The future of private equity: 5 thoughts from ASC leaders

Private equity firms have invested $921 billion in U.S. healthcare since 2006, according to the American Investment Council. 

Here are five thoughts about private equity from ASC leaders:

Rajiv Sharma, MD, owner of Digestive Health Associates (Terre Haute, Ind.): The one thing which I'm very happy about, thank God, is private equity. Thank God. Oh my God, 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.

Normally, you'll have a nice doctor who will come to an area, live there for 20 or 30 years, scope half the town, and then when they're done, they close up shop and they go. That's a wasted opportunity to: A) pass on a legacy and B) cash in the equity and the goodwill of the practice. I'd be losing time and money both. I cannot do that. I want to cash in on my equity. 

Collin Hart, CEO of ERE Healthcare Real Estate Advisors (Costa Mesa, Calif.): From a corporate or private-equity perspective, ASC real estate has become an attractive investment class in the real estate world over the last 10 years. That trend was accelerated by the global pandemic. Closed retail stores shifted shopping online, hurting retail real estate. In the multifamily space, eviction moratoriums made landlords rethink their investments: "If a tenant doesn't pay their rent, I can't kick them out?" 

Joe Peluso, administrator of Aestique Surgery Center (Greensburg, Pa.): A majority of ASCs are owned by physicians. Private equity and venture capital groups are assessing deploying major capital investments in ASCs, especially as insurers and CMS are transitioning their more complex, high-cost surgical procedures to ASCs due to cost savings with safe, convenient and quality results.

Craig Gold, administrator of Virginia Center for Eye Surgery (Virginia Beach): Private equity investment is a double-edged sword. On one side, it can provide much-needed capital investment and financial stability into an ASC; on the other, it can create a profit-hungry bureaucracy, which can detract from the clinical autonomy which comes from a traditional physician-owner model. The future of current private equity and venture capital investment trends will depend on which side is sharper.

Rami Abbass, MD, gastroenterologist at University Hospitals (Mentor, Ohio): 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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