Strong consolidation activity characterized the physician services sector in the third quarter of 2019, according to Provident Healthcare Partners' "Q3-2019 Physician Services Update."
Abe M'Bodj, an associate at Provident, spoke to Becker's ASC Review about the recent transactions and what's on the horizon for the gastroenterology sector.
Note: Responses were lightly edited for style.
Question: What stands out to you about third-quarter activity in the GI sector?
Abe M'Bodj: During the third quarter, there were two highly notable transactions that allowed existing private equity platforms to expand into new states. [Miami-based] Gastro Health's acquisition of [Seattle-based] Puget Sound Gastroenterology expanded its presence from Florida and Alabama to Washington. This was a big leap for Gastro Health to move to the Pacific Northwest, but it is proving that it's able to craft unique partnerships around the country. The GI Alliance also made its first large out-of-state acquisition in the third quarter, acquiring [Evanston-based] Illinois Gastroenterology Group. With about 50 doctors, this was a large transaction that provides The GI Alliance with a strong foothold in the Midwest market.
Q: Why should GI groups be paying attention to this kind of activity, even if they're not interested in PE investment?
AB: While PE may not be ideal for everyone, it's important that groups have an understanding of how these types of partnerships affect their respective markets. When a PE platform is formed or enters into a market, it will often have expectations of expanding significantly through acquisitions and de-novo locations in the region. This can have implications for other groups in the region with respect to recruiting and payer contracting.
Q: What's in store for this sector in the fourth quarter and heading into 2020?
AB: The fourth quarter has already gotten off to an incredibly busy start, with Gastro Health recently closing a transaction with [Fairfax-based] Gastroenterology Associates of Northern Virginia, and The GI Alliance formalizing a partnership with [Phoenix-based] Arizona Digestive Health as well as Indianapolis Gastroenterology. As we move into 2020, and potentially even before the end of the year, there will be additional PE platforms that are formed and enter into the gastroenterology market. Several groups in various regions around the country are under letter of intent with new PE firms that are looking to make investments into the gastroenterology space. As these platforms are officially created, and The GI Alliance and Gastro Health continue to expand, it is our expectation that transaction volume will continue to accelerate, providing GI groups with an opportunity for highly competitive transaction processes.
Want to participate in future Q&As? Email Angie Stewart: astewart@beckershealthcare.com.