“The Golden Age of Older Rectums”
By Jared Dashevsky, MD
We are in the Golden Age of older rectums.
- GI Alliance: 650+ physicians, 400+ locations
- PE GI Solutions: 600+ physicians, 60+ clinical partner locations
- Gastro Health: 300+ physicians, 100+ locations
GI Alliance is on an acquisition spree, having acquired seven GI groups since January. GI Alliance mainly acquires practices in the south, where they already have a prominent presence. In Austin, for example, they have 16 locations.
Gastroenterology practices are attracting PE firms for one main reason: we’re entering the golden age of colonoscopies, baby!
Think about it… the population is aging. The number of adults 65 and older is expected to double within 20 years to 80 million. And the newest USPTF guidelines recommend colonoscopy starting at 45 (versus 50). Suffice it to say: there will be a lot of people needing a lot of colonoscopies.
I like to view private equity in general from three perspectives:
- The doctor
- The patient
- The corporation (PE firm, PE-backed firm, hospital, etc)
From the doctor’s perspective, running an independent gastroenterology practice is becoming ever-so challenging. Reimbursements are declining, payers are consolidating, hospital competition is increasing and administrative burden is exhausting. As a result, the business components of running such a practice are cumbersome to manage efficiently.
So, PE firms—or PE-backed firms—may be attractive to physician groups struggling with day-to-day business operations. The PE firm manages the business of things; the physician manages the medicine of things. It’s nice. But, there are downsides, now that the physician is operating under a profit-motivated business.
As for patients, they’re always left out of the conversation despite being the “end-user” who’s left paying the costs of care. Robust data is lacking on patient outcomes under PE-backed health care—but data from PE-backed nursing homes suggests outcomes aren’t the best. Also, given PE firms are profit-driven, patients may be left paying hefty bills for the same amount—or less—care they would’ve received somewhere else not PE-backed. For example, one patient reported paying $1,100 for a colonoscopy (3x more than what she paid in a different state) at a PE-backed GI practice. A majority of the bill was a “facility fee.”
Again, PE firms are profit-focused. There’s inherently nothing wrong with this and it makes sense PE firms are after GI practices, given their lucrative colonoscopy reimbursements. These firms are just following the money.
Profit-seeking [is] a poor fit for any health care system.