Gastroenterology: Private Equity Leaps into the Fray

Vertical: Gastroenterology
Author: JC Lupis
Date: March 2020

One of the biggest stories in the gastroenterology market is the influx of private equity (PE) backing, whether through firms or the strategics they support. PE and PE-backed groups are deploying significant capital to expand their footprints, leverage economies of scale, and develop service lines. One estimate suggests that the number of PE or PE-backed gastroenterology transactions jumped from 2 in 2018 to 16 in 2019.

Partnership with PE-backed groups offers an alternative to hospital employment. Fully 53% of gastroenterologists in the US are employed by a hospital or healthcare system, and more than one-quarter of gastroenterology practices that were independent in 2007 had been acquired by a hospital or health system by 2017. This trend has often been attributed to a desire to escape the managerial difficulties of healthcare and focus on the patient.

Independent gastroenterology practices are facing numerous challenges. In today’s shift to value-based care, reporting metrics and program compliance are expanding in complexity, leading to increased administrative burdens and overhead. Moreover, medical equipment costs are rising, but reimbursements are not, shrinking the bottom lines of independent gastroenterology practices.

However, hospital employment – with its loss of independence – isn’t the only answer. Instead, these trends make partnerships attractive. The economies of scale provided by PE and PE- backed groups can ease logistical and administrative burdens and diffuse the cost of new and expensive equipment, allowing practices to take advantage of technological advancements. Additionally, larger practices have more leverage when negotiating reimbursements.

Gastroenterology Market: Key Chart

Number of Announced Gastroenterology Practice Transactions in 2018 and 2019

GHA-Gastroenterology-Chart

Gastroenterology Market: Key Data Point

Estimates suggest that almost half of US states lack any gastroenterology practices with more than 20 physicians.

Source: McGuireWoods LLP, Trends in Gastroenterology, Urology and Men’s Health Investments – 5 Key Points, March 2019

GHA’s Gastroenterology Market Brief includes the following sections:

  • Gastroenterology Market-At-A-Glance
  • Gastroenterology Market Developments
  • Key Gastroenterology Market Data
  • The Mergers & Acquisitions Landscape

To inquire about a copy, please contact research@ghadvisors.net.