Gastroenterology practices have become increasingly attractive to private equity firms in the past several years, according to a May 2023 report from Ann Arbor-based University of Michigan's Division of Gastroenterology and Hepatology.
Private equity in gastroenterology is not new, but its presence is expanding. The number of private equity-backed gastrointestinal groups grew by 28% to 68 in 2021, according to a report jointly published by consulting firm Fraser Healthcare and pharma research firm Spherix Global Insights.
"This trend has seen growing momentum in the past five years. The field presents an attractive PE target, as a significant portion of gastroenterologists remain in independent practices with ownership in ambulatory endoscopy centers," Rami Abbass, MD, a gastroenterologist at University Hospitals in Mentor, Ohio, told Becker's in 2021. "The growing regulatory environment, high cost of capital, administrative burdens and challenges of partner recruitment have made private equity attractive to some practices."
According to the University of Michigan report, independent gastroenterologists are increasingly looking to private equity firms as a way to stabilize their finances as the industry consolidates. This was exacerbated by the COVID-19 pandemic, when many practices operated at less than 10% of endoscopy capacity.
Some gastroenterologists who wanted to maintain independence from hospital employment saw private equity as a solution, according to the report.
Private equity is also drawn to gastroenterology because of the "returns they could earn through consolidating the market," according to the report. Many gastroenterologists view private equity investment as a way to leverage their practice's reputation while PE-backed practices can access resources and the latest technology to manage practices smoothly, potentially giving them a market advantage.