Is private equity worth it for gastroenterology practices?

Private equity is thriving in gastroenterology, with several equity-backed management groups taking over the market. 

The number of private equity gastrointestinal groups grew by 28 percent, to 68, in 2021, according to a report jointly published by consulting firm Fraser Healthcare and pharma research firm Spherix Global Insights. 

The influx of investment, however, is controversial, and many gastroenterologists warn against the cons of a private equity investment.  

"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. "The growing regulatory environment, high cost of capital, administrative burdens and challenges of partner recruitment have made private equity attractive to some practices."   

The high upfront acquisition payment has to be weighed against a potential loss of autonomy, Dr. Abbass said. For these relationships to thrive, physician partners and equity firms need to have shared values and a deep understanding of the regional landscape. 

But for many gastroenterologists, private equity is the key to thrive and pass on a legacy. 

"The one thing which I'm very happy about, thank God, is private equity," Rajiv Sharma, MD, owner of Digestive Health Associates in Terre Haute, Ind., told Becker's. "Private equity was perfect for me. Now I have access to capital, right? One thing which always bothered me was for GIs and other practices, unlike other businesses, we really don't have very clear legacy planning."

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