BUSINESS VSP Ventures: Care-Focused Alternative for ECPs in Transition By Mark Tosh Monday, August 12, 2019 12:23 AM RELATED CONTENT Seeking Solutions Private Equity-Backed Firms Seek Bigger Slice of Health Care Pie MyEyeDr.: Valuing Doctor-Patient Loyalty EyeCare Partners: A Doctor-First Approach Acuity: Launched in 2017, but Growing Quickly Keplr: A Change of Name, But Not Philosophy Vision Source Next: Building a Community of Support for Independent ODs Pearle Vision’s Ignite: Providing a ‘Strategic Conversion’ Program ‘Demystifying Private Equity’ Seminars Launched by Review of Optometric Business As private equity-driven deals in the eyecare sector seem to occur with more frequency, options for eyecare professionals who are seeking other means to address their ownership or financial structure are increasing, also. Pearle Vision launched an “Ignite” franchise option last year, and VSP Global introduced VSP Ventures this past spring as a way to facilitate practice transitions for eyecare professionals—to name just two of the transition alternatives. In March, VSP Global announced its intention to expand its retail strategy, which included the opening of three brick-and-mortar Eyeconic locations and the creation of the brand new VSP Ventures unit. (The Eyeconic stores and the separately announced plan to acquire the 725-location Visionworks are under the umbrella of VSP Global, and separate from VSP Ventures.) VSP Global said the creation of VSP Ventures "underscores a broader company commitment to provide a variety of options for [ODs] at every career stage and in every kind of practice setting—from privately owned, to dispensary managed, to VSP-owned and operated," and that the new unit will facilitate practice transitions for doctors looking to retire or evolve to a different model." “We launched VSP Ventures to be a care-centered, care-focused alternative in the market,” VSP’s Steve Baker told Vision Monday in a recent interview. Baker was named president of VSP Ventures shortly after its formation. “All of us have been watching private equity very carefully, and although no one has a crystal ball, we saw two very large dynamics [occurring],” Baker said. “Depending on where the sale and re-sale of private equity assets goes, that could have possibly a concerning outcome for us at VSP. But probably more so, we had doctors coming to us to asking whether we would consider being a purchaser of their practices,” he explained. Another key factor in the formation of VSP Ventures ties to the demographic changes ahead for ECPs. Baker said VSP estimates that—using a “rough retirement age of 65 to 67”—almost 8,000 doctors in its network will enter that retirement window in the next three years. “That’s a big number,” Baker said. “And as we consider what used to be the traditional transition model—the young associate with cash and sweat equity works over the years and then takes over the practice business—that’s just not sustainable for that number of doctors and even more so it doesn’t really fit with the desires of the younger “millennial doctors.” In one of its first moves, VSP Ventures established a joint venture with Rosin Eyecare of Chicago to acquire two practices in Nashville, Tenn., Shanks Family Eye Care and Coley and Coley Family Eye Care. Those deals, which closed in June, are going well, Baker said, and VSP Ventures will work with Rosin to continue to expand and take advantage of other opportunities throughout Nashville and Tennessee. The two groups share core beliefs about comprehensive care and full-scope optometry, he said. He noted that the joint venture may have additional deals to announce in the near future and that any moves Ventures makes in Tennessee will be via its joint venture partnership with Rosin. Baker said there are three important underlying factors in the mission of VSP Ventures. One, is the company’s overall commitment to invest in the profession of optometry and being fully committed to its long-term success. “We’re not going anywhere, so long- term [investing] is the key,” he said. “We will not flip and sell in aggregate. When we invest in a practice, we are not going anywhere. We are the long-term partner of that doctor, and we are not seeking to operate the practice so it’s financially attractive to someone else.” This kind of thinking is quite different than the philosophy of most PE-backed groups, he noted, and it also “sets the character and ideology of how we make investment decisions and how we choose to run the practice.” A second part of Ventures’ mission, he said, is to preserve a practice’s legacy. Ventures will not change the name on the door or the brand, “and we are committed to driving it into the future,” Baker said. “That’s very, very important for many doctors…. We are not going to turn practices into some sort of national brand.” A third key element of the Ventures’ approach is to invest in patient care, which draws upon the “founding ideology of VSP,” Baker said. He said the firm intends to partner with Ventures’ doctors to ensure that the right tools, operational resources and capital investment are all available. Of the acquisition opportunities that are under consideration, Baker said the breakdown is about 50-50 between doctors on the cusp of “the 24- to 36-month glide slope” to retirement and younger, perhaps millennial doctors “whose heart’s love is patient care.” The terms of the program call for Ventures to acquire 100 percent of a practice, and then the selling ODs will work under a professional corporation, Baker said. He noted that there is “no second bite of the apple” for the sellers of the practice because VSP Ventures has no intention of reselling the business.