The Future of Healthcare Practices: Navigating Consolidation and Value-Based Care

John Nantz is the Founding Partner of Redwood Advisors, a firm delivering strategic, organizational, and digital consulting projects to high-growth midsize companies. With over a decade of experience as a management consultant, he has led over 50 consulting projects across various industries, serving clients such as Johnson & Johnson Diabetes Solutions, National Geographic, and NASA Education. Before founding Redwood Advisors, John served as a Business Analyst at McKinsey & Company.

Here’s a glimpse of what you’ll learn:

• [2:24] John Nantz shares how he transitioned into healthcare consulting and M&A
• [5:35] Redwood Advisors’ focus on value creation in healthcare
• [11:35] The differences and challenges in advising small, medium, and large healthcare companies
• [19:40] Common struggles of early-stage healthcare companies in aligning leadership visions
• [26:39] How M&A transitions reveal gaps in strategy, culture, and operations
• [30:47] Three major trends in healthcare: consolidation, value-based care, and changing physician demographics
• [39:02] Physicians’ roles as coordinators in a team-based environment
• [42:09] How healthcare companies can cultivate long-term value
• [48:17] AI’s impact on the healthcare industry in the coming years

In this episode…

Outpatient healthcare practices face unique challenges in scaling operations, optimizing efficiency, and navigating mergers and acquisitions. As competition intensifies, physician-led organizations must develop clear strategies to drive sustainable growth while maintaining high-quality patient care. What foundational elements set top-performing healthcare businesses apart from those struggling to grow?

According to healthcare management consultant John Nantz, aligning strategy, culture, and operational excellence plays a crucial role in determining healthcare companies’ sustainability. Many smaller practices lack professional management, making it difficult to execute long-term growth plans effectively. As consolidation and value-based care continue to shape the industry, healthcare leaders must implement governance structures, refine operational processes, and prioritize patient experiences to remain competitive in a rapidly evolving landscape.

In this episode of Transaction Healthcare, Zak Eisenberg sits down with John Nantz, the Founding Partner of Redwood Advisors, to discuss how healthcare organizations can position themselves for growth. John examines major industry trends, the impact of consolidation on healthcare providers, and the differences in advising small, medium, and large healthcare companies.

Resources mentioned in this episode:

• Zak Eisenberg on LinkedIn
• Merritt Healthcare Advisors
• Merritt Healthcare Advisors email: contactus@merrittadvisory.com
• John Nantz: LinkedIn | Email
• Redwood Advisors

Quotable Moments:

• “If you want to have an unusual trajectory, you need to be acting unusually.”
• “A well-defined strategy, culture, and operational excellence are the foundation of sustainable growth in healthcare.”
• “Many physician-led practices struggle because they lack professional management; alignment is key to scaling successfully.”
• “Patient experience isn’t just about treatment; it’s about every touchpoint in their healthcare journey.”
• “AI-driven automation will transform healthcare by reducing administrative burdens and improving efficiency for providers.”

Action Steps:

1. Develop a clear strategic roadmap: Define your long-term goals, target markets, and competitive differentiators to align your team’s efforts. A well-articulated strategy ensures everyone works toward a shared vision, reducing inefficiencies and misaligned priorities.
2. Invest in professional management: Hiring experienced executives in key roles can help scale operations and improve decision-making processes. Many physician-led practices struggle to grow because they lack the expertise to navigate complex business challenges effectively.
3. Prioritize patient experience improvements: Streamline administrative processes, reduce paperwork, and enhance customer service to create a more patient-centric environment. A positive patient experience drives satisfaction and loyalty and contributes to long-term business success.
4. Leverage data and analytics for growth: Use performance metrics, financial data, and market insights to make informed, strategic business decisions. Data-driven decision-making helps healthcare organizations identify opportunities for expansion and optimize operational efficiency.
5. Adopt AI-driven automation for efficiency: Implement AI tools to reduce administrative burdens, such as note-taking and scheduling, freeing up providers’ time. Automating routine tasks enhances productivity, allowing healthcare professionals to focus more on patient care and strategic growth.

Sponsor for this episode…

This episode is brought to you by Merritt Healthcare Advisors.

Merritt Healthcare Advisors is an investment bank with a unique focus on healthcare providers and their businesses.

Merritt leverages the healthcare industry expertise of its owner-operators, clinicians, investors, and advisors to develop surgical facilities that perform safe, efficient, and cost-effective procedures.

To learn more, visit https://merritthealthcare.com/.

Episode Transcript

Intro  0:00  

Hello and welcome to Transaction Healthcare. I’m Zak Eisenberg, Vice President at Merritt Healthcare Advisors. Merritt Healthcare Advisors is an investment bank with a unique focus on health care providers and their businesses. Transaction Healthcare is a podcast focused on addressing questions and concerns at the intersection of healthcare, transactions and business.

Zak Eisenberg  0:25  

I’m Zak Eisenberg, a partner at Merritt Healthcare Advisors, and your host for Transaction Healthcare, where we address questions and concerns at the intersection of transactions, healthcare and business. This episode is brought to you by Merritt Healthcare Advisors. Merritt is a full service investment bank with a unique focus on health care. Merritt leverages health care industry expertise of its own, owner operators, clinicians, investors and advisors to advise owners, physicians and entrepreneurs in the health care sector about maximizing growth and running successful transactions. To learn more, visit www dot Merrittadvisory.com. I’m joined today by John Nantz, who is the partner and founder of redwood advisors, an Austin based boutique management consulting firm specializing in growth strategy for outpatient practices. Redwood provides hands on strategic and operational support and capital to help companies create value and make a meaningful positive impact on the world. John has helped over 15 outpatient practices achieve above market growth and market leading multiples, and invested in two outpatient practices in 2024 as a core partner to accelerate growth by elevating operations and financial performance. Hey, John,

John Nantz  1:38  

how’s it going? Zak, really good man. Great to be here with you. Good to see you.

Zak Eisenberg  1:43  

Hope. Thank you for

John Nantz  1:44  

that bio. But that was great. You need to send that to me. I don’t know who wrote that, but that sound really good. Yeah, you

Zak Eisenberg  1:51  

like you like that, that intro, well, thank you for sending it. It’s appreciated. Someone

John Nantz  1:56  

on my team did a great job.

Zak Eisenberg  1:59  

Absolutely Well, John, I think that’s honestly a great place to start. I’d love to jump in and talk about your background. How did you end up as a management consultant, and how did you end up in this wild space of health care related to M and A and managing companies and advising them on how to manage their their business better tell tell me and the audience about how you ended up here. Yeah,

John Nantz  2:24  

thank you. I’ll try to do this briefly. So, so I actually started management consulting. Was my first job out of college, went to Stanford and did my undergrad and Master’s there and interned at McKinsey, got a job offer to start at the San Francisco office. Obviously, he was excited to stay in the Bay Area. So started my career there. And similar to a lot of kind of early tenure consultants, I did, you know several industries, health care was one of them. And also technology did some technology work and but anyways, health care sort of runs in my family. My my grandfather on my mom’s side was a physician. My dad’s a physician. My dad’s dad’s a physician. So it’s sort of, you know, health care is something that I’ve been really passionate about, but I always was more excited from a business perspective. So I ended up leaving McKenzie to do some research and after about two and a half years, kind of had my own book of clients. Just sort of happened serendipitously in a lot of cases. But anyways, it kind of came together. So that’s kind of where Redwood started. So I was at McKinsey, left to do some research, expected to go back since we started my own firm, and then once I was there, you know, healthcare was just became kind of our number one industry. We got some introductions to and we’ve been really lucky because we’ve worked with publicly created companies. So we’ve worked with bio script, which was the second largest infusions company in the country. They actually were merged later the number one non emergency medical transportation, motive care. She was talking to CEO a day ago, because we’ve done a ton of projects there. We did a $50 million cost reduction transformation, which was successful. So we work with some really big publicly traded companies that are on right different exchanges. We’ve done some private equity back companies, particularly at the larger scale. So we work with Ares private equity on a lot of their portfolio companies. So National Veterinary associates, unified women’s care, etc, building out these value creation plans. And then we’ve worked with some smaller companies, oftentimes physician owned, doing kind of lighter strategic plans, uh, workshops, etc, to kind of get them pointed in the right direction. So it’s been really this rich journey. We’ve had kind of working across the spectrum, and that’s where we’ve done, like I said, I think we said 15, I can, I think that’s probably an underestimate of how many projects we’ve done. We probably had 15 clients. We’ve done more than that in terms of number of projects. So we really, as you know, healthcare is not. You can’t extrapolate from in, you know, industrials or automotive or technology, there’s all these. Thing is really complicated, right? I always, I always feel this complex set of feelings when I meet someone who’s got some great idea for health care, that is, doesn’t have health care experience, and you just like, man, you know, you like, how much cold water. Very different, yeah, this, this bright eyed, enthusiastic Harvard MBA, right? So, or you just let them kind of figure it out on their own. But anyway, just, you know, it’s very unique. So, so I’ve done, I’ve done all of that, and we’ve done that last 10 years. I’ve been running Redwood for 10 years now, um, focused on value creation planning or strategic planning. Kind of longer term, where do we want to go? Right building a road map. So for your classic practice, it would look like, okay, look, I’m in these three states. We’ve got some momentum. We’re excited. So we would help them be like, Okay, well, what job, what states are you going to be in, and what MSA is, and what areas and how many physicians do you want to have in each of those areas, and how are you going to do it? Is it going to be a platform, or are you going to buy a bunch of guys are going to do de novos, and then what’s the capabilities that you need to be able to bring to support that so really helping them think all of that through. So we’ve done a ton of that type of work, and then we’ve done some transformational support work. So once I know the plan, I have to execute on it. That’s really complicated. So how do you do that effectively? What are the goverNantz meetings and the dashboards and the cultural norms that help you, sort of over time, be successful, right? Probably more complex than the strategic planning, actually, is the one thing I’ve learned that I’ve learned the last 10 years, the execution is at all times more complicated to actually make the system not the execution, but the system that supports execution. Getting that really dialed in is really critical and not trivial. So we do a lot of that work, and then there’s some other work we do. M and A work will help, kind of survey, provider, providers. Hey, like, who’s likely to leave kind of provider strategy. There’s other, like, smaller things that we’ll, we’ll do, but we have this really, really deep healthcare background. Let me say one thing to add to that, so that’s the redwood advisors piece. The thing we’re doing that’s really new is what we call Redwood Growth Partners, which is the kind of investing arm of our firm, and the background on this sack is we met people like you and folks at your firm. We went to some McGuire Woods conferences, some McDermott conferences. We started meeting some small companies that we legitimately just got really excited about. And what we realize is they’re they’re not a consulting client. Like, I mean, motive care has $2 billion of revenue, right? So he that CEO is not, is not thrown off by paying a consulting fee to help us do it. If I’ve got a ten million revenue practice, the consulting value prop is not the same. So we were figuring out, okay, how do we help? Like, how do we make this work? And because I know really smart folks like yourself, we started to say, hey, look, there’s like, a little bit of independent sponsor model play or private equity, where we go get a small group of investors and we would take some minority position, or potentially a control position, in these businesses to help them get to the next level and the next next level, because we don’t want to be a typical PE shop that’s going to go from one to two to three. And no criticism there. But when you got these small companies, that’s like, hey, let’s get to the next level. Let’s get to the next next level. And because we’ve seen billion dollars of collections down to 5 million, right? That’s a 200x difference, and we had clients throughout that journey. So we’re one of the probably small groups of people. We know what those look like, and so we can help you go from five or 10 to 20 to 50 to 100 to 250 to 500 to a billion, right? We know what those look like, right?

Zak Eisenberg  8:55  

Right? Because there are unique challenges at each each stage of growth. That’s a really interesting difference for you, John, that a lot of groups out there don’t have, and I just want to go back to the beginning of all this, of how you kind of ended up in the space I love that it’s a personal connection for you, it’s not not everyone in health care is is in it, because they have always had values that align with health care. And we were talking about this earlier, a lot of people are in health care because it’s a great business. Now, what you know, aside from that, what’s so interesting about your experience, because you spent so much time focused on health care in consulting, is that you do have this very rich, wide background, and you see a lot of the challenges that these companies go through, not only day to day from an operation perspective, but also from a transaction or M A environment or a macro economic perspective of how they are shifting as it relates to changes at the government level or with the economy. Company and all all of these different size companies, the $5 million practice, is going to have a much different reaction and toolkit available to them to be able to weather the storm, so to speak, versus the company with a billion dollars in revenue, they’re just fundamentally different, different organisms. So maybe we can just talk about talk about this a little bit. How has that influenced the way that you view advising and maybe also working with these few clients that you’re talking about, specifically these smaller clients or or the groups that are maybe a little larger, but haven’t quite gotten to the level where they’ve gone and raised capital, or they’ve gone through an M A transaction, and they’re thinking about how to, really, as you said, bring their company not just to the next level, but the next next level, and and grow it into, say, a regional player or or even a national brand.

John Nantz  10:59  

Yeah, Zak, there’s so much there. What angle do you want to get into that? Tell me what the what do you want me to speak on in that, in that neighborhood? Yeah, I’d

Zak Eisenberg  11:09  

say, I’d say what I’m getting at there is from a from a sizing perspective, how do you approach advising or working with these smaller companies differently than you say would with I think it was bio script you mentioned was one of the larger you have. How does that mindset shift for you? And how do you think about priorities differently?

John Nantz  11:35  

The great question so you’re basically saying, what’s different across these companies, yeah. So the challenges, yeah, yeah, the challenges, well, let’s, let’s, let’s talk about that. So, so if you started the smallest end, right, we’ll kind of like, walk through the journey. There’s like, there’s like, a few important, like, milestones, right that you see these companies go through. So if you’re starting at the smallest end, the most notable feature is that they don’t typically have professional managers. Is hugely important. So if I take a billion dollar company and I take a 10 million practice, probably the most salient difference, both in terms of superficially like you can see the difference, but also it has huge implications operationally. Is a ten million they might have a practice manager, they might have a bookkeeper, right? And those guys can be super competent. I don’t want to take anything away from those people, but they are typically not CEOs. They are typically not CFOs. They’re typically not CEOs, but they’re not typically not CMOS, and they don’t think like that. They don’t have the skill set. So in practice, what’s happening is some of those doctors, whether it’s a board or a subset of them, are acting like quasi CEOs, right? Quasi executive leaders, and they don’t have the time or the skills to particularly do it that well, right? So at that small level, what you got is you have a lack of expertise, right? Typically, the opportunity at that size is massive. It’s really, really funny how this works, because at that level, if you have your stuff together, right, and you have a good practice, doesn’t need a great practice, it’s a good practice. And you want to grow, and you want, like, you can do amazing things at that scale, right? But they very rarely have the strategic acumen or organizational knowledge, etc, to really do much. And that’s so that’s what you sort of see. So that’s that level. Then around like 25 to 50 million, you’ll start bringing on professional people, right? But it’s a little more bare bones, because you can’t support a multi million dollar budget of staff. It’s like, Hey, I don’t have that level of margin, but you start bringing people on,

Zak Eisenberg  13:45  

and this was in revenue, right? Yeah, collections, yep.

John Nantz  13:49  

And then probably around 150 to 200 you’ll start to see like, okay, you’ve got some version of the full suite, but what you might not have is, like, the technical experts or some or those really advanced capabilities, and then that’s when you get up to the billion dollar mark. You have the full executive suite. And hopefully, if the companies will run, they’ve invested in these areas of expertise that can really make a difference, right? Could be population management, could be, you know, governance, could be operational teams. So that’s kind of the journey from kind of provider led to early management, then full management, and then I’d say that full, kind of like, you know, deeper capabilities, and then, and then each of those have their own challenge.

Zak Eisenberg  14:35  

Yeah? Let’s, let’s talk a little bit about the that helpful. Yeah, the small and the medium size, because I think our audience mainly fits into those buckets. What are those? What are some of those challenges? You know, either when they don’t have professional managers, or they’re transitioning to having a few professional managers, those challenges change. But what are the most. Common challenges you see across all the companies that you you speak with.

John Nantz  15:05  

Yeah, let’s, let’s take those lower pieces. And I know we were talking about this before we jumped on, so I’ll probably bring on the thing that I really want to talk about. So the three, there are kind of three things that I think are actually pretty important across the spectrum, although I think they’re probably more important the smaller piece strategy, culture and operational excellence, we’ll say each of those. So if you get, if you get to the small one, they might have a ENCODE, encoded version of that, like they have, might have, like, an implicit sense of what their strategy is, but it’s not typically articulated. So when I typically talk to a sub $20 million practice, most of them don’t have, even though, even the rudimentary components of a strategy, right, which is fundamentally, of like, what’s your winning aspiration? What does success look like for you in three to five years? How are you going to get there? And where do you want to play? Like, what geographies, what types of issues, what types of customers, what types of payers? I almost never see that. And then, and then, when you talked into the more it says. Concerning thing is, not only does it not exist, but when you talk to individual providers, they don’t have the same opinion, right? So one guy might say, I don’t think anything should change. I’m happy as a clam. And then another guy might say, Hey, we’re doing something amazing here. We should really grow and there, well, that’s not compatible, right? And then this guy, because they don’t have a CEO, he might try to, you know, open a new office and hire new people, he might go off trying to pursue his vision. And this guy kind of resents that, because that cost money. And he’s like, Hey, why are you reducing our profitability? I just want to, I’m happy. Why are you making my life complicated? So I guess that’s one. I mean, that’s not even that’s an observation. It’s also a recommendation, which is, even though people don’t have it, if someone was listening to this, I’d really encourage you to have one, right? Have those conversation. That’s one of the things that we will work with practices on. We will do workshops with physicians. It typically is extremely impactful to say, Hey, what are you guys trying to achieve? What’s your winning aspiration? What, Where do you want to play? What is, how are you going to win, right? What makes you different than the guys next door, right? And get alignment on that. So that’s strategy, right? So if you just want to keep doing and, you know, we all know these guys, like, there’s like, the three person cardiology group in LA, they’re they’ve done it 30 years. They’re happy. They’ve made a ton of money. They don’t want anything to change. Like, God bless you. That’s amazing. They’re a great part of the United US healthcare system. They’re not going to go through a transaction, right? So if you are more, if you’re if you’re happy with what you have, to just enjoy your life. That’s amazing. If you want to do build something bigger than I think a strategy is like the first thing to start with, second thing, culture. So there are two that we could spend a lot of time on this, which we’re not going to do, but I’m going to give two high level pieces on culture. So to me, the bare minimum is, what are your values as a culture, as a culture, right? And everyone always kind of says, Well, we know, I love that E line, and like, Oh, why don’t you write it down, right? It’s probably going to be more impactful, right? We learned this as human civilization, right? We had the oral history tradition 5000 years ago, and at some point we started writing things down. This is what human beings started to do. And there was a reason for that, because it helped drive standardization, etc. So we’re following that same evolutionary path in these organized organizations,

Zak Eisenberg  18:59  

right? I’m, I’m sensing a theme here, which is with earlier stage companies. And I think this applies outside of healthcare as well, but earlier stage practices and companies often one of the main things that they’re struggling with is that they don’t have total alignment on the most important things amongs, the most important people at the company, yeah, the owners, the physicians, the people who are driving the future of the company, and that starts with strategy, and then culture. And I’m sure that also kind of trickles into the last, last point very well, yeah, but is that a fair, fair summary? A little bit,

John Nantz  19:40  

I mean, it’s a really good summary. I mean, look, I mean, and I don’t want anyone to listen to this and feel bad, it’s totally normal, and there’s nothing wrong with it. But the typical practice, as we all know, is they have a monthly or quarterly meeting, and all the doctors get together and they look at the budget, and they talk about where they want to open a new office, and they talk. About whether the new machine they bought is working right. And they talk about, you know, how’s the office manager doing? And then Susie, the front desk person, sucks. We should probably let her go. And that’s the end of the meeting, right? That’s, that’s business management, and that’s not business management. That’s like administrative review, is what I would call that. And fine. And I’m just saying if you want to grow, if you want to do something bigger, if you want to double in size or more, you’re going to need to do something more than that, right? Like the normal course of affairs is not to double in size. So if you want to have an unusual trajectory, you need to be acting unusually. You need to be doing more than the average bear is doing. And so having an articulate strategy, having a culture is really important. And let me talk about culture. Let me finish that thought. So you need to have your values, and it’s fine like we consult in this space. We have companies we’re investing in patient centered. Okay, sure, that should probably be on the list for most people, right? And you figure out what those values are, and then here’s the here’s the more important thing, define the value, and then I think this is the most important thing that you need to do, define the practices that support that value, right? So if I say I’m patient centered, that means one thing to use Zak, it means one thing to me. It means one thing to Susie, it means one thing to Dr Bill, right? Dr Bill might say, oh, patient center. I’m going to tell him the truth, and that hurts, right? Who know? And then Susie’s gonna say, Oh, I gotta treat everyone super nice, right? So anyways, everyone’s gonna be defining them differently. So one thing we really recommend is overall and potentially by role, depending on how big the company is, come up with some examples of what does patient center look like at our company, right? So patient center might be, hey, when someone comes in, we offer them some water. Hey, it looks like you’re you know, hey, welcome. We’re going to be with you soon. Would you like some water, right? You need to know where the restroom is, just these little things, something concrete. It’s concrete. And then the front desk person is like, okay, part of my job is offering water, right? So the provider might be, um, hey, we’re being patient centered. If we get something back, that’s bad news, right? We reach out in person. We don’t text people. We don’t email and say, Hey, I got bad news for you. You You did break your leg or, you know, we got a bad result on this thing, you know, texting over emails, like we do everything in person, if it’s bad news, that’s a practice, that’s a value, right? So that’s where this starts to get really valuable, right? So I really encourage people to do that, and we do this religiously, right at our at the companies where we’re at, because it’s just like, we just think this is the right way to do it. And then the third one is operational excellence. And it’s funny, because health care is so operational, you think that like this would be top of mind for people, but it’s really easy to and I’ll give you a really, I’ll give you a good example. Is something I very passionate about. When people come in, they have to fill out all these forms, right? Very standard, 12 pages, right? And I always ask people, when was the last time you guys looked at what you’re asking people to fill out? Do you even look at this? And a lot of times people like, Oh, we don’t even know who came up with it. No one in the company even knows where this came from. Why the 12 pages? They don’t know what’s on the pages. It’s like, Well, that just took him 20 minutes. So you just said you’re patient centered, and now this lady spent 30 minutes on something. You don’t even know what’s in the packet, right? So that’s a great example of, okay, don’t do that, right? So like when we get involved in companies, that’s one thing we look at, because it’s if you think about the patient journey, that’s a huge part of it. So take the time, get doctors, sit down, look at the forms you’re asking people to fill out. Have counsel available, and just say, hey, what do we actually need? Because four pages a lot better than 12 pages. I mean, we don’t want to delete something if you need the information, right? But this is this bizarre thing where it’s just this accumulation of, you know, what we should ask about their psychological history. And I’m like, okay, look, it’s an urgent care company. I mean, what are we going to do about that? Do you really need to have a page on their psychological conditions? You’re not even going to do anything about that. I mean, that, like, don’t ask about something. You’re you’re not even going to do anything with it. That’s terrible. They just told you I’m depressed, and you’re not even acknowledging it. Don’t, don’t. You’re not going to do anything about don’t ask, right? So that’s just a basic example. Yeah,

Zak Eisenberg  24:46

so John, one of the other things that I wanted to ask about, and I was just thinking about as you were speaking, is, so these are challenges that exist, whether or not companies are looking to grow or to. Go through a transaction, or really anything that they want to do. It exists for them. When it becomes really pertinent is when there’s friction, where people want to do something very material, like grow the company two times in the next year. They want to double the size of the company, or they want to go through an M and A transaction or raise capital to accelerate growth. I wonder of these, and I know you’ve consulted on some transitionary periods as well relating to M and A or you’ve invested in some of these companies. How? How quickly do these issues percolate to the surface with these small to mid tier size companies, when they start talking about these bigger goals and aspirations, is it almost immediate, or does it take them a while to get there? It sounds like it’s the first thing that you think about, but sometimes I know based on our past conversations. Sometimes when you get to the table, they’ve already been trying to do something for six months or a year, or whatever it is. Maybe you could just talk about a talk about that interplay a

John Nantz  26:12  

little bit, yeah. Like, when do these issues sort of come to the fore? Yeah? And

Zak Eisenberg  26:16  

also, how, how important are they from the other side of the table? Because I know you’ve also consulted for buyers, let’s say, or, as you said, you’ve consulted a private equity firm and its portfolio companies about their thought process related to these things. And and I’m sure M and A or their development department comes into play from that aspect.

John Nantz  26:39  

Yeah. Okay, great question. So the way that I would think about this is, is, like, what we’re talking about, the strategy, the culture, the operations. There’s more to say, but let’s just leave it at those three for now, or like, the fundamental building blocks of growing a high performing organization over time. So most investors, although not all, shockingly, but I would say most are cognizant of these. And so when they buy a company, you know, like the larger companies that work for like, they have values, right? They figure that out. It’s on their walls, right? It’s part of their onboarding process. They have a company day, right? That’s one thing you get with scale. You get that type of standardization, right? And the reason for that is because it is really helping build growth. It’s helping to support growth. So among investors, it’s really common. Among physician own groups, it’s not, it’s really uncommon. And I think that’s one of the reasons so many of those providers. I mean, some providers just don’t want to grow, which is totally fine, but of the subset that do want to grow, I candidly, I think most are not that successful. I’ll just be honest. That’s been my observation in the industry, and there are exceptions to that, but I would say most, and then the question becomes, why? It’s because they don’t have the fundamental ingredients that support growth. You can’t really grow if you don’t have a strategy, you can’t really grow if you don’t have a culture, you can’t really grow if you don’t have operational excellence, or you’re not trying to improve over time in a consistent way. Like, those are the things that big companies do, right? So if you don’t have those, right? Like, you know, it’s like everyone wants to grow, but it’s like, you don’t have the components in place. So that’s why I would just say, when investors get involved, they’re going to do that for you, right? And that’s one of the reasons that they that they’re doing what they’re doing, and you’re doing what you’re doing, right, because that’s the expertise they have. And so, like, there’s no company over $100 million in collections that doesn’t have some version of a strategy, right? I mean, I’ve never seen it of an investor. Now, there might be a family owned company that doesn’t have strategy, and I have seen that. But, you know, this is pretty st standard fair, so that’s why I just say, Look, if you want to grow, I mean, this is one thing investors do, and I know your audience, right? We have a lot of physician groups that listen to this. You know, I’m being as clear as I can be, like, that’s the kind of thing that you really should have, right? And we have worked with physician own practices on stuff like that. And I think it’s really helpful.

Zak Eisenberg  29:13  

Yeah, it’s interesting that you you’ve seen this so consistently, because it’s one thing we observe as well. And I’m just curious, just zooming back out to big picture, over the last five to 10 years, it’s become an, you know, longer couple decades, it’s become even more important for smaller businesses, medium sized businesses, to really start doing these things or be thinking about them, because it’s becoming increasingly competitive and difficult to operate in health care. So maybe you can, you can just talk about how you see the health care industry from an operational perspective, really whatever perspective you want, having evolved over the last decade, what’s driving this? Change. How is it impacting your day to day? Not just the day to day of your clients, but your day to day. What are you talking about? More and then how do you think it impacts? Because, after all, the podcast is transaction health care, we have to talk a little bit about consolidation, which has been accelerating in the health care space. How do you think that evolution has impacted it? So there’s a lot to unpack in this, yeah, this question, and there were a few questions there. So we can, we can just start with the first

John Nantz  30:33  

All right, okay, so I think the first question was just for like, what are those big trends the last 10 years? How

Zak Eisenberg  30:42  

do you see the space having evolved over the last 10

John Nantz  30:47  

years? So what I’m going to do is I’m going to take that question and I’m going to answer in a way that I think will be germane to the tip that what I think is probably the typical listener, right? So as I think on the last five to 10 years, the three trends that I do think are super important in terms of shaping the industry, but also I think have implications for the listener, are consolidation, value based arrangements. And then I would say there’s a there’s a little less crisp, but I think just the physician population, right? The makeup of it, the priorities of it, etc, right? Quality of life issues. I mean, as I think about the next five to 10 to 20 years, I think that is going to become very, very important, right? This is not your typical 35 year old doctor. Is not the same guy now, then the woman, the typical 35 year old female doctor now is not the same as the the guy back in the 1980s very, very different profile in psychological and there’s variation, obviously, but we’re talking about the the typical profile, and it’s very important. So we’ll take each of those. So in the consolidation one, right? You have these two important trends, and so I think all most doctors have seen this. Probably the most important one is that hospital systems have been absorbing right a lot of physicians. So I forget what the percentage is, but it’s definitely, I think, more than half. And it didn’t used to be that way, if you go back to the 1980s or 1960s that was actually quite, quite uncommon. So these hospital systems gobbling up physician groups has been a massive trend. That’s consolidation piece number one, and you also have these bigger physician groups that sometimes span a city or a state, or even multiple states, that focus on one or multiple related specialties, right? So the percentage of doctors who are in like, a sub 10 person practice has gotten smaller and smaller and smaller and smaller, and you have more and more people in hospitals and more and more people in these physician groups. So what the implication is is, I mean, that’s exactly why you do what you do, right? Because a lot of physicians are like, Hey, this is the new reality. Do I want to get a local hospital system? Do I want to go with a bigger physician group like and that’s a transaction, right? And that’s where we where you guys are so helpful. So I think it’s just important to be cognizant of that, like, that is the environment we are in. The one nuance that I would throw in there, and this is, like, early, early, so this is, I’m not speculative, but it’s very early stage. But a lot of doctors, I’m talking to a lot of industry leaders the hospital one is getting interesting. There are groups of doctors that are now leaving the hospital, right? I would say in general, the satisfaction levels of physicians in hospitals is not particularly high, right? So, and there’s a variety of reasons for that. There’s the bureaucracy. I can’t, I mean, you know, the bureaucracy is crazy. They don’t, they don’t. They can’t control their schedules. They don’t, necessarily they can. Maybe they can’t control their staff, right? Stuff that’s just basic in your own practice, or even if you work in as part of a larger practice, right in a hospital, that might not be the case. So what we’re seeing more of is groups actually leaving the hospitals, forming their private practices outside, or joining these larger practices. I think that’s like an interesting thing that’s going to be potentially happening more more moving forward. So that’s Trend number one, value based, you know, we talked about that for 30 years, or how, I even know how long it goes back, but we’ve been talking about it for a long time, and we are really, really seeing that now. So, and this is where direct, directly related to yours business, act like, I know, when we talk to a lot of investors, not all of them, but particularly as you get higher, like a higher scale deals, right? They’re taking that lens of, okay, we’re in a value based world. Is this business going to do well in that context, right? Because you might have a business super, super profitable, but it’s like, yeah, but they’re charging more than the market average by a significant degree. They’re, you know, we’re. Not sure the outcomes are that much better. So there’s some risk, like, like, you know that that’s not, that’s not where you want to be, right? Sure, yeah. So I think that’s a huge thing to be cognizant of, like, as a physician group, like, hey, how do we participate in that? And, and just having that in, you know, in your, in your, in your mind, in your mental model. And then the last one is the physician population. So you know, probably the biggest trends are, obviously a lot more women are now physicians than than used to be the case. That’s, I think, monotonically gone up. And also, both because of that shift in gender, but also independently of that, the things that physicians are valuing are changing. So we’re seeing more concern about quality of life issues. We’re seeing more concerns about, do I, like my colleagues, is this mission oriented, right? So it’s a little less transactional. Like, hey, how much money do I get? What do you want from me? It’s a little more like, hey, I want to take my Friday afternoons off, and I want to believe that we’re doing the right thing for the patient, and blah, blah, blah, right? You think

Zak Eisenberg  36:03  

this is generational? Or do you think part of is also driven by the increase in ratio of patients to physicians? Because I think that’s part of it too, is that the number of physicians has not grown alongside or grown fast enough to keep up with us? Population growth, that’s another aspect that’s putting more pressure on the physician community. But yeah, both of those, both of those trends, ring true to me. I’m just curious in your mind how much weighting you put into you know, gender versus generational versus this, this macro dynamic of population trends.

John Nantz  36:46  

Yeah. I mean, I think it’s literally all of them. Like, is true that you know that the female physicians on average value different things in the male physicians on average. So that’s just true if you look at the data. So that’s one component of it. I actually think that generational piece might be the more important part of it, which is, because you’re seeing male physicians do this, it’s not, you can’t just completely explain it based on gender. It’s also very generational. So the millennials, right, are now kind of like enforcing them, and then they’re just a very different, very different cast of characters than the than certainly the greatest generation are the baby boomers, right? At least the ones who went into medicine, right? So that’s hugely important. Then, yeah, the burdens put on these guys is pretty significant, and that’s why a lot of guys are going to conceive medicine, right? So, yeah, I don’t have a solution to that, but I do think that’s kind of like, you know, the I’ll tell you, from an industry perspective, the an important point is that the mid levels are also doing more than they used to, right? So if you go back, I mean, you pick a pick a specialty, right? Like you pick anesthesia, right? You know, you now have an anesthesiologist might be residing over, right, a few anesthesiology assistants, right? Sort of, I think, was it CNA, right? I think is a title, so,

Zak Eisenberg  38:14  

right, right. That’s new, or physician assistant, yeah. And I’m curious your thoughts about why that’s happening, and you could take a few different angles to this, but what I’m interested in is really from a business operational efficiency or excellence perspective, how does this help these companies grow and really, you know, achieve better outcomes for their patients, while also growing profit? Because, after all, lots of these businesses are for profit businesses, but even nonprofit businesses need to think about being sustainable. You know, of course, there’s not an endless supply of money for failing hospitals. As we see, there have been a number of bankruptcies and closures in the last decade as well. So curious, yeah, curious. Your

John Nantz  39:02  

thoughts on that? Yeah. I mean, you’ve got a shortage of physicians, relative, right, relatively less, like you were talking about. So, so I think that’s kind of the macro context that’s that’s driving this. And I think there’s all I think there’s also more of a recognition that not everything that people come in for is that complicated, right? I mean, that’s just the reality there. I think there used to be a little bit of this ivory tower, like, you have to have an MD to, like, tell someone they have a cold, right? And that’s really not rooted in reality, right? And it’s not that’s not needed. It’s just sort of a away thing.

Zak Eisenberg  39:38  

Technology has also changed technology a lot, you know, taking blood pressure, etc, as much, lots of machines and physicians offices are auto, automated, so I can do quite a bit of this.

John Nantz  39:50  

Yeah, and I think that’s a big, I think that’s a big part of that. And so I do think you’re looking so I do think the role of physician is less like, you know, being the. Front person for every patient care and almost being the coordinator, right? Of a care team where they’re where they’re coordinating the team, because the obviously, those guys have to have a reporting person. That’s how that works by law. So like, you’re in charge of these people, one and then two, ostensibly, you’re taking the more complex issues, right? So your pas might be able to knock out a lot of stuff. And you like, you know, they might say, Hey, I don’t know what’s going on with this one, right? And so, for example, one business that we’re invested in is Orthopedic Urgent care company, right? And I think our provider staff, which are nurses and and PAs, can do a lot of it. And then there’s times that people come in, they’re like, I am not sure about this. And that’s why we have medical directors, right? We have orthopedic surgeons, where we can text in pictures, or even get them on Zoom and say, Hey, can you take a look at this? Is this broken? Is this right? So my point being, you’ve got coordination, and then you’ve got complexity. And I think that’s what those doctors the new world is, what we need them to focus on, and those lower acuity issues, right? Are being handled by other people,

Zak Eisenberg  41:10  

and that’s a great transition point to the next part of this topic, which is so we’ve talked about how we’ve gotten to this point, but you start to talk a little bit about what will be important for creating value in the future, not just creating value, but also being operationally effective for these businesses over, say, the next decade. And you, you’ve already identified a couple of trends that you think are key. But what are say the top three things that you think about when, when speaking with, you know, potential clients or current clients about what they need to be focused on to be really successful into the future, and that could set them up for growth, or, you Know, an eventual transaction, but ultimately creating value for themselves, for their company, and for their and for their customers, their patients.

John Nantz  42:09  

Well, I mean, I so, I think we did kind of, I think, I think, I think the the answer that I want to say is, is the first thing that I said around or a little bit on strategy, culture and operations, like, yeah, I would encourage people to, like, if you said, Hey, what should I go do? I would say, look like, those are the three things that you need to go spend some time on display whatever’s

Zak Eisenberg  42:29  

happening at a macro level, no matter what for small, medium sized companies, gotta get those first three things down and adjust them accordingly based on the macro environment. So maybe with that, let me, let me Zak,

John Nantz  42:44  

which is like, what’s new, right? What’s maybe, what’s going on in the industry over the next five to 10 years that people should be cognizant of, right? That in addition to those ever green best practices, like, what are some new things that, like, are worth keeping your eye on, right? So maybe we talk about that. So I think the three things are, I mean, I’d probably say, like, I do think value based care is really important, and I think it’s going to create a lot of opportunities, right? And we can talk about some examples of that. I do think technology. I mean, I know we’ve had the EMRs and all this stuff, but as we look forward, I do think that that’s going to be probably more important. So we can talk some examples of that. And then the third one would just be like, I really believe in it. Like, when I look at the guys who are winning at some with some scale, like patient experience, right? And I think so many practices, they don’t, they like, literally, don’t even think about it. They just, people come in, they fill out some forms, like I said that. People have no one. I mean, I’ve done this exercise before. I’ve literally walked around. I’m like, who put this together? Who designed this? Who knows what’s even in this? Yeah, and mostly have no idea. It’s like, okay, well, that’s the you’ve asked 1000s of people that fill something out that no one’s even looked at, right? That is not good patient experience, right?

Zak Eisenberg  44:04  

So I think, I think that’s true, by the way, even of large hospital systems, health care is not known for its patient experience, also in other industries called customer experience. It’s not something that health care is very good at, even other industries, user experience, right? It’s just it’s not core to which is so interesting because so many like we were talking about earlier, so many groups profess to be patient centric, but they don’t really think about the patient’s journey. They think about treatment. And of course, practices are great at treating their patients. But that’s different than the experience of being treated exactly,

John Nantz  44:46  

exactly for sure, and and I think people really underestimate how much it matters. And I know when we look at companies, particularly for an investment perspective, like we really look at that, we look at, you know, not that. Have to be excellent at it. But is this part of their cultural DNA? Like, we’re trying to get this right, even if they aren’t getting it right. In practice, they’re trying, like, is, if there, if there’s an indifference to the patient experience, like, that’s a really bad thing. Like, I think in the long run, that holistic patient, and then they’ll look oncology right. I mean, there’s some things you look like I’m sick make me better, right? And those people are completely focused on the care and the outcomes, but most medical treatments, right? Don’t fall into that category, right? So I think that that patient experience is really a key differentiator, right? And I’ll tell you why. We’ll talk to root cause. So why is it the way it is? Bad habits, and I think there’s, there’s also a litigiousness in health care, so there’s people are really worried about getting sued. So there’s a little bit of a cover your ass philosophy that’s behind that. And I get that like, I’m not saying anyone should do something that puts you at significant legal risk, but there’s a lot of room between what a lot of people are doing and what’s totally fine from a legal perspective. And I think people completely it’s like a lot of way these forms that happen is, well, some one person, one time, didn’t fill something out, and nurses like, oh, we have to ask everyone about their maternal father’s history. This is an urgent care center. I This is a form I filled out recently. I was like, This is insane. Why are you asking me what my maternal, you know, grandfather’s medical history was? I, you know, I haven’t I have a knee pain, right? I mean, it’s just insane, right? And so I think it was this just accumulation thing. And no one goes back and says, wait, wait, wait, zero based budgeting. We’re starting with zero. What do we need? What do we need? What do we need? And that’s how you create great customer experience, right? That’s how the tech

Zak Eisenberg  46:50  

companies do principle first, as opposed to, it’s what we’ve always done, which, right, is a good place actually, to John, that’s oftentimes what it feels like throughout health care. Lots of organizations are, well, it’s always been this way, or it’s been this way a long time. There’s a lot of inertia. One question I’ve been ending these these podcasts with recently, because it’s been all over the news, and it’s going to impact every industry, including health care. Whether the health care industry likes it or not, is, how do you think AI is going to impact this industry within the next two years? Even? Yeah, that is a really, really good question. Did I stop you there?

John Nantz  47:42  

Well, there’s just a lot to say. So it’s just, it’s, it’s figuring out, what, what, what, okay,

Zak Eisenberg  47:47  

what, what is. Oh, no, we I got it. I just want to, I don’t want to, like, I know, I like to know. It’s a big question. Let me narrow it a bit. What is the, the most widespread impact that you can think of one example that you think will in your opinion, and again, I’m asking you to predict the future will be nearly ubiquitous in the industry within two years.

John Nantz  48:17  

Well, I think that two years is the problem, because, as you know, health care just moves very slow. And so something that should take two years, take 10 years. I mean, I will say, I will say one thing that I’ve been really impressed with, that I do think, I think is going to be adopted at scale, in time. I don’t know it was two years, but fundamentally, like the note taking, right? There’s a lot of notes. There’s a lot of forms. When you go and look at doctors, they’re like, scrambling, taking notes. You might have a physician assistant just sitting there taking sitting there taking notes. The reality is that there are already technologies that are pretty darn good at that, that are actually in some cases better, right, and obviously cost a lot less money. So I think that form filling, I think that the note taking, right, which can take a huge amount of time, it’s one of the it’s one of providers least favorite things to do. I think that is going to be automated. Now, I don’t know if that’s going to be two years, but I do think that that’s going to happen. I do think that could happen quite quickly, and I think, and I think that will be very beneficial for everyone involved.

Zak Eisenberg  49:15  

Well, that’s a great place to end. Thank you,

Outro  49:15  

and that wraps up another episode of Transaction Healthcare. Hit the subscribe button to get notified when we release new conversations. And if you are someone interested in learning more about these topics, visit us@merrittdivisory.com or send us an email at contactus@Merrittadvisory.com