Private equity firms are looking to invest in gastroenterology groups as colonoscopy becomes increasingly in demand, Duluth News Tribune reported May 31.
Private equity-backed groups, including Southlake, Texas-based GI Alliance and Miami-based Gastro Health are dominating the market. Gastro Health boasts a portfolio of more than 140 locations, and GI Alliance has more than 400.
"We are in the Golden Age" of colonoscopies, one investment manager wrote in 2017, according to the Tribune.
There's a lot of money in colonoscopies and gastroenterology in general. Patients with inflammatory bowel diseases, including Crohn’s disease, run up about $23,000 in healthcare costs a year, according to a 2019 study. Medication for IBD can cost tens of thousands of dollars annually.
Additionally, the CDC recently lowered the recommended age to begin routine screenings for colon cancer from 50 to 45, so more patients will be looking to get screened. And while preventive colonoscopies are covered under the Affordable Care Act, colonoscopies for patients with existing conditions often are not.
Nearly 10 percent of U.S. gastroenterologists were either partners in or employed by a private-equity backed organization as of fall 2021, according to a report by Physician Growth Partners.
With rising costs of supplies, labor and equipment, gastroenterologists are increasingly looking to consolidate. Private equity is a great option to have access to capital, but it often means investment managers control the finances of medical offices, with profit as the primary driver, the Tribune reported.