance, pharmaceutical, retail pharmacy, medical equipment manufacturers and distributors, and hospital segments of health care have consolidated, the physician segment has been slower to do so. As a result, the balance of power in health care has shifted, and smaller practices don’t have the bargaining power to compete against these big companies. Consequently, small practices become “price takers.” This means they are compelled to take standard pricing and abide by increasingly complex rules.
Additionally, the continual march toward digitization creates new needs for information technology support. Picking, implementing, and supporting the right electronic health record takes specialized talent. New artificial intelligence solutions hold the promise of improved patient outcomes and reduced malpractice risk for doctors. But how do you pick the right artificial intelligence solutions, who pays for it, and how do you keep up with the rapidly changing environment? These are tough strategic questions that are hard to manage without specialized talent.
Recruiting great talent is becoming harder too. How do you find great talent in a tight labor market without settling on someone who is mediocre? There’s also the difficulty of finding and keeping quality staff members, in part because it’s becoming very expensive to offer an attractive benefits package and in part because of employee labor laws. With regulations continuing to evolve on all scales-federal, state, and local-it becomes more and more difficult to stay on top of changes.
While many physicians just roll with these challenges and accept it as part of being their own boss, increasingly there is a large group of physicians who are looking to be “liberated” from these administrative burdens. One dermatologist in this group recently told us, “People matter most to me – my patients, my staff and my family. The idea of reducing my burden within administration so I can focus on the parts of my life and practice that really matter sounds great to me.”
The increasing administrative burden compels some dermatologists to sell their practice in order to simplify their professional lives. In other words, they are trading their practice for a simpler life and more time: more time to spend with patients, their family and friends, or even to pursue their own passions.
As with selling a home, selling a practice is a nuanced exercise with many considerations. This includes, how to ensure dermatologists receive a fair value for their practice, how to manage staff and day-to-day business during the sale process, how to negotiate a transition, or lack thereof, with buyers, and the legal, financial, and administrative aspects of preparing a practice for sale. Over the course of the year, we’ll be walking you through steps necessary to prepare your prepare yourself and your practice for the next phase.
This is an interesting article, one I understand because my family and friends in Canada and the United States are physicians.
The three main specialties where you see a lot of volume of patients are dermatology, radiology and ophthalmology.
Not surprisingly, these are the highest paid specialties (at least in Canada) because of the sheer volume of patients they see and they operate clinics across Canada and the US, much like dentists do.
But physicians aren't business people, at least not good ones, and running these clinics has become a lot more complex for all sorts of reasons.
Administrative burdens are a nightmare, you need to attract and retain top staff and always focus on outcomes as you're only as good as your last social media review.
Well, maybe not, but it is a competitive space.
How competitive? Very competitive.
Last year, for example, Ridgemont Equity Partners acquired Anne Arundel Dermatology:
Ridgemont Equity Partners, a middle market private equity investor, today announced the acquisition of Anne Arundel Dermatology Management (“AAD” or the “Company”), a leading provider of medical, surgical and cosmetic dermatological services in the Mid-Atlantic and Southeastern states. AAD has approximately 181 providers across 74 clinics in Maryland, Virginia, Tennessee, North Carolina, and Pennsylvania and is seeking expansion into new geographic markets. The management team at AAD and physician-owners invested alongside Ridgemont in the transaction.
“Ridgemont has been close to the team at Anne Arundel Dermatology for over three years,” said Walker Poole, Partner at Ridgemont. “Given the strong clinical reputation, established presence across the Mid-Atlantic and Southeastern regions, and successful history of practice affiliations, we view AAD as a top-tier dermatological service provider in the US and are very pleased to add the Company to our portfolio.”
“Dermatology is a large and growing sector that remains highly fragmented,” said Dan Harknett, Principal at Ridgemont. “AAD has an excellent group of high quality dermatology providers and a proven management team that is capable of leading a much larger platform – we are excited to support this team and share the next step in the Company’s continued growth.”
“We have experienced tremendous growth across the Anne Arundel platform over the past several years and are proud of the team and infrastructure we have built,” said Scott Mahosky, CEO of AAD. “Our new partners at Ridgemont share the same vision of supporting high quality physicians focused on providing quality care while reducing the providers’ administrative burden. We look forward to partnering with Ridgemont to continue these efforts while increasing our presence in existing markets and expanding into new states.”
Financing for the transaction was provided by Twin Brook Capital Partners, Crescent Direct Lending, First Eagle Alternative Credit, Pathway Capital Management, Northwestern Mutual Investment Management Company, and funds and accounts sub-advised by Churchill Asset Management. Dechert LLP provided legal services to Ridgemont. Robert W. Baird & Co. served as financial advisor to Ridgemont and Coker Capital served as financial advisor to Anne Arundel Dermatology. Financial terms of the transaction were not disclosed.
About Anne Arundel Dermatology
Anne Arundel Dermatology is a leading provider of dermatological services in Maryland, Virginia, Tennessee, North Carolina, and Pennsylvania. Headquartered in Linthicum Heights, Maryland and with 74 locations and 181 providers, AAD provides a comprehensive suite of dermatologic services, offering general dermatology, advanced treatment options for skin cancer and cosmetic procedures. www.aadermatology.com.
About Ridgemont Equity Partners
Ridgemont Equity Partners is a Charlotte-based middle market buyout and growth equity investor. Since 1993, the principals of Ridgemont have invested approximately $4.4 billion. The firm focuses on equity investments up to $250 million in industries in which it has deep expertise, including business and industrial services, energy and sustainable services, healthcare, and technology and telecommunications. www.ridgemontep.com
What attracts these private equity firms to dermatology and other healthcare clinics is low debt levels, stable and growing revenues and the fact that it's a sector which is quite recession proof and non-cyclical.
Below, Dr. Betsy Wernli, President and board-certified dermatologist at Forefront Dermatology introduces the company to patients. Also, Dr. David Bertler explains how he treats skin cancer using Mohs micrographic surgery.
Lastly, importance of a skin screening at Forefront was life changing for Lori. See more clips here.