Memphis, Tenn.-based One GI ended 2020 with a pair of post-formation deals and has no plans of stopping as 2021 kicks off.
Michael Dragutsky, MD, chair of One GI, spoke with Becker's ASC Review about the state of the platform and elaborated on what's in store for private equity in 2021.
Note: Responses have been edited for style and content.
Question: What do you think has fueled your growth so quickly?
Dr. Michael Dragutsky: It's several things. I think it's a vision of regional density. We're real believers in that. To drive leverage with the payers and have clout, you have to do it on a regional level. We're concentrating on continuous states in a defined geographical area where the payers are. For instance, Mississippi and Tennessee share some common payers across those two state lines. And it's the same thing with other regions [we're targeting], they share some of the same payers.
Regional density hits home with a lot of decisions that we're focusing on. We're not going to states thousands of miles away just for the sake of adding a group. Yes, there are some economies-of-scale [for platforms that do that], but that's not the purpose of consolidation. … The purpose is to have the leverage and clout with payers, and you can only do that when you're a defined region.
Q: How has adopting that approach helped you stand out from the competition?
MD: People want to consolidate with their neighbors. No group wants to be out on an island. It's not beneficial for the group to be on an island with a major consolidator whose home base is several states away with no other practice in that area. It just doesn't make sense for the physicians to do that. Regional density allows us to go as fast as we have.
The second thing [that helps us stand out] is I think we really have physician autonomy at our core. I know a lot of people say that, but we've really defined it. I think not being the first consolidator, I really applaud the previous consolidators. They set this in motion, and they did what had to be done for independent gastroenterology to survive, and I truly believe that, but I think we learned from everyone's experience through the years. We've really codified physician autonomy and physician control issues to a much greater extent than had been previously done with the consolidators. We had a great partner in Webster that really shared that vision of autonomy. They want to give us the support and financing to help us grow. They want to partner with physician groups, and they don't want to interfere with physician autonomy or control the group. They just want to be a part of it. Those two things have really struck a chord with the practices that have joined us and will join us.
Q: Do independent GIs view PE as a way to compete with hospital systems, especially with COVID-19 accelerating the trend toward employment?
MD: With consolidation, yes, we're able to compete with the systems and also align with financial backers and PE. We're all in the same boat together. We want to be successful. You don't have that in a physician employment model with a hospital. You don't have equity in the hospital. Physicians are viewed as cogs that can easily be replaced. In our arrangement, the PE groups realize the physicians are the assets needed to make this whole thing work, and without those assets, a practice will not work.
Q: Since One GI formed, mergers and acquisitions have been through the roof. How will you compete?
MD: I think consolidation is important because the payers and the systems are going to want to partner with big consolidated groups down the road. Especially when the paradigm for fee-for-service changes to value-based care, population health or risk-sharing.
It's going to be easier or better for the payers to go to one group in a defined geographic area and say, "Let's partner with you, let's risk-share together." You can do that when you have a substantially sized group, but you can't do that with a group of a dozen physicians.
Q. A lot of analysts believe this will be a banner year in investment. How long can this continue because the well of investable practices will dry up?
MD: Yes, but there still are a lot of independent physicians and smaller groups that haven't been exposed to PE yet, and there's a tremendous upside for those groups because part of what we want to do is share ancillaries with a small group who doesn't have the financial capabilities to start their own ancillary. They'll see that PE is a good model to have all the ancillaries under their own roof and to protect their independence in the future.
[This year] is going to be a big year for us. At One GI, we currently have 58 providers. In this first quarter, we'll be up to over 140 providers [when our deals close]. Physicians see the right direction on this. We've been approached by groups from several states just to get educated on PE and learn about it. … We're doing this to keep independent practices alive. If every independent GI in this area decides to come with us on PE, we'll have a home for them. I think practices see that we are growing, because I've been told by the people joining us that the leadership is true to their word [and has] integrity, trustworthiness and honesty.
I've had relationships on a national and local level with a lot of GIs. It's hard for doctors to go into a relationship where they don't have complete control. We're trying to give them as much comfort as we can that we're going to be their support system and that physicians are our No. 1 priority. PE is an important partner, but we can't lose sight of the physicians themselves.