I was curious how a PE fund would respond to concerns of losing autonomy and compromising patient care. Would they not work with certain kinds of GI practices? So I just asked Paul Barrett.
Paul Barrett is the Managing Director of BelHealth Investment Partners, New York. BelHealth is a healthcare private equity firm focused on lower middle market companies. This interview is part of the book, Private Equity in Gastroenterology: Navigating the Next Wave.
When you take a 5-10 year horizon, how do you see the GI landscape change because of PE-fueled consolidation?
The practice of GI and patient care will remain the same, however, with PE investment will come additional opportunities in technology and innovation. There will be significant investment by PE firms in leading technology, equipment and systems in order to drive accelerated growth. The goal of PE groups is to create value by accelerating growth and creating scale so there likely will be more regional and national players vs. small and mid-size groups today. With the increased administrative and regulatory burden in GI, creating groups of scale makes a lot of sense.
What are the main concerns that PE funds have while considering investments in GI?
The main concerns in GI are similar to other physician specialties — ensuring and maintaining exceptional patient care and a compensation structure for physician partners post close that keeps all parties happy and incentivized to work hard. Our model at BelHealth differs somewhat from our peers in that we exclusively partner and back physicians and entrepreneurs. Our physician partners roll significant equity, remain Medical Directors of their practices, keep their local brand and maintain full clinical independence and autonomy. Our role is to support the group by building a best-in-class corporate back office and reduce the administrative burden at each individual clinic so the physicians and staff can focus on providing exceptional patient care.
“We do not partner with physician groups that have one outsized individual or ego that is not a team player.”
For what kind of GI practices would PE investments NOT be a fit?
For us, it’s critical that the physicians be interested in a partnership model and be enthusiastic about becoming part of a family of practices. Also, it’s important that all of our partners be team players and open to building consensus around all major decisions. We do not partner with physician groups that have one outsized individual or ego that is not a team player.
Several practices are waiting and watching. What might be the pros/cons of joining a PE funded group at a later stage?
The pros of joining a group early on are that it allows you to shape the overall platform as you see fit and in your image. However, there may be a few more bumps in the road as the platform finds its footing. If you join later, it may be a more a seamless transition, however, many of the bigger platform decisions such as which EMR/PM systems are chosen, may have already been decided.
Some doctors are worried that PE involvement will mean greater use of physician extenders, losing autonomy, and even compromising patient care at the cost of financial goals. How would you respond to that?
It’s a fair concern as some PE firms have not behaved responsibility in this regard. It’s incredibly important that you partner with a group that lives and breathes healthcare and that allows its physician partners to put its patients first and remain clinically autonomous and independent. From our perspective, putting short term profits ahead of best-in-class clinical care is short sighted and leads to a poor investment outcome in the end. With our dermatology platform, NavaDerm Partners, pro forma for our most recent partnership, we have 45 MDs and 3 PA’s and each of our seven founding physicians remain Medical Directors of their clinics.
By Praveen Suthrum, President & Co-Founder, NextServices.