Becker's ASC Review

37 GASTROENTEROLOGY What private equity has in store for GI in 2020 By Eric Oliver G astroenterology investment domi- nated the specialty in 2019, with no signs of slowing down in 2020. Here, NextServices President and Co-found- er Praveen Suthrum examined the current PE landscape in GI and offered insights into the future. Note: Responses were edited for style and content. Question: How will the four estab- lished (and fifth possible) PE-backed platforms coexist and continue to acquire practices? Praveen Suthrum: Initially, platforms tended to be regional first and national aer- wards. In 2019, we saw a few national deals. e PE platform in Texas [the GI Alliance] acquired a group in Illinois. e PE platform in Florida [Gastro Health] acquired a group in Washington. Newer platforms [like US Digestive Health] will tend to consolidate practices in their home region first. However, that doesn't stop conversations from happening across states. When a large or midsize practice puts itself in the market, it attracts bids from everyone. Investment banks will approach all the platforms on behalf of their clients to attract the best bids or determine strategic fits. rough 2020, we will see merger and acqui- sition announcements of various mid-size or large GI practices. e PE platforms will compete to acquire and expand. And newer PE platforms will form in other regions. Q: Three years down the road, what does the GI space look like? PS: ree years down the road, we will see between eight and 11 PE and strategic platforms. We will see a significant portion of large and midsize GI practices consoli- dated into PE platforms or into alternative strategic platforms, like the one created by Jamison, Pa.-based Physicians Endoscopy and Silver Springs, Md.-based Capital Diges- tive Care. Other players like Nashville, Tenn.-based AmSurg might come up with their own of- ferings. Companies like Eden Prairie, Minn.- based OptumCare might acquire a few GI practices. We will also see multi-specialty deals. Certain health systems will build GI divisions and acquire or partner with GI practices in their area. Some of these deals might fail, we just don't know which ones. We will begin to see [PE firms exit] around 2022-23 when some platforms will move onto the "second bite" of the apple. Newer PE players will enter the market, but overall the net result will [lead to] larger, consoli- dated GI practices. Other trends will play out, such as stool DNA testing becoming more common. Screening colonoscopy will increasingly become a lab test, and endoscopies will be more about diagnostic colonoscopy. Artificial intelligence-based endoscopy will become available [which will help] GI doctors increase [polyp] detection. ese technology trends will also accelerate busi- ness consolidation, because GI practices will see the advantages of getting bigger and more sophisticated. Q: How many deals do you expect to close in 2019? PS: ere are at least 16-20 deals in the works at various stages right now. Closing deals before the end of the year could have certain financial advantages. For example, if the valuation of the PE platform increases in January, then the practices joining the fold now will benefit from that upside. Q: Do you believe this level of con- solidation is good for GI? PS: Consolidation is inevitable and it's not unique to GI. Large aggregators such as CVS and UnitedHealth Group create a trickle down effect across the spectrum. e entire healthcare industry is consolidating. When hospitals in a certain region orga- nize themselves to become larger health systems, it creates a risk for independent practices by impacting the referral network. In this environment, the consolidation of GI practices is necessary to remain independent for the future. e question is not whether consolidation is good or bad for GI. e question we must ask is how we make things better for GI. In the 1990s, physician practice manage- ment companies tried to consolidate medi- cine. e reasons were similar — fragmenta- tion, better contracts and so on. But PPMs failed badly, and it le a lot of debris. As the industry consolidates again, we must learn from the past and aim to do it right this time. Getting PE in GI wrong could have too high of a cost. n Gastrologix enters into pair of partnerships By Eric Oliver I ndependent group purchasing organization Gastrologix entered into a pair of partnerships to provide more options to its independent gastro- enterologist members. Gastrologix partnered with MetaPhy Health Jan. 2 to gain access to the company's chronic disease management-focused telehealth platform. The platform helps patients develop care plans for nonalcoholic fatty liver disease and underlying metabolic syndrome conditions that contribute to developing the disease. Gastrologix also partnered with doctoc in mid-December to gain access to an automated medical answering service. The service allows physicians to collaborate with clinic staff and care team members. n

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