Will The Rehab M&A Market Reflect The Condition Of Our Economy?
This week, Paul welcomes back Steve Windwer, CEO of Cypress Health Partners, for our ongoing Delphi Series of interviews. Steve gives his perspective as an acquirer about the relationship between Rehab M&A, and the national economy as a whole.
Full transcript
Generated from the episode audio and lightly edited for readability.
Good afternoon and welcome to another episode of Paul Martin's crucial conversations. We are continuing in our deli series and today I am so excited to have with me Steve Winder. Now, Steve is a physical therapist and a chiropractor. He's the CEO of Cypress Health Partners. And as you know, Cypress Health is a private equity-backed company that is based out of Brainree, Massachusetts, and they currently have over 120 clinics in five states. Steve, it's great to have you with us today. Thanks, Paul. Great to be here.
Really appreciate it. So, let's jump right in to the three main and key deli questions. And the first of which is if we're looking at the current trajectory of the M&A landscape, what do you think are some of the real key factors that are driving that? Well, I think the landscape really mirrors the economy, right? I mean, the economy has slowed, interest rates have risen. I think it's put a lot of people on pause and you know with insurance rates flat right they're not paying us anymore and the other factor that's involved is you know postcoid I think value change there's been some value changes for people especially you know on the employment side they're looking for a lot more balance a lot more flexibility and so I think those are the key factors right now that are driving it and so based on this kind of current economic climate and you know what we're describing as a downturn in terms of numbers of deals etc.
The million-dollar question is how long does this continue before we see an upturn? Yeah, I mean I don't have a crystal ball. I wish I did. I think what I'm seeing right now, what I think a lot of people are seeing right now is slow, steady improvement, which is sort of mirroring the economy. I think the further we get away from the pandemic, the more that helps us. What we're definitely seeing is that the demand for care is at an all-time high. And you know, we just need to be really thoughtful about how we meet that demand through talent acquisition, through virtual care and so forth.
I think the marketplace is definitely searching for solutions for access to care for care that provides great experience and great outcomes. And so I think we're very focused on that. But I see slow steady improvement and that's certainly you know kind of mirroring what we're seeing locally. Yeah. You know, you bring up such a great point with demand and I continue to ask myself the question of how many industries do not have high demand and we are one of those industries that regulation reimbursement now economic changes etc but we always have had going for us and what I think we will for a long time to come is that demand and obviously there's a race to you bringing the supply to meet that demand.
So yeah, really good point. No question. So if a business owner is looking to potentially sell during this current, you know, slight downturn, what are some of the strategies that you might recommend for strengthening their position in this current market? So I think anytime you know you see things that are slowing down or difficult, you always got to look inward. And so for my advice would be focus on giving patients the best possible care. Focus on and these are our themes but focus on access, focus on outcomes, focus on experience.
Those things are always going to be incredibly important. Certainly right now you have to focus on retention and engagement with your team. You have to develop a comprehensive understanding of your business. I mean, that's where, you know, your team comes in to help businesses really understand their KPIs and what's going on within their business and how they can they can improve and really build a great foundation and focus on that foundation. That's really what they should be doing. Yeah. So, great points. Great points. Generally if we look over the next three to five years in this industry what do you see as some of the greatest challenges and also some of the greatest opportunities coming our way?
Yeah. So I think on the challenges side certainly the economic environment is challenging. It's challenging for everybody and so we have to be cognizant of that. The employment pool is incredibly challenging right? I think the statistics show something like we lost something like 20,000 physical therapists in the in the workforce. You know so talent acquisition has to be top of mind for everybody. One of the things that's a little bit challenging for someone like me and maybe someone like you is sellers expectations. You know, folks that are looking to sell still think it's three or four years ago u when the world was different.
And so, you know, getting expectations to be a little bit, you know, kind of more in line with where, you know, life is today. And I think another challenge is technology, trying to keep up with all the changes that are happening technologically. You know, virtual care, you know, RTM, AI, you know, there's just so many technological changes happening at a very rapid pace, especially if you're a small company with not the kind of resources. It's it's really hard to keep up. On the on the opportunity side, I think, you know, there's still tremendous opportunity.
We're very optimistic. Value based care. There's an incredible opportunity to really focus on less episodic care and more preventative care. And who better to do that than PTs. You know, I think opportunistically for smaller providers, you know, finding a partner that can help you grow and help your staff grow. And so I think there's a lot of opportunity to really push PT first forward and really make a difference and hopefully have a have an effect on MSK health. In particularly reducing the amount of time it takes for patients to get care, reducing the amount of opioid addiction, reducing the amount of unnecessary surgeries, which right now I think it's around 50% for orthopedic surgeries.
I mean it's just you know personally I'm very non-drug non-surgical until you need it and if you have to have it and that's my personal philosophy. It has you know how I live my life and so I'm really passionate about that and I hopefully I you know kind of convey that to all my staff and team and really moving us to the forefront of that is just an unbelievable opportunity and it gets me out of bed every day. Yeah, for sure. For sure. You know, you brought up a really good point in terms of valuebased care.
I've been hearing rumbles of valuebased care since I got into this industry in 1989. And you know, back then it was almost like a threat. If we now look at other part, you know, other health care sectors and what those other health care sectors are doing for patients, the value that they're providing and what they're getting reimbursed compared to the value that we're providing and what we're getting reimbursed, I still have hope that there will be enough great minds, guys like yourself, that will go to bat for this industry.
And there'll be a day then an you know a physical therapy visit whether it's 30 minutes 45 an hour or an hour and a half it'll get reimbured at $200 or $250 minimum. And I you know I just that's my hope there is a there yeah there is a real issue on you know the value that is perceived in the marketplace for us and the value that we actually deliver and it's remarkable because the effects are tremendous. I mean you know you can talk about the opioids and the unnecessary surgery.
Literally we're saving lives if we can push more people towards conservative care. Literally saving lives. What where's the value there and so you know there's a lot of problems in healthcare I think there's an opportunity for us to do our part to really have make a make a big difference absolutely you know as a current acquirer in this you know very unique time in the evolution of you know the rehab M&A industry is there anything unique and specific that you're looking for in potential partners that you may not have looked for a few years back.
I think it's probably the same for us. It It's always cultural fit first, you know. We want and we want partners. We're not look we're never looking to just acquire somebody and have them exit the business. That doesn't make any sense to us. It's not our model. It's not what we do. We're specifically looking for partners whose care model really emphasizes great access, great outcomes, and a great experience for our patients. And if we can find the right cultural fit with shared values, u then we can make the business model work.
Yeah, absolutely. Absolutely. I can I can hear through the walls, Tom's culture, structure, price, and the best deals that we have done, and I would say I'm sure it's the same for you. When you have that cultural fit, it seems like everything else just follows you know, follows suit with a great deal. No question. No question about it. So for a physical therapy business owner who may be considering selling in this current time, what advice or insights would you have for the concerns that they may have?
Because we get a lot of calls, hey, we don't want to sell our business in this environment. And you know, we try to jump up and down and say, but what advice would you have for those folks that are kind of looking at this with a very cloudy picture of this? You know, it's the same thing when I took on a partner. It's the first thing is find a partner you can trust. A partner that's like-minded PT led I think is important. And really has patient care at its forefront.
You know, if it's all about how much you bill and how many visits you see and how much you collect. It's, you know, for us that's obviously it's important because there's a business to run, but first and foremost is what's your patient experience? How good is it? What kind of outcomes are you getting? And how much access do you provide for your patients? And those are our tenants. If you if you start there and you find a partner, they going to have resources that are going to help you grow or they should have you should look for a partner that has resources to help you grow.
Meaning, they should have a fully built out talent acquisition team. They should, you know, be up on technology and have a tech team that can help you grow your business. They they should, you know, u be up on continuing education and getting into value based care and, you know, trying to move the profession forward. So, I think there's tremendous opportunity for folks that if the time is right that they're looking to partner with other groups. You know, we're it's not like, you know, they're that we're not paying anybody for their businesses anymore.
We're, you know, you still have to buy the business and partner with folks. And so, I think if you get it right up front, meaning with the right people and the right culture and the right fit, then you know, you find a way to make the rest of it work. Absolutely. Absolutely. Well, Steve, I will tell you, there is a lot of talk of culture fit out there, and obviously we do everything we can execute on making those cultural fits. But the real proof is when you've talked to somebody that has partnered with a company two years ago, three years ago, five years ago.
And I do have to because I just had a conversation with somebody yesterday that is part of your group right now. And somebody that we had worked with. And one of the things he said to me was that Steve has done everything that he said he would do. You know, is it perfect? Nothing's perfect, but it has been a phenomenal ride and I just had nothing but good things to say about, as you're describing, that culture fit. And so I applaud you for that. I really do.
More than you can possibly know. Seriously, when I looked for a partner to take on the number one thing was integrity. Do what you say you're going to do and it's one of our core values. And so, to get that kind of feedback just made my day. Thank you so much. Seriously, that feels great. No, that's great. That's great. Well, Steve, hey, look, you've done a phenomenal job at packing a whole lot of information into a nice tight, I think, great discussion that we had today.
So, I just want to tell you how much I appreciate your time and the value that you've given to our listeners today. Paul, thanks so much. Really appreciate it. And and like I've said before, appreciate everything you've done for me and for the profession. It's, you know, you're an icon. So, thanks for having me on. Thank you. Thank you. Well, boy oh boy, it's hard to even it's hard to even take a breath after I've been called an icon. But what I will say to all of you is thank you for listening today.
And if any of you have any questions for myself or Steve, click below, let's talk. We'll get you in touch with Steve or we'll answer the questions that you have. And have a great day and I look forward to talking to you in the very near future.
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