Gastroenterology practices have garnered increasing interest from private equity firms over recent years, as highlighted in a May 2023 report from the University of Michigan’s Division of Gastroenterology and Hepatology.
- The presence of private equity in gastroenterology isn’t a new phenomenon, but its expansion is notable. The number of gastrointestinal groups backed by private equity surged by 28%, reaching 68 in 2021, as per a report co-published by Fraser Healthcare and Spherix Global Insights.
- The past five years have seen a growing momentum in this trend. Gastroenterology is an appealing target for private equity because a significant number of gastroenterologists still operate in independent practices and have ownership stakes in ambulatory endoscopy centers.
- Factors like the increasing regulatory environment, high capital costs, administrative burdens, and challenges in recruiting partners have made private equity an attractive option for some practices.
- The COVID-19 pandemic intensified the trend, with many practices operating below 10% of their endoscopy capacity. Some gastroenterologists, keen on maintaining independence from hospital employment, viewed private equity as a viable solution.
- The allure for private equity in gastroenterology also stems from the potential returns they could achieve by consolidating the market. Many gastroenterologists see private equity investment as an opportunity to capitalize on their practice’s reputation. In turn, practices backed by private equity can tap into resources and cutting-edge technology, potentially giving them a competitive edge in the market.