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Paul Martin

Good afternoon, and welcome to another episode of Paul Martin's crucial conversations. Today we have with us a long term colleague and friend of Martin Health Care Advisors. And that is Brian Barth. Brian is the chief acquisition and development officer at core of Physical Therapy.

Cora is a private equity backed physical therapy company that is based now out of Charlotte, North Carolina. Cora currently has over 200 clinics in ten states, and they now span as far south as southern Florida and as far north and west as Wisconsin and Illinois.

So, Brian, I welcome you here today with us.

Brian Barth

Paul. Pleasure to be here. Thanks so much and look forward to the conversation. Absolutely.

Paul Martin

Yeah, we're really excited to have you here today, Brian, because you know, there was an announcement made back probably a month or so ago. And so walk me through this change that was official back on June 21st. And for folks out there, what basically happened is core physical therapy was recapped, recapped this when one private equity group replaces another private equity group. And so Cora, which was backed by Griffin investors long time private equity group in this industry, has now been backed by a new sponsor, each AIG capital. So Brian, how will this alter the operating and the growth strategy of Cora physical therapy?

Brian Barth

Sure. And I think maybe to just go through Paul sort of the thought process of the transaction in AIG. I mean, you know, the official transaction really is capital acquired. Cora from Griffin in that transaction closed in June, as you mentioned. But we think think of it is much more than that as we really view this as a strategic partnership. Griffin was a great partner and we grew substantially under their ownership. We more than doubled our size in terms number of clinics.

While we're proud of that growth, I mean, we are definitely focused on growing to support our mission, and that mission is providing quality care to all patients and being a strong resource in each community community. You know that we operate. We're very excited to be partnering with AIG, I mean, as our mission. It was a key consideration as it relates to their investment, and they've been nothing but supportive of of that mission. I mean, AIG brings substantial resources and relevant experience also, I mean to the partnership.

So I think the bottom line here for the actual transaction I'm in is that ownership did change that, that's for sure. But but our mission to deliver, you know, excellence clinically in the outpatient service line, I mean, to the entire community, we're a community where our clinics are located really remains unchanged.

I mean, I think the other important component is that the management team of Cora remains in place. I mean that that within itself says an awful lot as well as we're we're shareholders, we continue to be shareholders along with AIG. So we're excited about this. I think that, you know, we're going to continue to grow most definitely with this partnership in AIG. So I mean that that really is relates to the transaction. I mean, I can go further if you'd like me to as relates to whether it's going to alter our growth strategy or not, if that's if that's what you'd like me to do.

Paul Martin

Well, tell us a little bit, you know, having been a member of the M&A source and which has conferences and literally you walk into a room, there could be 50 private equity groups. AIG has always stood out as having a very special interest in health care industry services.

And so I was always wondering when they would make that big splash into the outpatient rehabilitation industry and what better splash to make than Cobra. And it does appear as though as we were talking before today that your management team has been together for many, many years and that will just continue on.

There are times when you see a large private equity group takes over a company and they replace the management team and it sounds. Like that this is not the strategy here, but in terms of the growth strategy in particular, how will this alter the strategy you had under Griffin?

Brian Barth

Well, I don't know that I really see or Kaura really sees a changing occur. I mean, I think what we see is a continuation with the new strategic partner. I mean, the strategy for operations and a growth, definitely they're going to stay the same. Now, with that said, it will definitely increase the pace at which we're growing. I think that's that's one of the key components that that will occur. I mean, one of the reasons, as you mentioned, not only the management team was appealing, I mean to AIG, but our operational and growth strategy was absolutely I mean, the other component that that really AIG extremely felt comfortable with. And as I mentioned a little bit earlier, it's that ability for us to provide services to all in every community we serve. I mean, in AIG, I mean, is going to give us the ability also, I mean, to expand current service lines that will then, of course, broaden our community and patient base. So I think that sort of is is some of the thoughts as it relates to the growth. I mean, strategy for us to go forward.

Paul Martin

So for private practices out there today who are looking to potentially partner. There are so many words for this partner cell transition to a larger company. How does this change? How does this change to AIG impact them as it relates to opportunities with Quora?

Brian Barth

All right. I think that first we're going to still aggressively go after folks. I mean, in those partnership opportunities and and I think Paul, you know that one of the the things that we look at is to enhance our our footprint, the current footprint. I mean, the ten states that you mentioned that we're currently in as well as we're going to expand upon that footprint also into two new states is not only solidifying market presence where we sit, but also to enhance that that that market presence within other states, that makes sense.

I mean, that could be contiguous geographies or opportunistic geographies. I think they're all available to us. I mean, with the relationship and partnership that we have with HHI, I think the other component as it relates to potential and I'll call them partners, because that is exactly how we look at it.

They're partners and that will allow them and their teams to also grow professionally. Personally, if that's what they choose, I mean, there are individuals that are out there, there wanting to grow their business, and we cannot afford them that opportunity for that growth. It's happened already within Quora many, many times. I mean, folks that we've worked with and they they were in management, they were the sellers, but they of course, remained on and now their vice presidents of operations, a core overseeing multiple states operationally.

So those are some of the other things that that can happen for for them and maybe a little quicker and not not to prolong this. But I think the other thing is there's probably opportunities that we haven't even thought about that other folks bring to the table as relates to those things.

Paul Martin

Yeah, sure. Yeah, we always enjoy. And again, for our audience, we enjoy when we have worked with the company, they've transitioned to a larger partnership. And then years later, we see that there, as Brian just mentioned, are running a large area or have moved into some form of a corporate position. You know, it was something that I had the opportunity to do when we had transitioned our company to NovaCare many years ago and to see how to see how these companies work. You know, and I don't want to mean at the top, but at the base of, you know, where a while the capital comes from B, we're typically all the administrative services are coming from H.R., et cetera. Really interesting to learn and see how that happens. And I think that's a great opportunity for many private practice owners.

So, Brian? We now have one I'm going to call the new Cobra. This is the new AIG backed Quora. What are the one? The two key attributes that you guys will now be looking for in an acquisition candidate?

Brian Barth

You know, Paul, I don't want to sound like a broken record. I really don't want to. But I think, as I've said, it's a continuation. I mean, AIG and partnered with us because of what we did and what we are doing. So, I mean, these are things that we've always done. I mean, I see them as the ability to enhance, but it really is our foundation of principles that we utilize within our organization top to bottom. I mean, so with that said, I mean, we're going to continue to use a disciplined approach and thought that we've always used.

I mean, absolutely, as I alluded to, I mean, we want to partner with organizations where the ownership wants to remain and continues to grow within where they sit or even outside of where they sit. I mean, we see that as because of our community based thought process, very important, very important for us and our success. But I think probably the most important and it's our number one core value is that we want folks to have the same culture and everybody, you know, I hear people, our culture, culture, but our culture truly is providing care to everyone.

And no matter insurance or whatever it is to everyone, if we're going to be a community resource, we have to be able to provide services to the entire community. Otherwise we totally go against our entire principle thought process. And really, that is what has allowed us to be successful.

Paul Martin

So Brian, what I hear you saying is that AIG replaced Griffin. AIG may be unique from Griffin in its capital structure in potentially the size of the fund that they have, but that what they acquired was something that will continue to move forward, which is you're looking for companies with strong community ties and you're looking for companies who want to partner and grow. And like I said, they're spot on.

Brian Barth

Absolutely. And we're, as I've said, I mean, we're really excited about that opportunity and those opportunities.

So, Brian, you know, myself as a physical therapist and many physical therapists out there, you know, there's a little chatter out there, not particularly with you guys, but with any company that now is backed by private equity, backed by big money.How will this impact the therapist in terms of their operating standards, potentially their clinical standards? Will this how will this impact the therapists?

Brian Barth

So I always believe you have to sort of take a step back and look at who is leading that charge, OK? At Quora from the CEO down. All of leadership, clinic managers, regional managers, vice presidents of operations are all physical therapists.

So I think that is extremely important and I think it also says a lot as to who we are and what we stand for. OK. So with that said, I mean, we really view, you know, this whole aspect.

I'm going to want to call it a transition because nothing of the transition. It's a tremendous opportunity. I look at that way to continue to develop our therapists. I mean, you know, again, I mean, our mission isn't changing. I mean, excellence of care, access to all. I mean, we're also, you know, of course, very understanding, you know, our therapists are the group that make it all possible. And we're not naive as it relates to those things and our operating and playing standards.

They were key reasons AIG wanted to invest. I mean, so there's no plan changes as relates to that. But as we grow, I mean, the opportunities I think for achievement continue to occur. We continue to invest in that continuing education programs as well as new clinical programs. And I think even somewhat very important, the technology to be able to provide, you know, that world class therapist experience. I mean, so I think that they're the folks, I mean, you're the folks. I mean, and and I respect that and and I'm very proud of that also has released organization for sure.

Paul Martin

Yeah. It all happens that the therapist to patient level and for sure, and it sounds like there's a real strong commitment to continuing to expand the opportunities for therapists not only to grow in positions, but also to grow in their clinical education, clinical standards as well.

So and as I'm asking this question, I'm asking this question whether it could be positive or potentially negative. But what about the patient? Will their experience change based on this change in ownership?

Brian Barth

You know, it's interesting you ask that, because Quora, I mean, we actually. See that there's several groups that are customers, OK, and that create that overall or we have to provide that overall customer experience to granted the patient is extremely important.

Don't get me wrong, I'm not downplaying the patient, but it's also the payers and the physicians. I mean, we as a matter of fact, I mean, we see that that is extremely important as it relates to the balance within our our company to be able to provide that, that customer experience. And it's interesting because actually AIG has some very good experience in that customer relationship experience component, and we're going to draw down on that. I mean, they've done it before. They can educate us. They can provide us, I mean resources as it relates to that.

And I and I will tell you that we are extremely focused. I mean, on the customer experience and actually we see that that it's probably a that it is not. Probably it is an important component of our growth strategy.

Paul Martin

Yes. Very interesting, Brian, because you know, again, for our audience many times, you know, our our perception is that, you know, if there's more money involved, there's going to be more push for profitability, which at the, you know, at the bottom of the food chain from, you know, private equity, et cetera, is that patient?

And I think what we're hearing from Brian Brian is that AIG has a focus on that customer experience, which includes not only the patient but physicians and payers, and that they're actually learning from AIG some additional ways in order to enhance the experience for the physician, for the patient.

Most importantly, as well as for the payer. So, Brian, we we have seen some major changes in this industry over the last six months. You know, there's continued consolidation, but now we're seeing the real big boys acquiring and merging with the other big boys, which means that, you know, the real big boys, they've got real big capital that can buy pretty much purchase almost any physical therapy company. How do you think that this consolidation at, you know, kind of the top of the food chain as well as continued consolidation, you know, across the United States?

How do you think this will change the rehabilitation industry? This is kind of a global question for a, you know, entrepreneur in this industry. How do you think that will change this industry going forward?

Brian Barth

Well, I'm sure everybody has their own opinion as it relates to this. I'm sure they all are different. I have to say it that way, too. But I mean, consolidation is going to continue. I mean, it's going to happen.

I mean, and I also probably would say with dramatic consolidation, I think there's always change in any industry, any industry, not not just as any industry, but also go and say it this way. And that is, I mean, the outpatient petty business.

I mean, it's still extremely fragmented. I mean, everybody uses that word. And there are a lot a lot of, you know, independent providers that still make up the vast majority, the vast majority of of the industry. And I think that we chora I mean, we believe that, you know, we're several and I'll say maybe many years away from that true level of major major consolidation occurring. I mean, that's I mean, just because of the fragmentation that's still out there. I mean, granted, I understand, yes, there are a lot of large players that are coming together, but I also believe that there is still a component of the industry that Is yet to be consolidated. I don't know if it ever will. I mean, I think that there is a sense of independence within the outpatient physical therapy industry sector. And I also believe that the. There are desires for organizations such as ours to work with those organizations that have that unique home felt feel.

And for us, we don't try to change it. I mean, granted, yes, you know, we have systems, we have processes, but we are not trying to change who that organization is and what they are. And I think that is sort of a difference is it relates to what is happening out there. And I guess probably the best way to to even finalize that thought is approach. And everybody has their own unique approach.

Paul Martin

Yeah. I can tell you that is so well said. And I think, you know, for our audience, you know, it's very interesting that, you know, Brian, which Brian is not a physical therapist. Correct? Right? No, no, no. OK.

But you know, a lot of the discussion today was around patients, physical therapists that experience that communities, that community experience and also a support of the fact that you know, this industry, you know, I think for a long time to come, we'll still have a large percentage of the private practice, whether it's a single clinic practice or it's a 20 clinic practice that there will still be opportunities for those businesses to thrive in this industry. And here's what I will say. I've known Brian for many, many years and going back, you know, Brian is a very, very, very strong and very highly highly trained in what he does financial looking at deals, making deals and getting deals to the finish line. Brian is one of the nicest guys that I know. And this is going back many, many years. So, Brian, I want to thank you for coming on today and having this discussion with me.

I think it's been extremely valuable for our audience today, and thank you for your for your participation today.

Brian Barth

Paul? Absolutely. You know, I enjoyed the conversation as I always do, and I will, you know, sort of say this at the end. Whenever you say many, many years, that really makes me feel old. So but again again, thanks so much. I mean, it's been a great time, and I look forward to maybe doing it again sometime.

Paul Martin

Absolutely, absolutely. For all of you out there, I thank you so much for joining us today. And if you have any questions specifically for and about this conversation that I just have with Brian, click below. Let's have a conversation.

Thank you. And I look forward to seeing you all in the very near future.