A group of lawyers from Nixon Peabody LLP recently represented a downstate bariatric surgical practice and its affiliated marketing services organization with expansion into the south.
New York Bariatric Group and its MSO, New York Bariatric Group — together, NYBG — joined forces with Roller Weight Loss and Advanced Surgery, which serves Northwest Arkansas and Oklahoma.
The affiliation further strengthens NYBG’s reach and leverage, and could serve as a blueprint for other medical practices looking to join forces with an MSO, according to Lori Green, partner and co-leader of Nixon Peabody’s M & A and Corporate Transactions Team.
Green, who is based in Rochester, was the mergers and acquisitions lead in the transaction, which featured an all-woman legal team from Nixon Peabody representing NYBG. Michele Masucci, a partner based in Long Island who focuses on regulatory needs of health care and private equity firms, was the regulatory lead. They were assisted by Jennifer Jovcevski, Jena Grady and Jennifer Greco.
“A transaction of this sort enables others to realize the types of transactions that are occurring and how they could apply to them,” Green said.
“A management services organization basically does everything except practice medicine. They’re more than billing and collections. They will find real estate, they will assist in recruiting physicians, they will buy equipment. The management services organization structure relieves physicians of the need to do anything but practice medicine.”
Nixon Peabody first worked with New York Bariatric Group in 2018, when founder Dr. Shawn Garber formed an MSO for his practice. In general, a newly formed MSO acquires the non-clinical assets from a physician’s practice.
When NYBG was acquired in 2019 by Sentinel Capital Partners, the Nixon Peabody team represented the private equity firm and have continued to provide legal assistance.
The affiliation with Roller Weight Loss and Advanced Surgery needed the strength of the Nixon Peabody team, Green said.
“This was not just an M & A transaction because of all the regulatory requirements,” she said. “It was a very regulatory-intense transaction.”
Expansion is likely to continue. Doctors recognize the appeal of what an MSO offers, she said. When it comes time to negotiate rates with third-party payers — i.e., insurance companies — an individual practice now has the strength of numbers.
“What ends up happening is if an MSO is successful, it continues to affiliate with more surgeons,” Green said. “The larger the group, the more leverage you have.”
That, in turn, means more capital.
“The more partners they become affiliated with, the greater their cash flow, and they then become more attractive to private equity groups,” Green said.
MSOs tend to focus on particular practices in the medical field. For instance, NYBG probably wouldn’t affiliate with an oral surgeon or orthopedic specialist; they would more likely join or form their own MSO.
“I do believe this is an area that will continue to grow,” Green said.
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