Private equity firms are targeting gastroenterology practices in full force, and the trend is expected to continue far into the foreseeable future.
Here, Joe Feuerstein, MD, a gastroenterologist at Boston-based Beth Israel Deaconess Medical Center; Samuel Giordano, MD, a gastroenterologist at Camden, N.J.-based Cooper University Hospital; and Aasma Shaukat, MD, a gastroenterologist at Minneapolis-based University of Minnesota; shared insights into private equity with Becker's ASC Review.
Note: These responses were edited for style and clarity.
Question: What are your thoughts on PE investment in gastroenterology?
Dr. Joe Feuerstein: I think that private equity will continue to move into the GI market. Prior moves have been very successful in the outpatient surgical marketplace in dermatology and ophthalmology. The Audax group and others have been investing in GI aggressively and shown success with the [Miami-based] Gastro Health network.
Dr. Samuel Giordano: I think [the spiked interest in investing has been] an interesting development in the GI space. It speaks volumes that many of the firms view the demand [to be strong today, and strong in the] not-so-distant future. With an aging baby boomer population, and a growing elderly population, combined with the improvement of medical care and delivery, more and more people will be in need of GI specialists in the future. Lastly, [gastroenterology is] one of the few fields where [the preferred procedure] is procedural and recommended for all. These things, among others, make [gastroenterology] ripe for equity interest, investment and future growth.
Dr. Aasma Shaukat: PE investment in gastroenterology is a growing trend and we are likely to see much more of it. As with anything, there are pros and cons. Pros [include] that practices can merge or consolidate and allow for growth, shared resources for cutting costs and better negotiating power. Cons [include] that practice owners may lose control of the direction of [their practice's] growth and the financial future tied to the PE firm's financial health
Q: How do you think PE investment will change care delivery in the speciality?
JF: As things move forward with a for-profit mentality driven by PE, and not necessarily by small groups or physicians, this will move more toward a leaner, more profit [focused] case approach.
SG: Currently, the GI market [is divided] between private groups, solo practitioners and hospital employees. This divide leads to differing needs from each side. Initially, private equity interest may [target] those private groups or solo practitioners that they feel are productive [and] may [bring] a value-added opportunity. In these settings physicians are seeing increased operating expenses and progressively restrictive healthcare regulations, operating a private practice today has become increasingly difficult and financially burdensome. Thus, many independent physician practices who wish to consolidate or ease this burden [turn to] PE firms. Eventually, I think the PE investments will move toward employed physicians and [may even] attempt to lure in the more academic-oriented, and, in some cases, more well-known physicians away from academia, [possibly] creating competition [to the point] where we may see the pendulum swing back to private practice over time.
AS: GI care is increasingly [being] delivered in the outpatient setting. We will see an expansion of GI services in the ASCs, such as for endoscopic ultrasound and ERCP. We will also see a better integration of imaging software, universal EMRs, streamlining of software and expansion of ancillary services, such as use of anesthesia and infusion centers.
Q: Do you think PE investment in gastroenterology will continue for the foreseeable future? Why or why not?
JF: I do think it will continue to be present, buying up the smaller practices.
SG: As PE firms are seeing already, GI is an area of investment [where] much financial benefit can be obtained. As more firms see this, more will want to enter this arena. What we know is the demand for GI from a patient care standpoint will increase over the next 20 to 40 years based on a number of factors such as the burgeoning aging population, people being more medically aware of [colonoscopy] screening and [others]. Combined with a predicted shortage of GI physicians, and the slow [educational/training process for new] specialists, demand [for GI services] will likely double in the not-so-distant future. As demand increases, physicians will use more leverage to negotiate [stronger] reimbursement [rates] and this will continue to make GI attractive to PE firms.
AS: Yes, this trend is going to continue and expand as more and more practices face the challenges of [the] changing healthcare landscape, and pressure from hospitals and large healthcare systems.
Want to share your thoughts on PE? Reach out to Eric Oliver at eoliver@beckershealthcare.com.