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How to Look at Private Equity Investment in Physician Groups: Gastroenterology


Gary W. Herschman and Anjana D. Patel, Members of the Firm in the Health Care and Life Sciences practice, in the firm’s Newark and New York offices, co-authored an article in Healio, titled “How to Look at Private Equity Investment in Physician Groups: Gastroenterology.” Investment banking analyst Abe M'Bodj of Provident Healthcare Partners also co-authored.

Following is an excerpt:

Gastroenterology represents a newer area of interest from the private equity community as the sector shares many of the same market dynamics that are driving investment activity in other physician specialties, including: favorable demographic trends, increasing outpatient procedural volumes, and market fragmentation. The first private equity transaction within gastroenterology was completed in 2016 by South Florida-based Gastro Health in its recapitalization with Audax Group.

Gastroenterology has strong macroeconomic tailwinds that will drive future growth within the sector. The population of U.S. citizens over the age of 65 is expected to more than double from 35 million in 2000 to 71.5 million by the year 2030. Per the American Cancer Society, colorectal cancer is the third most common cancer diagnosed in both sexes, with an estimated 135,430 new cases expected in 2017; it is estimated that 90% of these cases will occur in those aged 50 or older.

Additionally, the cost containment efforts by payors and hospitals have significantly driven demand for outpatient surgical care. Procedures performed in the ambulatory setting are both more cost efficient and satisfying to the patient population. Between 1993 and 2014, the ratio of outpatient to inpatient procedural volume increased from 55% to 66%, with gastrointestinal cases representing approximately a quarter of all ASC procedures performed.