Today’s Advertiser helped make the production and delivery of this episode possible. But the themes expressed by the guests do not necessarily reflect the views of Inside Reproductive Health, nor of the Advertiser. The Advertiser does not have editorial control over the content of this episode, nor does the Advertiser's sponsorship constitute an endorsement of the guest or their organization. The guest's appearance is not an endorsement of the Advertiser.
How the heck can independent REIs compete against private equity giants in the fierce bidding war for fertility clinics?
Dr. Crystal Chan, Co-Owner of Markham Fertility, explains how, shedding light on the competitive landscape of reproductive medicine and female entrepreneurship.
Key Takeaways this episode:
How she found her two business partners
The decision-making authority often lacking in academic REIs (Motivating her shift to private practice)
Her journey of female entrepreneurship (The unique challenges she’s had to overcome)
The disparities in fertility care access (How Markham Fertility plans to increase accessibility)
A peek into the private equity-owned market vs. the independently owned market (And the implications for patient care)
Why REIs owning equity is crucial for practice sustainability and patient-centered care.
Get your FREE list of over 450 independent fertility practices across the USA by clicking on the link below. Brought to you by MidCap Advisors.
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Transcript
[00:00:00] Dr. Crystal Chan: When you own equity, you're afraid and fear makes you work harder. So it's at every layer. So I used to have incentive when I worked at an epidemic site. And I'll give you an example. So let's say in that world, if a patient complained to me, Hey, Dr. Chan, I didn't like this about your clinic, even though I had incentive, I didn't have an ability to really.
Significantly make change in the institution. So I would say something along the lines of, I'm so sorry that was your experience. I'm gonna, take this feedback, send this feedback up the chain. And most of the time I felt like nothing would really happen. Versus when you own or co own a clinic, when a patient complains about something, I jump on it. I say, what was the issue? Who was the issue? I'm sorry you had that experience. I will change it.
[00:00:46] Griffin Jones: How many independent fertility practices are there now? Thanks to support from MidCap Advisors, Inside Reproductive Health has done the work and compiled a list of over 450 fertility clinics across the USA indicating if they're independently owned, part of a fertility network, if so which, or part of an academic system View the full list by visiting:
https://www.insidereproductivehealth.com/unitedstatesfertilitypracticeownershiplist2024
[00:01:31] Griffin Jones:How in the blue heck do three young female REIs compete against the private equity giants in this bidding war going on for fertility clinics? To outdo them and acquire a fertility clinic of their own. Dr. Crystal Chan explains how. She explains how she found her two partners. She explains what decision making authority academic REIs often lack and what particularly pushed her away from academics and into private practice. She shares her thoughts on female entrepreneurship, the disparity that she and her partners decided to tackle, and the challenges they faced in doing so. She talks about the private equity owned market versus the independently owned market. She talks about their vision for increasing access to care.
Hear what she has to say about remaining independently owned, and why it's so important that REIs own equity, and why owning equity is more effective than other types of incentives. I love it when audience members have hot takes and then become guests on the podcast. I hope that's you, and I hope you enjoy this conversation with Dr. Crystal Chan.
[00:02:30] Announcer:Today's advertiser helped make the production and delivery of this episode possible for free to you. But the themes expressed by the guests do not necessarily reflect the views of Inside Reproductive Health, nor of the advertiser. The advertiser does not have editorial control over the content of this episode, and the guest's appearance is not an endorsement of the advertiser.
[00:02:50] Griffin Jones: Dr. Chan, Crystal, welcome to the Inside Reproductive Health Podcast.
[00:02:54] Dr. Crystal Chan: Thank you. Thanks for the invite, Griffin. I'm a huge fan of your show. I listen to it on my drive to work every day. It gets me, inspired and ready to take on the day. So it's a real honor to be here and I'm excited to hear my own voice, on my drive to work one day.
[00:03:08] Griffin Jones: That is very kind of you. I appreciate when people in the audience become guests on this show and we have a few mutual friends, Dr. Nat being one of them, but we but I don't know a lot about you and I'm going to change that today. I know just a little bit about you and that you are an anomaly in this millennial REI world of purchasing a, an existing fertility practice independently owned by physicians there's very few that have done that in the U.S. and perhaps even fewer in Canada in recent years, and so I want to understand what's going on. What happened even prior to asking why? Your practice is Markham Fertility Center, and for those that aren't familiar with Markham, that's I guess now you would call it a first ring suburb since Toronto aided suburbs 25 years ago, so Markham is like a very large suburb. First ring suburb of the fifth or sixth largest metro in the continent and there was a practice there. You are now one of the owners. How did that happen?
[00:04:18] Dr. Crystal Chan: Yeah, so that, that goes back to the, our origin story is the Modern Markham Fertility Center, MFC. So I personally started my career in academia. I was at Mount Sinai Hospital in Toronto in the core of Toronto as a clinician investigator and an academic REI or RE. So that, that had been my dream and I thought that I would live and die for that job. I, when I signed on as an academic RE, I never thought I would leave. All my mentors who I love dearly still work there and I did my fellowships there and I stayed on for a job.
So in total, I was probably at this academic facility for six to seven years as an attending, eight to nine years if you include fellowships. About five years in, I started to feel this itch, the five year itch, which is to leave and go private. And I think it started with this very simple notion of wanting more control over myself and my environment.
You hear that a lot from people that leave. There were a few triggers firstly is the idea of being your own boss. I think a lot of us naively go into medicine thinking, this is a job you do to be your own boss. And the greatest irony is that in academia, you discover very quickly that not only are you not your own boss, you actually don't only have one boss, you have many bosses, and lots of bosses that you are accountable to, for research, for committees.
Teaching. And I feel guilty a bit saying this because these mentors and the bosses I had I still very much, respect them and were mentored by them. But there's always this feeling of like publish or perish, do the teaching, do the committees and feeling of you're never doing enough. And so it got a little bit tiring and some of these tasks weren't bringing me that much joy so that there was this desire to go be my own boss. The second thing was COVID. I think that COVID illuminated a lot of cracks in the system. And COVID coincided with the entry of PE into the fertility space in Canada.
So COVID made me realize just how little control I had over my work environment. And I'll give you an example. So I was the lead physician at a satellite clinic of this academic practice. And I guess the hospital wanted to close down my site. Because of COVID to save money and fine. That's obviously a very smart business decision and now as a business owner, I probably have to do the same thing, but I wasn't consulted as the person that was the lead physician at the site, as the person that kind of built The site and the referral base and all that.
[00:06:50] Griffin Jones: So just timing wise, was this like at the height of the this is in March of 2020, or is this more like after 2021, something like that?
[00:06:58] Dr. Crystal Chan: This was the summer of 2020. Summer of 2020.
[00:07:01] Griffin Jones: Okay.
[00:07:01] Dr. Crystal Chan: I only knew the site was done when they had packed up all my stuff in a box and say, hey, someone closed your office.
[00:07:08] Griffin Jones: And this was not a hiatus because of the pandemic. It was the office is closed.
[00:07:12] Dr. Crystal Chan: It was after the hiatus, because of COVID, and an intentional decision of the business to close the office without consulting.
[00:07:20] Griffin Jones: But the idea was that it was not coming back online.
[00:07:23] Dr. Crystal Chan: It was not coming back online. It hasn't come back online. It wasn't viable, I was just looking for an alternative. Where could I care for my patients, do the research at the pace I wanted to, and have some say over operations? And I wouldn't leave that cushy, secure, stable academic job in my mind to be an associate of a private clinic, particularly I was a little afraid of the reputation of PE backed clinics or networks, as I was just, I think physicians are raised to be wary Of big corporations and the prioritization of profits over patients, there was this fear of mine that if I joined as an associate somewhere PE backed, that I would be forced to see a certain number of patients at a certain frequency, that I would be incentivized or asked to, convert a certain number of patients to IVF, and then in my mind, that environment would be worse than academia.
So I knew my next step had to be MD owner of either a de novo clinic or what I like to call a turnkey clinic, which is what we are. And I knew from the type of person I am, I'm social and gregarious, I'm a bit of a socialist, that I couldn't be a sole proprietor. It's just not my style. I like to have friends and I like to trauma bond with friends, so I knew that I had to, go into a group partnership with other doctors and I had to find them.
So you know, Eduardo Harrington, who I'm sure we both adore. He did the podcast with you, many podcasts, and he talked about when you're looking for a practice, what to pick. And he said, try to pick a rocket ship going to the moon, not like the sinking Titanic, right? So you want a proven business, good track record of projections of success in this crazy marketplace.
So then I have to find the perfect partners, entrepreneurial REs to partner with me, find a turnkey rocket ship clinic. So easy, right? Really easy. And the other problem, as you know from, In the province of Ontario, there's a publicly funded IVF system, and only existing brick and mortar clinics get funding. If you build a de novo clinic, you can't get access to that funding as it currently stands. So we also have to find work. Add
[00:09:22] Griffin Jones: that to item 93 of how confusing the Ontario funding for IVF is.
[00:09:29] Dr. Crystal Chan: Exactly. So I had to find this perfect storm, and I think what I realized in life is it's better to be lucky than good.
And quite literally at that point, Merck and Fertility and my amazing partners, Dr. Mavis Garcia and Dr. Marta Wise fell into my lap. So the story was that MFC had been around for about 30 years. It, by volume, it's, in the country, it's probably the 10th or 11th biggest IVF clinic. It's the northernmost IVF clinic and lab in the greater Toronto area, in this metropolitan Toronto area.
So it has access to all the north smaller towns. It was started by Dr. Mike Vero, who was this larger than life character who had a waiting list of a year. Like one of these guys with the guru status, right? Cult following of nations. He started MFC as a sole proprietor and hired Dr. Garcia, Dr. Wais as his associates. Check them out on their podcast called My Fertility Podcast. So these women are influencers, they're superstars, and just incredible physicians. Lucky to work with them.
[00:10:22] Griffin Jones: And so they were already working with Dr. Vero.
[00:10:24] Dr. Crystal Chan: They were exactly. Five years ago, they were trucking along, amazing business, and they thought naively before PE came in that one day if they worked hard enough, Dr.
Vera would be like, hey guys, I'm retiring. Here's the business. Peace out. I bestow you my business. But of course, that didn't happen. And what actually happened was his desire to retire that came around COVID time, he intersected with a feeding frenzy of PE acquiring Canadian clinics. He got multiple PE backed offers for MFC, and he was ready to retire.
So at the end of 2020, he came to Dr. Garcia and said, look, I'm sorry. I know you wanted to take over. I know you were preparing to take over. She was assistant medical director for years. But look, I got these insane PE backed offers and I'm sore. So at that point, Dr. Garcia, the phenomenal woman that she is, said, just give me one chance. And he's no way, doc, associates can't buy clinics at this level. You're, this is a different playing field. But he conceded and he let her tell, or they told Dr. Wais.
[00:11:31] Griffin Jones: So was Dr. Garcia a partner at that time? Did she own equity in the practice? Neither Dr. Garcia nor Dr. Weiss owned any equity. Dr. Vera was 100 percent equity partner.
[00:11:42] Dr. Crystal Chan: There were naysayers. So at the time, we were already aware of the multipliers that were involved and no independent physicians in Canada, to my knowledge, had ever acquired a clinic at those levels. And we had been brainwashed with that notion that it's impossible.
PE has too much money and leverage. They knew from the books that It was actually not that big a risk. The numbers made sense. The people made sense. The clinic made sense. The goodwill, the referral base, the public funding. And they approached me. This is the good thing about having friends. So we were friends.
So they approached me. I was not quite mid career, in that cusp of mid career with a good referral base myself and a good reputation. And the three of us women are immigrants, our first generation immigrants with just so much grit and like sheer will. That we just knew we could do it.
We were a bit scared, but we knew we could do it. So we bet on ourselves and found a bank that liked the numbers and shared the vision and we acquired the business. And no looking back. We just bet on ourselves and guaranteed the business to ourselves and now this is, here we are with the new MFC.
[00:12:46] Griffin Jones: So are the investment banks the same as the commercial banks in Canada for this purpose? You've got RBC, you've got Bank of Montreal, you've got Scotiabank. There's only a handful of options on the commercial side in Canada, generally speaking, isn't it? And so is there only, is there also only a handful of options? For did you go through a commercial bank or did you go through an investment bank?
[00:13:08] Dr. Crystal Chan: We went through one of the big four commercial banks amazing, Scotiabank. We we have a banker there that is like a friend, an ally, and he and his team really saw the vision. There were other commercial banks that declined, but we found a, a banker and a bank that really saw the potential.
[00:13:28] Griffin Jones: I can't help but think about this, Chris, when you mentioned this, going into the interview, you mentioned that, you all had found a way to compete with the multiples that other clinics were, or excuse me, that other firms were paying for clinics. And I thought why would a multiple be so high for a single doc practice? And it's almost there's, Dr. Vero couldn't have gotten a multiple like that without having Dr. Garcia and Dr. Weiss work for him. So it's almost like, in that part it worked against you a little bit, didn't it?
[00:14:00] Dr. Crystal Chan: So I obviously can't disclose the amount that we acquired the clinic for, you know as well as I do, it's not always about dollars and cents when you negotiate a deal, it's also what value you bring. We gave Dr. Vero huge value. He would have to pay his dues for, what, three to five years if he had sold to a PE backed network or a firm. He didn't have to do that with us. He worked three to six months. We were confident we had volumes and the trajectory that we would be okay once he left. I remember his last day, he wore bicycle shorts or, sorry, basketball shorts. And then he just peaced out. And it was a nice transition for him, I think. There were obviously, there's always, when you're negotiating such a big deal, there's tension. But I do think, I guess you could interview him, but I think it gave him that freedom. We also took care of his staff, his legacy, his patients.
He really cared about his patients and his staff. And that's the big thing. I think a lot of people that sell to PE they, they worry more about the succession, so we gave them other than just dollars and cents. And, I'm not going to get into details of the multiplier and this and that, but we gave them other type of value.
And I would say on an emotional level, Griffin, I, that's a good interpretation but I would say a good business is a good business and the numbers make sense and they still make sense and we're doing better than any projections. And so to have the opportunity. To have an established clinic, established personnel, very minimal turnover, public funding, reputation, geographic positioning in this metropolitan area, all those things, to me, have been more than worth the price. It's the best decision I've ever made.
[00:15:43] Griffin Jones: I did not know Dr., I do not know Dr. Vero, I know of him and I knew of him, and I believe when I first became acquainted with him, he was a solo practitioner. Was he a solo practitioner prior to Dr. Garcia?
[00:16:00] Dr. Crystal Chan: Yeah, he, lone wolf kind of guy, he's from the generation of sole proprietors.
I think that it's, I'm not sure of that. That era is gone, but yes, he was a sole proprietor from beginning to end. He had several iterations of MFC, starting at a smaller location for a smaller lab, and then finally, expanded to this whatever 10, 000 square feet or whatever it is that we have in the medical building now. But he was always on his own, with associates, with no equity.
[00:16:26] Griffin Jones: Okay was Dr. Garcia the first associate or other, he had other associate RAIs over the years?
[00:16:31] Dr. Crystal Chan: He had others, but she was probably the most tenacious, loyal, present, and highest volume partner, and he was, the only one he had ever designated as assistant medical director.
[00:16:43] Griffin Jones: And Dr. Garcia and Dr. Wais were the only associates at the time when he was retiring and selling?
[00:16:49] Dr. Crystal Chan: Correct. Oh, I should add there were also two affiliates defined as people that had their independent practices and then plugged into the lab for their IVF. And they still, and those relationships still exist.
[00:17:01] Griffin Jones: But it was you that approached Dr. Wais and Dr. Garcia, not the other way around originally. They weren't looking, hey, let's get one more person to buy this with us. You were looking around at what might be a good oh no.
[00:17:13] Dr. Crystal Chan: It was a perfect alignment. They were looking in a hurry, and I was open to the possibilities.
[00:17:23] Griffin Jones: You may have answered this, but how did that, how did, were you just always in these sort of conversations together? But how did you align so quickly? How did you come to find each other?
[00:17:31] Dr. Crystal Chan: Dr. Wais was my favorite fellow ever. She did fellowship at my academic site. She was just a superstar fellow, and she went off to MSU, but the funny thing is I encouraged her to go there.
I said, hey, there's this clinic in the north. It's like a diamond in the rough, go there. So she what, we were friends. We were staff and fellow, but then we were actually friends. And then Dr. Garcia's husband is was friends, is friends with my ex husband. So it's a very small world. So there's a little bit of, pre-connection before all this happened. So we're all friends.
[00:18:03] Griffin Jones: So then you shop around at banks, you find one that is a good partner, you agree to a deal that worked for you, worked for Dr. Vero. And then you mentioned succession was a handful of months and he went out in basketball shorts. But tell me, how did succession go? Like from when the deal was inked to when Dr. Vero's out shooting hoops, like what happened in between then?
[00:18:30] Dr. Crystal Chan: There's a funny story right after acquisition. So you know, 30 minutes into acquiring the business, the ink wasn't even dry. We get a phone call from a very reputable. And then we also have a very senior RE that works, with a big PE backed network, and he called us to congratulate us. And then he followed by saying, are you interested in partnership? So we were like 30 minutes into being, business owners and the first informal offer to merge or to be acquired came in.
So we tried to, put the blinders on to all that was happening with PE consolidation around us and we, the first hundred days of acquiring the practice was to understand the business and to amalgamate the business. Actually, the original organizational structure of MFC was Very archaic. How it was is that the MFC was actually Dr. Vero's practice, plus the lab, plus biochemistry. And then the other associate doctors ran their own practice. They ran their own HR, they ran their own management their own equipment, things like that. And then they would plug into the lab or pay MFC for the use of the IVF lab.
So that obviously was not a modern way or efficient way of functioning. So the first hundred days was the MFC. Nose to the grindstone, just transforming what we call old co MFC to the new co amalgamating everything under the same umbrella, everything under the same leadership, HR management, all of that. And it sounds like not a big deal, but it is a big deal. You have to renegotiate contracts basically as a new employer for, half the staff. You have to do this all while being very cognizant of people's feelings. They are grieving the loss of Dr. Barrow. Some of them went back with him for 20 years, right? So there's this transition and nobody likes change. We don't like change or the staff don't like change. So that was hard. Lots of tears, lots of stress. In that transition, but we did it. So tell me
[00:20:28] Griffin Jones: more about the details of this transition. This is like switching payroll companies or HR software or your EMR or what else?
[00:20:36] Dr. Crystal Chan: Switching payrolls is switching your boss, your direct report. So for example, a nurse that reported only to Dr. Garcia, On Monday, now on Tuesday, is an employee of MFC and has to report to the HR department of MFC. Whatever you're used to, your culture, your, how you get things done in your little sphere, changes when you report, start reporting to somebody else. Yes. Payroll had to change direct reports had to change. We had to redo the whole organizational chart.
[00:21:04] Griffin Jones: I'm talking with Dr. Chan about keeping independent practices thriving in this era of consolidation, but how do you know which fertility centers are still independently owned? Many of you have asked for a comprehensive list of fertility practices that shows who owns each of them.
We heard you. Thanks to support from MidCap Advisors, Inside Reproductive Health has done the work and compiled a list of over 450 fertility clinics across the USA, indicating if they're independently owned, part of a fertility network, or part of an academic or hospital system. If you're an independent practice owner that wants to find your people, if you're an industry side person that wants to map your customers, if you're a fertility network that wants to check your own list, You can download this list for free. View the full list at
https://www.insidereproductivehealth.com/unitedstatesfertilitypracticeownershiplist2024
[00:22:00] Griffin Jones:And what did you find to be the biggest challenge in doing that?
[00:22:07] Dr. Crystal Chan: People get comfortable in their roles and people get comfortable in what they can control and who they can control what they can't control. So there were a lot of growing pains and, a lot of, we spent a lot of time talking to staff, getting their feedback. The feedback almost always was, you guys are changing things too quickly.
It was fine. Why are we doing it different? And so just to draw people back to the, what the vision is, and we did a lot of visioning, and mission statement development with the staff. We actually had a retreat about that, to say, look, guys, we have old CO, out of necessity, from a business standpoint, we have to transition to new CO. Let's not make this about, this nurse versus that nurse or, don't be too granular. Let's talk about what the vision is for NICO. What is the vision as clinic and, we can talk about what we came up with as a vision, but let's focus on the vision and everything that we do. It's to get us closer to that, that, that goal, that mission.
[00:23:04] Griffin Jones: And you are getting people to buy into the vision. Remind me of when the deal closed. Was that 21?
[00:23:12] Dr. Crystal Chan: Yep. 22, mid 2021. Summer of 2021.
[00:23:15] Griffin Jones: We're now recording in May of 24. And three years. So in the beginning, you had that sort of you, you're a lot changing quickly. 3 years later, is it still a lot changing quickly?
[00:23:28] Dr. Crystal Chan: I think as a group of partners, we're always looking for what's next. We're very hardworking. We all strive to be the best. We really want to be the best. Excel in this marketplace. So yes, we're always looking for what's the next opportunity, what's the next project, how can we do better for our business, how can we do better for our patients, our staff.
But I would say the frenzy has settled down. I think that first 100 days was really the most difficult and now it's fun, Griffin. So I think when we first started, it felt a bit like we were David against Goliath. Goliath being the peep for as confident as we are. We were, there was a little bit of fear, can we compete, in the marketplace?
So in the past three years, not only have we survived the loss of the headliner, Dr. Biro, we have replaced him and we've grown 20 percent in volumes and referrals and in our socials and our reputation, our staff satisfaction score, our patient satisfaction scores. So we have really done really quite well in overcoming these challenges. So now that fear has been replaced. By excitement about what's next and this feeling that as an independent, privately owned, doctor owned clinic, we have more agility. And now I think of our independence and our, we don't have to report to investors. We just report to ourselves, our patients, and our staff. I think of it as a competitive advantage because it lets us be nimble and agile and You know, make a quick decision about what our next project is and just go for it.
[00:25:03] Griffin Jones: Are you hiring doctors?
[00:25:05] Dr. Crystal Chan: Yep. So we have a, we hired, we're able to get one more associate, the amazing, Dr. Kenji. That was a year and a half ago, and we are having, getting another one joining this summer. And yeah we're looking for more. We definitely have the referrals to accommodate at this point, probably five or six.
[00:25:22] Griffin Jones: Do you have a partnership track for the new docs coming in?
[00:25:26] Dr. Crystal Chan: Yep. So that's something we are developing. We, there isn't, I will say that's very early stages, but I do think, we, we've seen that when doctors have skin in the game, they perform better. I think that no matter what incentive plans don't work as well as actual true equity ownership. So that's something that we're looking into. And we have a really, We just really settled on a very strong leadership team. We have a gentleman named Mark Evans. He's our managing director. And we have a clinical director named Allison Gilmore.
Combined, the two of them have run four Canadian fertility clinics, essentially, with about 40 years of combined experience. With this current leadership, we're perfectly poised to think about recruitment and how we secure that next generation of doctors and partnership track and, partnership modeling is something we're looking into, but it's not refined yet.
[00:26:18] Griffin Jones: I think Mark and I correspond on LinkedIn sometimes, and I think it was him that I found out that Dr. Viro had retired and that you all had come, I think even before Dan had mentioned it to me and something you said that incentives don't work as well as actually owning equity, why is that the case?
[00:26:38] Dr. Crystal Chan: When you own equity, you're afraid, and fear makes you work harder. It's just, it's at every layer. I used to have incentive when I worked at an academic site. When, and I'll give you an example. Let's say in that world, if a patient complained to me, hey, Dr. Chan, I didn't like this about your clinic.
Even though I had incentive, I didn't have an ability to, to really, Significantly make change in the institution. So I would say something along the lines of I'm so sorry. That was your experience I'm gonna take this feedback send this feedback up the chain and most of the time I felt like nothing would really happen to be honest Versus when you own or co own a clinic when a patient complains about something I jump on it I say what was the issue?
Who was the issue? I'm sorry. You had that experience. I will change it it in my previous life, I had incentive, but it wasn't my mission to make the clinic the best possible place it could be for patients. In this life now, with equity and skin in the game, I feel like MFC is my baby. I can say for my partners, MFC is also their baby.
We share this baby, and we want the baby to be the best baby it can possibly be. And every single piece of staff feedback, Patient feedback resounds with us and we do want to make a difference for it. I think that's the difference and I'm not saying that incentivized associate doctors don't work hard. They do. They work hard for themselves, their patients, their families, but it's just different. We work hard not only for those Entities, but also to build up MFC to make it the best it can be.
[00:28:13] Griffin Jones: Think of how cool of a t-shirt that would be. Crystal equity equals fear . I think I don't know if the doctor community would buy it so much, but the entrepreneurial community, they would eat that up. Equity equals fear. I can just see like value-tainment making those types of of t-shirts. But I, it, and you're right, it does. So I wanna talk about the. The percentage of equity and the percentage of fear, because I think that a lot of private equity back groups would say that is correct, equity does equal fear, and so if you own less equity, you have less fear.
You get that there's some sort of, maybe there's a J curve where there's a benefit to having a certain amount of equity and the right amount of fear, but after that, it's all stress. And so I'm interested in how you would respond to that, but I'm also interested in, I've thought about how much fear does, how much equity does someone have to have the appropriate amount of fear? And what we're really saying with that is responsibility, that they actually take that sort of ownership. Would they do it at 1%? Would they do it at 5%? Does it have to be 20 or greater? I it's, so talk about that, that, that percentage of equity and fear.
[00:29:24] Dr. Crystal Chan: Okay, so I think there is a benefit that the three partners here are equal partners.
So I'm not sure if it's an exact percentage or just a feeling that you have an equal skin in the game and your friend and your sister is depending on you and you're depending on her and vice versa. So there's this real, again, here's the socialist in me, this equal partnership thing does breed that. So I really don't know if it's a numerical percentage. I think 100 percent is too much. I just, I'm not worthy. To all those sole proprietors of the path, I can only imagine, although back then it probably wasn't as competitive, but just to have that 100 percent of responsibility in yourself, that's a lot.
So I think that's too much for a lot of modern REs. I don't know anyone who really gets out of bed wanting to be, like, the 100 percent boss of a fertility clinic anymore, so I think equal partnership. With, I don't think it's two partners, three partners, four partners, five partners makes much of a difference, but I think that sense that you're in the game, you're playing as a team, it's I like to give this analogy that we're like a Super Bowl team, like the Kansas City Chiefs, like Dr. Garcia is the quarterback, I'm like the tight end, and I'm like, Because we're sharing, and we're in this team together, and we have the same vision to make it to the end, to get to the ghoul, she knows when she throws that ball, I'm going to be in the end zone, and I'm going to catch that ball. So I think, the socialist in me likes to say that maybe it's not so much the percentage but the Spirit.
[00:30:52] Griffin Jones: That analogy hurts as a Bills fan. You're from Toronto, Creslo. Toronto's supposed to back Buffalo. It dug a little bit deep, but unfortunately if you had used the Bills in that analogy, the analogy wouldn't work as well. I'm sorry to say. When you were musing on the areas for opportunity, the areas for growth, and you're reflecting on what are the biggest opportunities for the future, what answers did you come up with in those reflections? What are the biggest opportunities in the coming year or so?
[00:31:22] Dr. Crystal Chan: It's very timely that you ask me this question. So we, I think like never before growth is on the agenda on the minds of, all fertility clinics at this point. We know it's a growing industry. We know that in North America, we're probably only 1 percent of people that need IVF are actually accessing IVF.
So we know there's a lot of opportunities for growth and also, advocacy for patients and access. So one thing that we really are. Working on or struggling with as independent owners right now is how do we grow and whether or not we build a new clinic and lap at a different in a different town, a different city. Do we grow by growing the capacity of our headquarters or do we grow by literally planting a flag in a different city or township? and building a new IVF lab. If you look at what the private equity backed clinics are doing, a lot of them, the de novo clinics, as well as established clinics, are doing that. And it's very interesting, and I think it comes from the fact that Moving to
[00:32:31] Griffin Jones: a new city? You're saying moving to an entirely different province or state?
[00:32:37] Dr. Crystal Chan: Or city, to build a different lab, just to spread their footprint. So if you look at PE, it's a short term agenda. For they're buying revenue streams, they're buying profit streams, and they're hoping to exit in a certain amount of time, pretty short term, usually about seven years, and with a margin to show for.
So I think there's much more of a mandate to improve the, increase the footprint and build clinics and amalgamate sites and just have more IVF labs, more IVF sites. But if you look at independent proprietors The interesting thing is the biggest clinic in the GTA, the highest volume clinic in the GTA, owned by a single proprietor, only has one lab, one site.
So the question is, if you don't have to show the investors what you did, is it better to build out your one site and do 2, 000 IVF cycles there? Or is it better to build another site and do 1, 000 and 1, 000? The second you leave your headquarters and you build another IVF lab, you have personnel to worry about, you have staffing, you have HR.
You have risk, you have all these operational costs that you have to multiply and compound. Again, when PE is coming in and they're endowing X number of millions of dollars to a group of physicians, they have to do something with that money, they have to have something to show for, investments to show for, but as a team, An independent clinic, we're not sure that's the right move. What we know we want to do is improve access to people in the north of Ontario. It is frankly unfair. So there are about 16, 17 clinics in the greater Toronto area, up and around, and there's nothing up north. And that's not fair. And our patients from the north have to drive nine hours to get here. It's absurd.
So this is definitely passion over profit here, as we figure out how to organically, sustainably expand And address that, that volume in the North, North of Ontario that needs to be serviced on reserve, off reserve, just, North Ontario.
[00:34:39] Griffin Jones: And reserve refers to people, First Nations people, with, here, would either be called Native American reservations or Native American territory. And which is, Which there are multiple of in North Ontario and just very like rural areas and I don't know if rural is the right word.
[00:34:56] Dr. Crystal Chan: That is the right word. Oh,
[00:34:57] Griffin Jones: but it's farmland even disappears, like a hundred miles north of Toronto, it's like it's towns that are quite isolated even from each other and they're very low population centers. So you're thinking of putting an IVF lab?
[00:35:11] Dr. Crystal Chan: No, definitely not worth thinking, but just improving access and hubs to, to people in the North, it's a necessity. It's a necessity. And if you look at where the PEBAC clinics are going, they're just going more core, more central, more business, metropolitan areas, right? Because that's where the volumes are. So they're not going to attend to sparsely populated areas. So again, this is still, This is where it's nice to be an independent. Yes, you have to make smart business decisions, but it is also, you want to be a good doctor and a good person first. And this gives us the opportunity to do that where we're situated, our, our geography, it all works.
[00:35:56] Griffin Jones: Are there technologies or other kind of partners that would help you do that, expand that type of access in North Ontario in a way that wouldn't have been possible five or ten years ago?
[00:36:07] Dr. Crystal Chan: Yeah, for sure. Virtual clinics, virtual platforms, EMRs. And, as people develop whole ultrasound wands and things like that, I think the tough part is blood drawing phlebotomy services, but if you could figure out how to scale that up that would be great. And even before technology catches up, you can find partner clinics in the North. There are a lot of specialists in family medicine in the North that can help out with that. So it's just about having, you The desire to make it happen and this is a big project for Mark Evans. This is his true baby and his passion is to advocate for patients in rural areas to get access.
[00:36:44] Griffin Jones: Are there any of those technologies, apps that you mentioned that you particularly like? Like any companies or models that you feel strongly about?
[00:36:52] Dr. Crystal Chan: We're just really in, in kind of discovery phase with them. So I really can't speak to any specific app that, that we're, looking at right now.
[00:37:00] Griffin Jones: There was a doctor in the Twin Cities in Minnesota, I believe he is since retired, but he used to see patients in the Dakotas and really rural areas and he had his own plane and he would fly to them. You see any of you getting your pilot's license?
[00:37:15] Dr. Crystal Chan: I think, again, we're always looking for the next challenge. I'm not sure I want to be in like a doctor killer plane, but I
[00:37:21] Griffin Jones: Yeah, they scare the hell out of me. I
[00:37:23] Dr. Crystal Chan: do have, yeah, I do have a little bit of a, free spirit, where I think one day when MFC is like running and doesn't need me here all the time, I see not only myself, but Dr. Garcia and Dr. Weiser. I can see us doing a little bit of medical missions and things like that and, doing something a little bit outside the box.
[00:37:40] Griffin Jones: As larger networks and health systems continue to acquire fertility clinics, how many Dr. Crystal Chans are there on the U. S. side of the border? I don't have to guess. I know, I have a list, and I'm willing to let you have that list for a million dollars. But because of MidCap Advisors, I'm willing to let you have that list for free.
We've put together a comprehensive list of over 450 fertility practices across the United States, showing exactly who owns them. We think it's every fertility practice we've indicated if they're independent, if they're owned by a network, by which one. or if they're academic or health system, go to InsideReproductiveHealth.com, find the industry report section and then find the fertility practice ownership list. You've been asking for this list for a long time. It's been updated as of October, 2024. So don't wait, view the full list by visiting:
https://www.insidereproductivehealth.com/unitedstatesfertilitypracticeownershiplist2024
[00:39:01] Griffin Jones:With regard to Staying independent. Is that something that is part of the mission? On day one, you got a call you at least got a tire kicking call, and who knows, it could have been far more serious than that and I imagine you've gotten plenty since and you will get plenty more. How is, how important is it to stay independent? How open to it, or how open to merging or being acquired, are you?
[00:39:06] Dr. Crystal Chan: So we're very young we're having a lot of fun. I always say to my partners, when this stops being fun, you let me know. Maybe we'll get out. But we're still having so much fun and I cannot envision a time at this moment where we will stop doing this or stop functioning as independents. That being said, we have to look around us. So if you don't mind, I'll talk about the Canadian landscape.
[00:39:32] Griffin Jones: Yeah, please.
[00:39:33] Dr. Crystal Chan: So I think of Canada as a microcosm. of the U. S. is about the industry is probably, 15 percent of what it is in the U. S., but the interesting thing about being a microcosm of the US is that when change happens, you feel it sooner because it's smaller. It's a smaller swimming pool. So there are about 40 IVF clinics in Canada, and five to ten years ago, the landscape was totally different. Out of those 40, about seven were hospital based academic centers, and now there's two, two or three academic centers.
Five, five to ten years ago, most of the clinics were independent physician owned, and in the last five years, it's completely inverted. So Mark and I looked at the data what we tried to Pull from the internet, what, talking to people, but by our calculation, by clinic, about 60 percent of Canadian fragile clinics are PE backed and controlled, and the minority, 40%, are now independent or public or hospital based.
That's by clinic, but if you do the calculation by number of REs that work at the clinics, actually 70 percent of the Canadian REs work in a PEBAC clinic or network. And where's that private capital coming from? It's both domestic and international, so 80 percent Canadian investors and, 20 percent international. So this consolidation has been happening, fast and furious around us, so we're not immune to it, Griffin. And like I said, that was just one offer, we've probably been approached like that. Why is this happening? I think, I'm sure you've talked about this with a lot of guests, it's that entrance of PE into the market, recognizing the revenue streams that we have.
And then number two is this, the original clinic proprietors reaching retirement age and wanting to sell. What is interesting is that you're seeing, and this, we're seeing our friends who are in their early 50s, Some people who traditionally would be too young to sell or contemplate retirement, some of these younger mid career doctors are also selling and I think, you know that, why is that? I can speculate because I think they know that they have to put five years in, after they quote unquote sell and they want a head start maybe on their retirement. And I think that, that's a trend that we're seeing. When the networks or the private equity base, this is not to vilify PE at all, but when they come, I think there's a little bit of gaslighting that says, hey, this is a competitive market.
You might want to work with us because you might need our HR to survive and, our recruiting abilities And, maybe we can help you, right? So what I'm seeing is not a lot of Canadian doctors are actually falling for that. I'm not sure in the States that they are. So in Canada, the main entry points of PE seem to be, number one, helping doctors start a de novo clinic while retaining control, or number two, buying from retiring doctors. We're not seeing a lot of Canadian Fertility Clinic owners at my age saying oh you're right I need you, I don't know how to run my own business, please help me, here's some of my equity. I don't think we've seen any sales like that, maybe I'm wrong, maybe one or two. I think that's the polarity of it.
If you can't start your own de novo clinic, you might need PE investors to help you, or if you're done or getting ready to be done, you need PE to help you get out. For I, we're in this kind of in the middle having fun, running our clinic, proud of our baby, love our staff love us, like we're there's no reason that I can foresee right now that I change, but I don't see any reason right now for us to be consolidated and I want to state very clearly. I am not here to vilify PE. There, it, life is not black and white, it exists in the grays. It's not like PE is bad and independents are good. In fact, there are many independent clinics that are really not good, and a lot of PE affiliated clinics that are fantastic. So this is not about that, but it's just. Right now, we're having a good time being independent and that's what we are for the foreseeable future.
[00:43:34] Griffin Jones: In the U. S., it seems to me that you're number two reason I've, in my view, is the number one reason that you've got retiring docs and this is their way to cash out on what they've built. The problem with the, and the view of the middle in my in my view is that you have so many in, in, even in Canada, is that you have so many people that are in the middle, but they're with docs that were retiring.
So you have plenty of young middle partners, like 40 something year old partners that have plenty of fight left in them. But they have sold to private equity groups in Canada too, and lots of them. They were usually of partners of older docs who are retiring. And we don't know what the, for those 40 something year old docs, we don't know what their, will they run, will they take their urn out? They're probably, many of them are probably, Two years into a three year earnout, or three years into a five year earnout will they take that, do that, go golf for a year if they if non beats are enforceable in that way in both Canada and certain US states, and then come back and. start a competitor to their old practice. That could happen too.
[00:44:46] Dr. Crystal Chan: I think that would be a great interview, Griffin, for the young retiree. I think that's a segment I don't think you've interviewed yet. I would be thrilled to hear from them. I think there's only a handful in Canada. I'm friends with some of them. There's a handful and it'd be interesting to see what they see for their future.
[00:45:02] Griffin Jones: I want to ask you what your view as of. Of the rising tide of female entrepreneurs or of what we should think about when we think of women owning businesses and women I want to skew this with my own thoughts, and I want to hear your thoughts, but very often when I hear female entrepreneurship, it's related to venture capital.
It's usually talking about going out and raising money and building large enterprises the VC way, as opposed to starting a small business and making a small, profitable business. And so very often when I hear many people in women's health say that the venture capital is just not there for women's health in the way it is in other industries and it's sexist and it all very well may be. And those all, Very well may be valid arguments. They're not arguments that resonate with me on a personal level because I started a business from nothing and I didn't go the VC route and I didn't ever try to raise money and I want other people doing that. I want other people doing that in general, both men and women, because I think that's what is the best of capitalism when Multiple people own different ventures that we have a really well balanced economy and society when that happens, and there's no gatekeeper there.
There's no person that says, yeah, I'll give you this amount of money or not. It's the marketplace. So you are maybe you haven't had The gatekeeper of venture capital, I would say the banks are probably somewhat of a gatekeeper and so what is your take on this though? Because you also did not buy something though where you're trying to raise money and scale, like you bought a business that you're trying to make profitable yourself and you're one of a few proprietors of it. How was your view on that landscape?
[00:46:58] Dr. Crystal Chan: Those are interesting thoughts, but yeah, I would say when we presented to the banks, we had a little bit of that perceived just gonna use the word, sexism. There was one banker I can remember that was a bit like there, dearies, this seems like a big business for the three of you. And that bank decided to pass on us, but again, some banks have provision. On my comment on female entrepreneurship I guess I would say, do you know what the greatest lie ever told?
[00:47:24] Griffin Jones: No.
[00:47:25] Dr. Crystal Chan: Okay I think the greatest lie ever told was that women don't make good business people, and that we can't run businesses, and they don't, that women don't cut it as entrepreneurs as well as men do. So I guess I'm here, this is a very important mission of me being on the podcast to say that I think that's pure BS, and I think that's bias, and implicit bias, and I would posit that many women are good people. Business people. These are generalities, but women tend to be organized. Women tend to be multitaskers.
Women tend to be calculative. I know that word has a bad connotation, but I wouldn't want to go into business with partners that are, can't calculate. So we tend to be calculative. We're nurturers. We nurture our staff, our patients, our clients, our business, and we know how to share and work together as a team. So if you find yourself lucky enough as I have to find a group of female partners that not only get along, But can mute their egos and delegate to each other and step out up and step down relative to each other when, our strikes arise. That synergy can be amazing. And I think it's important to talk about female entrepreneurship because there's a lot of research right now about gender inequity.
My colleague at University of Toronto, Andrea Simpson, she publishes a lot about gender pay gap in medicine. But in RE, it's not only a pay gap, it's a position gap. So in Canada, of the 40 clinics that we have, only 1 to 2 of the 40 are female physician independently owned. It depends how you define independently owned. There's 1 to 2, like us. And there are 12 physician owned male proprietorship. But if you look at the graduating class, RE in the U. S. and Canada, I bet you that's majority female. I guess I don't know that. I don't, I'm not a fellowship director, but I feel that it's majority female. So what is it? Why are REs being, female REs being trained, but not in the positions of academic chair or, business owner or co owner or network?
Whatever owner. Is it lack of mentorship? Is it socialization? I don't think the answer is that women are bad at business. I just, I don't buy that. So we are female physician led and Owen, that is our brand. We are proud of it. We're out there internally, externally. Communications is very central to who we are. We're proud of it, we've leaned into it, we really do believe that female physicians know what patients go through, and that is a priority to serve that our patient and we want to inspire our staff, we always joke about it that since we took over, a lot of our staff have left us, not because they don't like working here, but to get the job done.
To advance their careers and education. I think as they see us in these positions of mentorship and they go and which we foster that. Love that. But we want to inspire young women in STEM to do, to see that you can do what you dream of doing. We are a Latina woman, an East Asian woman, and a daughter of a Polish immigrants. The three of us, again, We are feisty, we are gritty, and there's a part of us that wants to prove something, that we can do it together as female entrepreneurs.
[00:50:27] Griffin Jones: It was important to you to start with other women as an entrepreneurial cohort to select as your first partners. Will it remain that important to you as you bring on future partners?
[00:50:39] Dr. Crystal Chan: It's a great question. So that was just more happenstance. It wasn't intentional oh, I want a team of females. It wasn't like that. It just happened that way. And I think that once that happened, it's that kind of That was who we are, but we're definitely not close to a male or other partner joining us, I definitely wouldn't say that, but what we're seeing is a reaction to this kind of how we present ourselves as female physician led and, oh, and I'm not sure if it's like post Barbie movie or something, but there's a certain clientele of patients and a certain cohort of staff or employees that are attracted to us and drawn to us because we're seen as female entrepreneurs and trailblazers.
Ironically, it's 2024, but we're still seen as trailblazers in this industry by being female entrepreneurs, so they're, out of ten consultations, there's gonna be one patient that says, Hey, I heard about you. I like how that you guys are running the business, not private equity. Some people know, people listen to Freakonomics, like they know, not everybody cares who owns their fertility clinic, but some people do, and some people come to us.
[00:51:42] Griffin Jones: I think part of the reason why, just in general, you're seeing less younger docs own practices, but you mentioned, there's 11 to, 11 or 12 independently, male owned, independently owned practices. There's one. You've been listening to two female independently owned practices in Canada. Why do you feel that I'm with you that I don't think that that there's any basis for suggesting that women make bad entrepreneurs and to the contrary, plenty of evidence that they make great entrepreneurs. Why aren't more women choosing to do what you did and or for those that are on the Maybe take it one step further for those that are on the fence Listening, what would you say that might nudge them?
[00:52:26] Dr. Crystal Chan: So I think and I oh, okay. I'm just gonna say it I think it's hard to be a mom and a business owner and a doctor and be present for everybody your kids I have three kids. So your kids your staff, you just have to nurture too many people. So it's, I think, I can't imagine again being a mom and a doctor and a sole proprietor. So you need to work in teams. No need to. I'm sure there are amazing female entrepreneurs who could build or buy a clinic on their own. But for me, for us, I think we work better in a team because If my kid gets sick, it's nice to know that Dr. Garcia can be at my meeting, see my patient. So I think one of the tips is you can do it because we did.
It was scary. It was hard, but if you work hard enough and everybody worked hard to get to the NRE, you can do it. But find partners. Find partners that you trust with your life. Find, I'm going to get emotional now, find partners that you love, that is like a sisterhood to you. And that's the only way I think you can be truly successful in this crazy, consolidating environment.
[00:53:40] Griffin Jones: So I think there's a play and endorsement for independently owned practice in there that may, maybe you didn't even, you live it, so you obviously realize it. But I too believe family first, career second. I know people want to say, oh, you can do both, you can have a book for, I'm saying for me, Griffin Jones. Family first, career second, and then everything else to me is is the thing that gets cut. My, my physical health would be third and community, all those things are important, but I've deliberately there's no fantasy football in my life. There's no there's very little Netflix.
It's maybe a Saturday movie with my wife, but I'm not watching YouTube. I'm not, Scrolling on social media, like all of that, the happy hours that people do, all of that is gone from my life. But it is family first, and, but I still do want to be financially free. I'm not trying to buy the biggest house in the community. I'm not trying to buy an infinite fleet of classic cars. But I do, being financially free is important to me, so career is a second. Because I own my business and I don't have investors behind me, I go at my pace. And if it's you know what, I'm not just, I'm just not going to do this at this time because I really want to spend time with my kids.
I really want to see my family. I want to be there with my grandparents when they're passing away, whatever it might be. I'm the one that decides, okay, that's just gonna be a little less money than I make. Now, it goes back to the fear earlier, you have to get to a certain place where you're comfortable doing that, and if you got loans against you, and, it is scary in the beginning, but once you get to a certain place then it's just, you know what, I don't have to do this just to get another multiple. I can go with this place and I can prioritize in this way, so I think that's a plug for owning one's own business.
[00:55:33] Dr. Crystal Chan: And there will always be people like me. Someone called, I always quote this person, so an anonymous person said to me that you, Mavis and Marta are dinosaurs. Nobody will ever do this again. Associates just want a little incentive plan, guaranteed income, and they're fine. They don't want to run a business, they don't want to take on the stress, they want to care for their families. But I don't think so. I think we are not the first or last to be like this, programmed this way. There will always be people that will take a chance on themselves.
I think, we didn't really talk, I'm scientific director, but we didn't even talk about science or technology. Technology was supposed to improve access to IVF and drive down prices. Private equity was supposed to improve economies of scale get volume discounts and push down IVF price and improve access. That, that hasn't happened. That, we haven't seen move, PE or technology yet really move the needle on outcomes nor price. But eventually, Hopefully, with AI coming in, IVF in the box hopefully, you'll decrease barriers to entry for independent people to start their own clinics.
So I see, we've only been in this PE world for 5 10 years. In 10 years, everything we think we know now is going to be completely different. Some PE firms will be very successful and some won't. Some PE networks might have to sell out their clinics. Many crazy things will happen in the next decade, and so you're going to see probably a new wave of entrepreneurs coming in and doing it, and yeah my, my take home point is find people that you can work with and that you trust, and there's never any, I, it's, One third, one third, one third, between the three of us. There's, we don't fight about that, it is, we are in it together, and we are a team, and we're on a rocket ship to Mars, to Cotonou D'Ordo.
[00:57:30] Griffin Jones: I can't wait to have you back on to hear about where that rocket ship is flying and orbiting in some years time, and to bring you back on to talk about why some of those technologies have not yet been able to make the field scale. But this has been such a great conversation. I'm glad that I've gotten the chance to know you more and I look forward to having you back. Dr. Crystal Chan, thank you so much for coming on the Inside Reproductive Health podcast.
[00:57:57] Dr. Crystal Chan: Thank you, Griffin.
[00:57:58] Griffin Jones: How many independent fertility practices are there now? Thanks to support from MidCap Advisors, Inside Reproductive Health has done the work and compiled a list of over 450 fertility clinics across the USA indicating if they're independently owned. Part of a fertility network, if so, which, or part of an academic system, visit InsideReproductiveHealth. com. View the full list by visiting:
https://www.insidereproductivehealth.com/unitedstatesfertilitypracticeownershiplist2024
[00:58:30] Announcer:Today's advertiser helped make the production and delivery of this episode possible for free to you, but the themes expressed by the guests do not necessarily reflect the views of Inside Reproductive Health, nor of the advertiser. The advertiser does not have editorial control over the content of this episode and the guest's appearance is not an endorsement of the advertiser. Thank you for listening to Inside Reproductive Health.
