Rami Abbass, MD, a gastroenterologist at University Hospitals in Mentor, Ohio, joined Becker’s to discuss what gastroenterology practices should consider when weighing the pros and cons of private equity investment.
Editor’s note: This response was lightly edited for clarity and brevity.
Dr. Rami Abbass: The current most controversial trend in gastroenterology is the growing role of private equity in the acquisition of practices. 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. The growing regulatory environment, high cost of capital, administrative burdens and challenges of partner recruitment have made private equity attractive to some practices.
Many gastroenterology practices are now left considering the pros and cons of a private equity acquisition. An upfront acquisition payment must be weighed against the loss of autonomy and a potential longer-term, reduced professional income level. Some providers worry about medical decisions becoming more financially driven or changes in patient perceptions of the practice.
The physician partners and private equity firm need to reach a deep understanding of the regional competitive landscape and have a shared vision of where value can be created — such as in operational enhancements, market share growth, cost reductions, expansion in ancillary services and enhanced negotiations. Discussions within practices are further complicated by risk tolerance — private equity funds are frequently heavily leveraged — and the age of the partners in the practice. It appears in the current landscape that private equity interest in gastroenterology will continue to see growing momentum for the near future, and physicians will have to continue to weigh the pros and cons it presents.
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