Category: Industry Updates

06 Jun 2019

PE and beyond PE: Who wants to invest in your GI practice?

There are a few GI investment models brewing. Some of these are beyond private equity (PE).
Read on for insights on what’s underway.
The story so far with private equity and GI
In March 2016, Audax Capital’s investment in Gastro Health triggered private equity investment in gastroenterology.
After a lull of about 2.5 years, there were two more PE deals.
In October 2018, Waud Capital and Texas Digestive Disease Consultants created The GI Alliance (TGIA).
In November 2018, Frazier Healthcare Partners bought Atlanta Gastroenterology Associates to form United Digestive. Both The GI Alliance and United Digestive have been referred to practice management companies.
In April 2019, Gastro Health made its first out-of-state acquisition in Southeast Gastro.
In May 2019, we saw the announcement of a $130M GI deal. Regional GI, Main Line Gastroenterology Associates, Digestive Disease Associates took investment from Amulet Capital to create the 7th largest deal in the US.
What does it all mean?
Think of these practice management companies as platforms created with the specific intent of acquiring assets of other GI practices and centralizing administrative and technology operations. Growth is created both organically (better reimbursements, contracting, cost control) and inorganically (acquisition of other GI practices).
The practice management companies create management teams that are responsible for executing on the investment thesis set forth by the PE fund.
In the beginning, most practice management companies will tend to expand regionally. For example, TGIA will expand in Texas and Louisiana. Gastro Health first expanded in Florida.
According to Abe M’Bodj of Provident Healthcare Partners, there are about 12 ongoing transactions including acquisition deals. In 2019 and 2020, we will see regional hubs of practice management companies. They will be the first-movers (high risk, high reward). They will be led by PE funds who would’ve accomplished similar deals in other specialties.
Just as with dermatology and ophthalmology, we will see many PE-backed GI practice management companies emerge in different parts of the country. After most big GI groups are taken, the market will open up cross-regionally. At that point, PE funds (and their platforms) will scout around for healthy GI practices wherever they might be located.
When most of the market is taken (that is, whoever wants to sell has sold), it’ll possibly be a 5-7 year window. That’ll time itself with recapitalizing the original practice management companies with other PE funds.
For example, Audax Group invested in Advanced Dermatology & Cosmetic Surgery (ADCS) in 2011. They built it up and exited their investment in 2016 – a 5 year horizon. If they time their GI investments similarly, then we’d see a spur of M&A activity around 2021. One deal leading to another.
Investment models beyond PE
Companies such as Amsurg (now merged with Envision Healthcare) might consider competing with PE funds to create GI platform companies. As you may well know, the company already co-invests with gastroenterologists to build surgery centers. HCA, Surgery Partners, SCA, Physicians Endoscopy (interestingly, Kelso, a PE firm, owns the company) and USPI are other big ASC players.
Taking investments from Amsurg or co-investing with them to create a GI platform company will likely be a different model than PE led models.
A PE led model might mean selling 80% and converting 20% into stock in the new platform entity. A company-owned model might reflect a typical ASC investment model (where majority, say 51%, is owned by the company) in a smaller regional entity.
This is also referred to as a Management Services Organization (MSO) model. The management company makes money by supplying business services and in some cases, by owning or co-owning assets of the practice. They negotiate on insurance contracts and supplies for members.
An MSO announcement could also be in the works. A management company and one or more GI groups could join forces to create and extend the model as an alternative to PE.
It’s also possible that there might be other investors (other types of companies, asset management firms, family offices etc.) who might compete with PE funds for the right investments. Investment models in these acquisitions may drastically vary.
While no one’s talking about it as yet, industry outsiders (e.g. technology or insurance companies) might venture into GI through an acquisition.
Expect the unexpected.


By Praveen Suthrum, President & Co-Founder, NextServices.

Our new book Private Equity in Gastroenterology – Navigating the Next Wave is still available for download. Here was the best compliment we got to date: “I need my entire board to read this!”
22 May 2019

Loss of autonomy. Compromising on patient care.

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.

Our new book Private Equity in Gastroenterology – Navigating the Next Wave is still available for download. Here was the best compliment we got to date: “I need my entire board to read this!”
09 May 2019

“If you are paid by Medicare, aren’t you already employed?”

“If you are paid by Medicare, aren’t you already employed?”
When I first heard someone suggest this, it struck me as odd. How can independent gastroenterologists be employed by Medicare? 
Well, let’s consider that question. I looked at Medicare contribution for six different types of GI practices in Q1 2019.
Practice A (group in east coast): 29%
Practice B (solo GI in east coast): 19%
Practice C (group in mid-west): 19%
Practice D (solo GI in northeast): 16%
Practice E (group in west coast): 16%
Practice F (solo GI in east coast): 27%
Yes, one could make that argument. Medicare is an employer of these practices at least 16-29% of the time. Because they are paying doctors and doctors are dependent on that payment.
Would this ’employer’ ever give you a raise?
To answer this question, I wanted to review Medicare ‘allowed amounts’ for colonoscopy. Because those procedures are still the bread-and-butter for GI practices.
During the last 10+ years, here’s how Medicare paid for colonoscopies (approximately).

As you can see, Medicare pays less than what they did 10 years ago!
Here are the ‘allowed amounts’ from 2009 and 2019.
Diagnostic colonoscopy: $369 (2009), $331 (2019). -10.3%
Colonoscopy with biopsy: $442.90 (2009), $424.90 (2019). -4.06%
Lesion removal colonoscopy: $499.52 (2009), $446.16 (2019). -10.6%
Let me just say what you already know. It’s unlikely that you will ever get a meaningful raise from CMS.
In fact, Medicare will keep paying you less
Why? The simple answer is they won’t have money to pay.
Read: Medicare will run out of money in 2026, three years earlier than expected, government report says (Chicago Tribune)
We are looking at a pie that can’t keep up with its consumers anymore.
Look at this graph from Kaiser Foundation. Medicare Advantage enrollment has nearly doubled in the past decade. 6.9 million in 1999. 20.4 million in 2018.
There’s no stopping this trajectory.
People are living longer. By 2050, 83.7 million Americans will be over 65 years (double that of 2012 numbers).
Read: Why Medicare Advantage Is Marching Toward 70% Penetration (L.E.K. consulting)
There’s no stopping this trajectory.
Private insurance companies tend to model their payment strategy around Medicare. They will also pay less – especially for standard procedures like colonoscopies.
Airbnb for gastroenterology?
Many disrupting trends are quite clearly on the horizon. Declining Medicare reimbursements for colonoscopy is surely one. DNA testing is another.
As a business person, it’s easy for me to say cut your dependence on Medicare. But I know that it’s not an effortless path to navigate.
There is money in GI but not from traditional sources. Let me give you 10 IDEAS to consider.
1) Reduce your dependence on colonoscopy reimbursements by adding relevant procedures and ancillaries (e.g. is obesity a subspecialty of GI? Some of the largest GI groups make up to 50% of their money from ancillaries)
2) Diversify your patient volume and sources (e.g. a GI practice hired an Asian doctor to attract a new patient pool. Do you repeatedly see the same demographic?)
3) Outsource and reduce costs of basic operations (e.g. billing, accounting. What’s it costing you to hold onto these?)
4) Start clinical trials for upcoming biologics
5) Develop gastroenterology niches (e.g. infusion centers for Crohn’s. What’s different about your GI practice?)
6) Re-energize your hospital partnerships, establish new ones (How can you partner to help the hospitals succeed? Collaboration and negotiation vs competition)
7) Analyze your top and long-tail referral sources. Nurture new ones
8) Standardize and automate your workflow using technology (e.g. We use a variety of algorithms to bill certain claims, check status, check eligibility etc.)
9) Get asset-light to stay current with changes. Stop owning things (e.g. don’t buy servers). Start renting/subscribing (get on the cloud)
10) Build your brand. Make patient engagement as important an activity as seeing them. (Do your established patients hear from you other than the time of recalls?)
When Hilton needs more business, they go about building whole new properties. When Airbnb needs more business, they simply borrow your assets using a system that they’ve already built. At $31 billion, they are valued more than Hilton or American Airlines.
And here we are still talking about declining payments from Medicare. Even though, the same Medicare population (senior citizens) is Airbnb’s fastest growing demographic.
More on all this soon. But for now, it’s time to shape our mindset towards disruption. It’s time to think differently about gastroenterology.


By Praveen Suthrum, President & Co-Founder, NextServices.

Our new book Private Equity in Gastroenterology – Navigating the Next Wave is still available for download. Here was the best compliment we got to date: “I need my entire board to read this!”
16 Apr 2019

Cologuard = Google car?

Our new book Private Equity in Gastroenterology – Navigating the Next Wave is still available for download. Here was the best compliment we got to date: “I need my entire board to read this!”






Cologuard = Google car?
I sat in a Google self-driving car back in 2012…when it was still a Toyota Prius. See the pic below. Neither I nor the car look this way anymore.

The big gadget on top of the car is the LiDAR sensor. That device fires rapid pulses of light all the time and all around to detect objects in the vicinity. It’s what self driving cars use to navigate.
Back then LiDARs cost $75,000. It wasn’t accurate enough to ensure people won’t get killed on the road. Google spent $200,000 to assemble each autonomous car. Most car companies called it an unreasonable but “cute, research project”.
Every 2 years after that, the LiDAR doubled up in accuracy and dropped by half in price. So did the Google’s self-driving car.

The 8% miss rate
Recently, the Digestive Health Physicians Association (DHPA) lobbied on behalf of gastroenterologists to make sure that Cologuard modifies its multi-million ad campaign. The campaign implied that Cologuard can be as good as screening colonoscopy. Of course, they can’t say that.
As you would already know, Cologuard’s stool DNA technology was approved by FDA in 2014. The product is included in major screening guidelines and quality measures. Medicare covers it.
On their website, they present themselves as a “sensitive screening strategy that improves patient compliance” for colorectal cancer screening. If you click on “How effective is Cologuard?”, an image loads up showing that Cologuard found 92% of colon cancers (per a study involving ~10,000 people).
That’s an 8% miss rate. The company is quick to say in multiple places that false positives and false negatives occur with their product.
At The GI Roundtable conference in April 2019, Jason Dominitz, MD, MHS, National Program Director for Gastroenterology in the Veterans Health Administration asked the audience this question. What risk are you willing to take for your patient?
The question might as well apply to Cologuard.
It’s not my place to comment on clinical aspects of Cologuard. I’m just the biller who knows how to get my clients paid correctly for various GI procedures.
But as a curious technologist, I can’t help but note that it cost $2.7 billion to fully sequence the human genome (in 2003). And today, it costs $200 to do so.
I learn that it’ll soon be a penny to sequence the whole genome. It’ll open new dimensions in digital biology, including editing genes.
I can’t help but think along the same lines with Cologuard.
Screening with a scope is linear – one doctor, one patient at a time. Screening via a test is non-linear or data-based. You can scale the test exponential with no dependency on humans.
With digital biology, we move from analog to digital, taking us into the realm of software engineering. We can now talk about data that can be read, analyzed and possibly programmed.
We are then moving from linear to exponential.


Exponential growth of Cologuard
See these graphs. This one shows their impressive, consistent quarterly revenue growth.

This one shows the number of physicians who ordered the test for the first time. Observe the exponential spike in 2018.

With more tests, Exact Sciences (the maker of Cologuard) will have more data. With more data, the test will tend to get more and more accurate. As of end of 2018, Exact Sciences performed 1 million tests.
Surely, they’ll do more.
Beyond the TV ads, they are making all the right marketing moves within GI. They were the only gold sponsor at the AGA Tech Summit in San Francisco this April.
I wonder if more Cologuard screening resulted in new patients for GI doctors. Because now patients are probably more aware or concerned about colon cancer. I don’t know the answer to that.
What if Cologuard recruits a vast global community of bio-programmers to somehow reduce the miss rate? Or even catch the miss rate as it occurs?
It’s not unthinkable if you’ve ever used the Waze app – a GPS navigation software. Waze even lets you know where cop cars are standing based on what other drivers tell the app.
Catching the miss rate as it occurs is also not unimaginable. That’s how Facebook’s AI pulls down inappropriate live videos – even as they occur.


What I worry about… 
I worry…
• That referrals of screening colonoscopy, the bread-and-butter of severalGI doctors, will decline.
• That insurance reimbursements for traditional CRC screening will keep getting lower. To the point of no return.
• That the forces of DNA sequencing and AI (check ai4giclassifying polyps) will intersect at some point in the near future.
• That ancillary revenues from biopsies (from CRC) will also go away becausenow we will exactly know which polyps are cancerous.
• That GI doctors performing below quality benchmarks will be left behind
• That it’ll be too late when GI doctors realize that the world has changed


Guess the price of LiDAR today?
Today (7 years later), the Google car is called Waymo. They call it “the world’s most experienced driver” (would Cologuard at some point call itself the world’s most experienced CRC screener? 😱).
Waymo got cooler. See below. The little black thing on top is the LiDAR.

Making a car autonomous used to cost $200K/car. Then it dropped to $100K/car.
Then to $50K/car.
Now, it hovers around $1,000/car.
The LiDAR scanner costs $50. To remind you, the scanner cost more than 1,000x back then.
It’s expected to cost $10 and sneak into the gadgetry that occupies your smartphone.
Unlike the LiDAR scanner, Cologuard continues to be priced high. More than screening colonoscopy – at $649 because Medicare and others are willing to pay for it. That’s more than sequencing a whole genome! We are sadly so used to bloated healthcare. But even a broken system can’t stop an exponential curve.
Exponential changes don’t just happen because of one trend or technology. It’s because various trends collide and accelerate the doubling.
Should I say this or is it apparent? GI is in the middle of massive disruption. It just depends on which side of the disruption we choose to be.


All product and company names are trademarks or registered trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them.


By Praveen Suthrum, President & Co-Founder, NextServices.

11 Apr 2019
GI Roundtable 2019

59 Takeaways from The GI Roundtable 2019

Our new book Private Equity in Gastroenterology – Navigating the Next Wave is still available for download. Here was the best compliment we got to date: “I need my entire board to read this!”
GI Roundtable 2019
If you aren’t already feeling the tremors of GI disruption, you soon will.
Regardless of whether you are a small, independent practice or a large group, you might not be so sure where the future of GI is going. You might be wondering what should you be doing now and not finding clear answers.
Just know that you are not alone.
This past weekend, we were at The GI Roundtable 2019 in Seattle. It was a congregation of GI leaders (both doctors and administrators) from various parts of the country. Discussions spanned from clinical to business.
There were plenty of insights.
There were at least 59 takeaways that caught my attention.
As Dr. Irving Pike (from John Muir Health) said during his keynote, we can take three approaches to these changes:
1. Digging our heads in the sand and ignoring them
2. Working harder and faster, faster, and even faster
3. Or a more thoughtful and planned approach.
The idea of sharing these insights is so that we choose option #3 as an industry.
Takeaways from Irving Pike, MD, Senior Vice President and CMO at John Muir Health. Instrumental in the development of GIQuIC quality registry.
1. Aging population = Greater proportion of CMS. You already know that CMS pays you less than commercial payors. This means decreased future compensation.
2. If screening colonoscopy declines, what alternative income streams do you have?
3. “Don’t think for a minute what’s impacting hospitals and health systems has nothing to do with your GI practice”
4. Get lean…get rid of waste and reduce your costs.
5. Medicare Advantage enrollment has grown from 6.9 million in 1999 to 20.4 million in 2018. It can reach 70% penetration (per L.E.K Consulting).
6. Increased Medicare means greatest pressure on provider payments. Out of $680 billion increase from 2018 to 2027 in Medicare expenditures, $269 billion is from providers.
7. GI doctors will need to develop ancillary revenues to survive what’s to follow.
8. Unprecedented mega-mergers. United-DaVita. Walmart-Humana. CVS-Aetna. Cigna-Express Scripts.
9. New interest from outsiders. Apple. Alphabet (Google). Lyft. Amazon.
10. New healthcare consumers – 74% of Millennials prefer virtual visits.
11. Direction of payments is moving from Treatment-based to Population-based. Fee for service ► Pay for performance ► Bundled payments ► Global payments for a population ► “Owning” lives.
12. Move from volume to value. Define clinical pathways and reduce variation. Use Quality indicators. Become more transparent with PCPs, insurers and health systems.
13. As of 2018, half of US GI doctors are now employed and the other half is independent. Someone said, if you are getting paid by Medicare, you are already employed.
14. Bring focus to patient engagement and brand building.
15. Use telehealth, advanced EHRs, diagnostic technology.
16. Location (metro or rural) will drive new practice models – from PE to large clinics.
17. Bigger is NOT better without a clear strategy. Bigger can be better because of economies of scale, single signature contracts, new infrastructure, sub-specialization.
18. Physician concerns about Private Equity. Autonomy, autonomy, autonomy. Not everyone will be treated equally. Operating agreement can be non-binding. Change in culture.
19. There will be multiple practice models existing at the same time depending on local circumstances.
Takeaways from Jason Dominitz, MD, MHS, National Program Director for Gastroenterology in the Veterans Health Administration
1. An estimated 145,600 adults in the United States diagnosed with colorectal cancer in 2018. Estimated mortality: 51,020.
2. Screening adherence is only 65%. For non-colonoscopy tests, abnormal results aren’t always followed up with colonoscopy. When colonoscopy is done, quality is often lacking.
3. We are doing too much screening colonoscopy. Low quality after screening is leading to additional testing (missed adenomas are common).
4. In a study, each 1% increase in ADR was associated with 3% decrease in risk of cancer (Corley NEJM 2014).
5. To increase ADR. Expose more colonic mucosa (complete insertion of scope, better bowel preparation, field view of screen, uncover “covered areas), increase recognition of pathology.
6. If you are not meeting benchmarks, there are techniques and tools to help.
7. New guidelines for screening colonoscopy are coming.
8. Colonoscopy can be like speeding on the highway…what risk are you willing to take for your patients?
Takeaways on business of gastroenterology – Reed Hogan, MD (GI Associates & Endoscopy Center, Jackson, MS), Joseph Cappa, MD (Connecticut GI, Bloomfield, CT), James Leavitt, MD (Gastro Health, Miami, FL), James Weber, MD (Texas Digestive Disease Consultants, Dallas, TX), Louis Wilson, MD (Wichita Falls Gastroenterology Associates, Wichita Falls, TX)
1. Reimbursements will drop. Diversify your portfolio and be prepared for changes in payment models. (Dr. Joe Cappa)
2. Strategic planning is not always about scale. It’s also about maintaining quality of life and focusing on doctor-patient relationships. (Dr. Louis Wilson)
3. Negotiating rates with payors is really about building relationships. Seek 1-3 year contracts and do it on a schedule. If they say no, come back to them 6 months later. (Dr. Louis Wilson)
4. Patient satisfaction, ADR, outpatient use of endoscopies all roll into developing relationships with your key payors. (Dr. Joe Cappa)
5. If you are a solo practice, you need to be outsourcing. Use consultants. Take advantage of the structures that someone else has built. (Dr. Louis Wilson)
6. In large cities like Dallas, San Antonio, solo practices are dying. They’ll be busy but they’ll get paid 70% of Medicare to do their work. It’s unfair. They are getting squeezed out. We get 200% of Medicare rates. (Dr. Jim Weber)
7. Rural areas, sub-urban areas you can survive as a small or solo practice. May be because things are less complex. (Dr. Jim Leavitt)
8. As gastroenterologists, you must view the site-of-service differential as an opportunity to align yourself with them (hospitals) – they are going to need you. The repercussions are going to hit us in unpredictable ways – not what you think. (Dr. Louis Wilson)
9. In partnering with hospitals, control the patient and ancillaries. More than 50% of physician income streams come from ancillaries for us. (Dr. Jim Weber)
10. Hospitals view GI as a cost center. But if we have them on our payroll, they can achieve what they want on the inpatient side. (Dr. Joe Cappa)
11. One advantage of being large is you can provide a range of services that hospitals need. (Dr. Jim Leavitt)
12. Even if you break-even on ancillaries, you must have them. It’s great for the practice and the patient.
13. Patients are willing to pay cash for dietitians, for higher quality of care.
14. Simple things like imaging bring great satisfaction. I don’t send them to the ER, they walk across the hall to get their CT, walk to the pharmacy…then they refer their family for screening colonoscopy. (Dr. Jim Leavitt)
15. Infusion centers are great for the practice, great for patients. With larger volumes, your profit margin goes up.
16. Think of payors as customers.
Takeaways on EHR, your staff, patients and you – Daniel O’Connell, PhD, clinical psychologist
1. Have a 5 min huddle before your morning schedule and after your afternoon schedule with your MA.
2. Key things to know before you see the patient – name, date last seen in clinic, who they saw, name of the referring provider, reason for referral. “A doctor should know what’s knowable.”
3. Patients don’t have a problem with a computer. Convey that it’s a “tool for us”. Set up the room in such a way that the doctor, patient and computer are in a triangle.
4. Take 90 seconds and finish up 2/3rd of your note when the patient’s there or right after. Go home for dinner.
5. Take the first 60 seconds to set an agenda and say, let’s make a list of things you want to go over with me today.
6. Magic is when patients leave thinking they are making an informed decision.
7. A good scribe can have more impact than an MA. A scribe (e.g. pre-med student) can start becoming an extension of the care team.
8. Empathy: seeing from their perspective without judging. Cognitive empathy: Demonstrate you understand their thinking. Emotional empathy: Demonstrate you recognize and respect their emotions.
Takeaways on Private Equity in Gastroenterology – Joe Cappa, MD, Jim Leavitt, MD, Jim Weber, MD, Louis Wilson, MD
1. We are in the process of evaluating and understanding this (private equity) a little bit better. What does it mean for younger physician? It also depends on the geography, environment around you, trends of medicine. (Dr. Joe Cappa)
2. There are some risks you can’t predict. Deal team issues. We have 4 out of 7 doctors who have 30+ year window. They are entirely asymmetric. (Dr. Louis Wilson)
3. Alignment is critical.
4. We did our private equity deal to ensure we would remain independent. Anyone who’s tried to consolidate with other groups knows it’s very hard work. PE is a catalyst for consolidation. (Dr. Jim Leavitt)
5. The business of medicine is different from the practice of medicine. Most doctors are happy to give up control of the business of medicine. (Dr. Jim Weber)
6. Nobody wants to be a doctor except the doctor. Payors, hospitals, PE companies don’t want to take the meat out of someone’s esophagus on Friday night. (Dr. Louis Wilson)
7. If you are going to have autonomy, you need to have skin in the game. (Dr. Jim Weber)
8. It’s hard as hell to be a platform. (Dr. Jim Weber)
9. If you want to do PE, go buy a blue blazer because they all wear them. And be prepared to answer the question, what keeps you up at night because everyone will ask you that. (Dr. Jim Weber)
10. Wear your empirical skeptic hat. Keep your options open. Future of GI is still very bright. (Dr. Louis Wilson)
11. There are at least 10 deals underway across the country, including acquisitions by practice management companies.
12. In April 2019, Gastro Health made its first out-of-state acquisition in Alabama.
Yes, there’s too much happening too fast. The future of GI entails forgetting what we know more than learning something new. I’m reminded of these lines from Yuval Noah Harari’s new book, 21 lessons for the 21st Century.
“To survive and flourish in such a world, you will need a lot of mental flexibility and great reserves of emotional balance. You will have to repeatedly let go of some of what you know best, and learn to feel at home with the unknown.”


By Praveen Suthrum, President & Co-Founder, NextServices.

02 Apr 2019

When healthcare goes awry. From drugs to disruption

Recently I was at a healthcare facility in a semi-urban region – less than 100 miles from a major metro. It had a whiff of industry from good times that have long drifted by.

I tried to locate a Starbucks. Google Maps spotted one and took me towards the local university campus. As I drove there, I noticed several pain management clinics advertising themselves in unusual ways for “relief”.

Once inside the facility, I asked the administrator what that was about.

“Oh, this region has all the street drugs,” she said almost casually. “Until drug dispensing laws were tightened recently, some doctors offices dispensed opioids on demand. For cash.”

“What do you mean?” I asked. Even though I knew what she meant.

“Well, just last week a doctor was convicted for prescribing excessive amounts of opioids to patients, including a pregnant woman. Patients paid cash and got the prescriptions they wanted. People who are addicted are desperate – they’ll do anything. Who’s to blame?”

As we walked around the facility, I noticed very few patients. She showed me various rooms – X-Ray, Mammography, MRI, physical therapy. Empty. Almost.

The facility wasn’t new but it had an unused air about it. Physicians had left. New ones had joined. Then they left too – prompting the physician owner to come out of retirement.

I wanted to know why on a regular weekday there were so few patients.

She gave me a tangential answer. “The nurse/tech can’t even get enough scans a year to keep up with her license.”

“Why?” I persisted.

Then she gave me the whole story. “Well, the two big health systems here bought 95% of the independent practices in the region. So there’s no one left to refer patients to private facilities. As the largest employers, the health systems mandate that their employees only see docs within their system. Doctors in this town are struggling to make ends meet. Whether they are employed or run a private practice, they are stuck. Mostly, we get Medicaid patients and they don’t pay. Then there are patients who come looking for drugs. We don’t do that here.”

“Are there jobs going around?” I was curious.

“Well, there are a few but no one’s willing to pay. They want to pay minimum wage. Like $10-12/hour!”

While seeing me off at the door, she said, “I don’t know what’s going to happen with us in two months. But it was nice to meet you.”

When it all goes awry

It’s one thing to read about the opioid crisis but quite another thing to see its effects play out live. When you add declining insurance payments and competitive gridlock created by dominant health systems to the mix, you’ve created a recipe for despair. One problem feeds off the other, spiraling an entire ecosystem to a new zone.

You can have good doctors but no patients. You can have needy patients but not paying ones. You can have paying patients but for the wrong reasons. And then you can have a BIG BROTHER who’s happy to lock it all up.

To know the future, you don’t really have to travel forward in time. You just need to look around the edges of trends (good or bad). Extreme examples always have a telling tale.

Whether we realize it or not, healthcare is going through a massive disruption. Big insurance and large health systems are no small forces. And we haven’t even talked about technology or government mandates.

Doctors are busy seeing patients. Or they are busy trying to survive and make sense of what’s being thrown their way. It’s time to revisit why doctors got into medicine in the first place. To align themselves and cohesively shape what’s to follow.

In the end, the future of healthcare will be what we make of it. Clearly, it’s changing for good. With the right intentions and effort, we can also change it for the good.


Originally published on LinkedIn,  by Praveen Suthrum, President & Co-Founder, NextServices. 

Image Credit: Pexels

28 Feb 2019

11 Ways to grow gastroenterology practices through ancillary services

Reduced insurance reimbursements continue to create pressure on medical practices, particularly gastroenterology (GI) – a specialty that I’m most familiar with. Ancillary services offer a way to buffer a practice from financial pressure.

Before considering ancillary services, it’s important to streamline billing and technology at your practice. Efficient billing maximizes reimbursements. Better technology-driven processes minimize waste and improve efficiency.

When you operate an efficient practice, you’ll create savings (or increases) in revenues that can be utilized towards starting ancillary services. Below are 11 ancillary services for gastroenterology practices to consider.

What exactly to offer depends on these factors:

• the size of your practice
• patient needs
• availability of space and staff
• ability to invest or take a loan
• alignment with practice philosophy of care
• geographical concentration of your services
• competitive dynamics with local hospitals
• inclination to partner with an outside company
• regulatory restrictions in your state
• insurance coverage

1. Move procedures from the hospital to your ASC. Building an ambulatory surgery center (ASC) requires time and effort. However, an ASC has the potential to significantly increase revenues through facility fees that would otherwise go to the hospital. Further, it’ll result in better efficiency through common technology and more coordinated care for patients. There are companies that partner with GI physicians to start ASCs.


2. Start a pathology lab. Gastroenterology groups generate a variety of lab samples. Insourcing the technical component (TC), professional component (PC) or both will add significant revenue streams. Note that insurances do not easily go in-network with most new labs. To maximize reimbursements, you’ll need to have the ability to conduct ongoing negotiations on out-of-network claims with third-party administrators and insurances.


3. Offer infusion and/or other biologics. Drugs for inflammatory bowel disease are expensive with small margins. You can’t afford to receive any denials from insurances because you already pay upfront to buy these drugs. However, if billing is rigorous on all claims and there’s suitable patient volume (e.g. patients of Crohn’s disease), then biologics can be a profitable endeavor.


4. Start imaging services. If there’s enough need for imaging in the area and a large patient volume, a practice could consider investing in CT and ultrasound equipment. This creates a new channel of revenues for the practice.


5. Offer hemorrhoid banding. One gastroenterology practice we know improved its overall patient satisfaction levels when it began offering this procedure. It’s relatively simple to offer this procedure and provides faster relief to patients. It can be performed both in the ASC and in an office setting with promising reimbursement levels.


6. Build anesthesia partnerships. Several gastroenterology practices offer anesthesia as an ancillary service at the ASC with great success. It reduces pain for patients during procedures and therefore improves patient satisfaction. Again, anesthesia claims might require separate tracking and negotiation if fee schedules aren’t agreed upon. Note: the Centers for Medicare and Medicaid (CMS) recently made coding changes in anesthesia resulting in a reimbursement drop.


7. Earn from clinical research. If the practice is academically inclined, you can develop a clinical trials program to evaluate new drugs, medical devices or tests. This can add a new revenue stream. For example, gastroenterology practices run trials for ulcerative colitis, irritable bowel syndrome, opioid-induced constipation and so on. It’s important to note that comprehensive research programs have inherent risk and take longterm commitment from doctors to create value.


8. Add nutrition and weight management programs. Unlike some other ancillary services, adding a nutrition program requires less upfront investment. These income streams sometimes work better with a cash payment model. Focusing on diets specific to digestive disorders (e.g. anti reflux diet, FODMAP diet, gastroparesis diet etc.) can help patients manage their conditions better. Some practices offer procedures such as Endoscopic Sleeve Gastroplasty (ESG) and gastric bypass to help patients with weight management.


9. Dispense medicines at your practice. You can consider partnering with an in-house dispensing company and dispensing your top 20 drugs at the office. It saves patients a trip to the pharmacy. Note that laws in some states strictly prohibit drug dispensing at doctors’ offices. Some practices also sell nutrition supplements, vitamins and probiotics that aid in digestive care.


10. Add advanced GI procedures. Procedures such as Peroral Endoscopic Myotomy (POEM) and Endoscopic submucosal dissection (ESD) are advancing the field of endoscopy. Smart Pill and small bowel capsule are others to consider. One of the practices we work with has a partner who focuses mainly on advanced gastroenterology procedures most of the time. Billing and coding is complicated and requires continuous attention to get paid correctly from insurance companies. Adding advanced procedures help practices be recognized as leading the field.


11. Specialized centers of care. Some practices offer specialized centers of expertise for conditions such as Crohn’s Disease, combining endoscopic services, biopsy reviews, infusion therapy, diet, and onsite lab testing. Another example is a liver center to manage liver disease and transplants. More advanced GI groups can consider starting centers of care based on patient needs


Bonus: Offer genetic counseling and diagnostic testing for gastroenterology. More and more patients are getting a genetic test and seeking their doctor’s counsel. While the areas of billing and coding for genomics is still evolving, you can expect this area to grow in demand.

(Aside: Blueprint Genetics offers the following panels for GI: cholestatis, congenital diarrhea, congenital hepatic fibrosis, gastrointestinal atresia, pancreatitis and so on).

Outside of direct contribution to revenues, ancillary services have the benefit of helping patients more comprehensively, improving satisfaction and even attracting new doctors to work at your practice.

These services enhance the practice’s reputation in the community. They create opportunities to serve new patients (and their families) who might’ve otherwise not known about your practice.


  1. GI Practices: Don’t Overlook Ancillary Services For Revenue Growth, Expert Roundtable by Gastroenterology & Endoscopy News.
  2. 9 Ancillary Services That Can Boost Practice Revenue, Medscape.


Originally published on LinkedIn,  by Praveen Suthrum, President & Co-Founder, NextServices. 

This article is part of our latest book, Private Equity in Gastroenterology: Navigating the Next Wave. Click here for the ebook and here for paperback.

Image Credit: Singkham from Pexels

07 Feb 2019

Understanding 6 trends shaping healthcare through one specialty: gastroenterology

If you throw a pebble today, it’s likely to land on an article that talks about how artificial intelligence and its brother machine learning are changing healthcare.

Yes, I get it broadly. But I was curious to explore how exactly healthcare’s trends are shaping any one medical specialty. I chose gastroenterology (GI) because I’m most familiar with the space. And here’s what I found.

Trend #1: Manipulating bacteria in your stomach (Microbiome)

We are still a long way from fully understanding the microbiome (the microorganisms in our body). However, fecal transplants (it’s what you think – restoring bacteria by infusing stool of a healthy donor) have shown promising results. Especially for inflammatory conditions such as C. Diff Colitis and autoimmune conditions such as inflammatory bowel disease.

The human microbiome industry is expected to be worth $3.2B by 2024. The company, Commense develops approaches to “guide the priming, seeding, and maintaining of the microbiome in infants and children”. Openbiome is a non-profit stoolbank promoting safe access to fecal transplants (by the way, they offer $40/session).

Just as with genetic editing, the future may offer the ability programmatically manipulate a patient’s microbiome to result in better health.

Refer: Is The Future Of Microbiome Research Already Here?

Trend #2: Genetic editing for stomach cancer (Genomics)

In 2018, a Chinese scientist claimed that he produced the world’s first CRISPR babies (gene-edited ones). There are several companies (e.g. Myriad Genetics) working to tackle specific conditions such as beta-thelassemia (blood disorder).

GI isn’t too far. Research suggests that CRISPR-Cas9 technology can be used to genetically modify organoids. To understand GI diseases such as pancreatic cancer, gastric cancer better.

Refer: Modeling Human Digestive Diseases With CRISPR-Cas9–Modified Organoids

Trend #3: Computer vision to detect polyps (AI)

Detecting adenomas (benign tumors) is the holy grail of colonoscopies that GI doctors routinely perform. With the help of AI, doctors could potential detect adenomas with greater accuracy.

As an alternative to traditional colonoscopy, video capsule enteroscopy offers videos via a capsule that traverses through a patient’s digestive tract. 50,000 images are captured over a period of 8-72 hours. AI can ‘view’ these images and videos and highlight polyps (small growths) that the human eye can miss.

Refer: Development and validation of a deep-learning algorithm for the detection of polyps during colonoscopy (Nature)

Trend #4: Fitbit for the abdomen (Wearables)

Monitoring electrical activity of the stomach has been in the works. The stomach sensor syncs with an app to send signals of gastrointestinal events (think bowel moments).

Startup GI Logic developed a biosensor to listen to the abdomen and classify the signals via Abstats. The Wearable device suggests a new way to monitor patients to before/after GI procedures.

Refer: Tummy Tech Tracks Electrical Activity for Signs of Indigestion (IEEE Spectrum)

Trend #5: Minimally invasive GI procedures (Robotics)

Endoscopic procedures such as Peroral Endoscopic Myotomy (called POEM, to treat achalasia), Natural orifice transluminal endoscopic surgery (called NOTES, to remove gallbladder) are on the rise. They offer benefits of faster recovery, less pain, potential for scarless procedures and so on.

A variety of devices, instruments, scopes, imaging techniques are making these advanced endoscopic procedures possible.

Refer: Robotics for Natural Orifice Transluminal Endoscopic Surgery: A Review

Trend #6: Customizing accessories to remove difficult lesions (3D printing)

Not limiting itself to printing models of damaged parts, 3D printing aims to print tissues of organs themselves.

Closer to the present, gastroenterologists are experimenting with 3D printing custom endoscopic caps (accessories that attach to a scope) to remove difficult-to-target lesions in procedures such as endoscopic mucosal resection (EMR). EMR is yet another procedure to remove cancerous lesions from the stomach.

Refer: Mo1520 New Technique for GI Endoscopy Using 3D Printing (GIE Gastrointestinal Endoscopy)

Connecting the dots: So what?

The science part of healthcare has always progressed rapidly. Making it easier for patients and doctors alike. There’s nothing really new about that.

What’s new this time is this: the pace of change outside of healthcare is changing.

AI. 3D printing. Robotics. Sensors. Programmatic tools to edit genes.

These trends are converging. Creating new combinations.

So what?

Majority of the GI space circles around traditional procedures such as colonoscopy. Patients have abdominal pain or are at risk of colon cancer. GI doctors perform colonoscopies. Bill for them. Insurances reimburse. Even software is developed around these themes.

But this everyday model for GI is changing. Not exactly because of changes in GI. Not even limited to changes within healthcare.

But because of changes outside of healthcare.

And when you delve into one specialty, it has the potential to tell you the story of all others.

That’s exactly why it’s important to connect these dots.


Originally published on LinkedIn,  by Praveen Suthrum, President & Co-Founder, NextServices. 

Image Credit: Pixabay

22 Jan 2019

Four insights from healthcare’s imminent future

Instead of driving on the highway, let’s imagine you drove upwards from wherever you are…you’ll reach space in about an hour.

On your way up, you’ll begin to see everything differently. Cities, roads and trees slowly blur out to make way for a new kind of reality. Converging. Diverging. Both at the same time.

What appears dissimilar on the ground (trees and shrubs) will appear similar (green). What unites on the ground (mountains and rivers of a country) will appear cleanly fragmented (land and water).

Observing healthcare from space. Playing the game with healthcare…

When you zoom out, you’ll see the industry differently. You’ll see it in tandem with other changes that are changing it.

You’ll see how quickly it’s changing. And where. You might even discover why.

View #1: A smaller, similar, consolidated world

In 2018, 715 private equity deals created a value of $103.72 billion. It’s a new record for healthcare. One big driver for this frenzied deal-making is targeted consolidation. Private equity is zooming out to connect disparate dots to create newer, larger formations. They are creating a forest out of the trees.

I’m seeing this unfold live in the space that we largely serve (gastroenterology).

View #2: Unrelenting, unstoppable changes driven by technology

If your job hasn’t been touched by AI, it’ll surely soon be. Many millions in healthcare will be displaced, especially those dealing with routine, repeatable, pattern-oriented work. Not just transactional activities like billing but also medicine itself.

In 2018, FDA-approved watches began reading EKGs and using that data to detectconditions such as hyperkalemia (high potassium). In the future, algorithms would allow “self-driving” in procedures such as colonoscopy.

View #3: Societal aspirations of living healthier, stronger, sexier and longer 

What we want out of our bodies is no secret. If we are sick, we want to be healthy. If we are healthy, we want to be strong. If we are healthy and strong, we want to be sexy. If we are healthy, strong, and sexy, we want our bodies to last forever.

Biotechnology research is keen to make these desires possible. In 2018, a Chinese scientist claimed he’s produced the world’s first CRISPR babies (gene-edited ones).

Read: Yuval Noah Harari’s writing offers an in depth analysis of where such developments might lead to in the future. His latest book deals with the present.

View #4: Data dominance 

Amazon, Apple, Google, Microsoft have all made big healthcare moves in 2018. Amazon bought an online pharmacy, launched its own healthcare venture and created a medical AI cloud service. Apple created an app to detect irregular heart beats. By tinkering body’s information, Google plans on extending life.

You’d note that all of them are data-hungry, technology Goliaths. With data, they will learn how to do healthcare even better by connecting disparate dots (e.g. Alexa detecting that you have a cold, Amazon suggesting cold meds).


Let’s connect the dots

When you connect these dots, you’ll observe some straightforward maps.

  1. The healthcare industry will consolidate, corporatize and be more and more unified.
  2. Reliance on data and technology will limit us from functioning outside the grid. No more doctors without computers or computers without doctors.
  3. The industry will go through many phases of frustration and confusion before the dust settles. And then it’ll disrupt all over again because of further advancements.
  4. Scope of healthcare will range widely. From fixing sickness to designing babies.
  5. Our healthcare decisions will be guided (and possibly manipulated) by countless algorithms and people who control them.


What do we do?

At some point this year, I realized that we are in the middle of a massive wave. And there’s no stopping it.

Healthcare is changing for good.

No one can tell us where this wave will take us. So, what do we do?

Instead of worrying about the wave or trying to escape it, we must choose to shape what’s to follow. Not with newer technological widgets. But with our moral and ethical compasses. That we are already genetically blessed with.


Originally published on LinkedIn,  by Praveen Suthrum, President & Co-Founder, NextServices. 

Image Credit: Ky0n Cheng @Flickr

31 Dec 2018

Uber and Lyft ride into healthcare. What to expect (and what not to)

Here’s the premise.

36 million American patients miss their medical appointments. If only they had a ride waiting outside, they’d make it to the doctor’s office.

Uber and Lyft have both made announcements in healthcare this month. And why not? In recent months, Apple, Amazon, Google, Berkshire Hathaway have all plugged into healthcare.

Here are a few headlines that recap this ride-sharing story.

Uber wants your doctor to call you a ride to your next checkup

Know the Risks When Using Uber Health, Lyft

Whoa, Uber’s New Service Will Drive You to the Doctor for Free

New BCBS Institute working with Lyft, CVS, Walgreens to tackle social determinants

Lyft announces integration with Allscripts EHR system, allowing 180,000 doctors to hail rides for patients

Five Things to Know About the Uber and Lyft Provider Partnerships

Basically, the doctor’s office or the hospital would hail a ride. A patient would hop in, possibly share the ride with other patients. Helping providers not lose money in missed appointments ($150 billion per year). Helping patients not fall sicker by skipping those appointments. Further, sick patients end up in acute care burdening the system more and more.

I get the logic.

Just that I see a few bugs in it. More so because we are practically in the trenches with doctors everyday.

Why patients don’t show up (really)

JAMA just published findings from a clinical trial of 786 adults with Medicaid. This is what they found:

“Offering a rideshare-based transportation service may not decrease missed primary care appointments.”

The Annals of Family Medicine published this study in 2004. Why We Don’t Come: Patient Perceptions on No-Shows. Before Uber or Lyft existed.

Patient “no-shows” is a big problem for doctors. But you rarely hear that they didn’t show up because they couldn’t get a ride.

The 3 big reasons that the Annals of Family Medicine study found were:

  • Emotions
  • Perceived disrespect
  • Not understanding the scheduling system

Here’s quoting from the study:

“Appointment making among these participants was driven by immediate symptoms and a desire for self-care. At the same time, many of these participants experienced anticipatory fear and anxiety about both procedures and bad news. Participants did not feel obligated to keep a scheduled appointment in part because they felt disrespected by the health care system. The effect of this feeling was compounded by participants’ lack of understanding of the scheduling system.”

This does sound right.

There’s another study, Why do patients not keep their appointments? Prospective study in a gastroenterology outpatient clinic. The findings:

“Forgot to attend or to cancel (30%); no reason (26%); clerical errors (10%); felt better (8%), fearful of being seen by junior doctor (3%); inpatient in another hospital (3%); miscellaneous other (20%). 13 (27%) of the review patients had not kept one or more previous appointments.”

In our experience, this sounds perfectly reasonable. More than a quarter of them cited “no reason”!

There are also unexpressed financial reasons. By showing up, patients need to face up to deductibles and co-pays. It’s not always that they want to pay up.

Several articles talked about how the rides would help lower income populations.

The reality is doctors struggle to get paid by Medicaid (insurance that covers lower income). They never know if they’d get paid for the service they are about to provide. They do it anyways.

It seems unreasonable to expect that over-stretched doctors and staff would now hail a ride for patients via the EHR.

EVEN IF we do call Uber from the EHR

I was recently in a meeting at a large hospital in the east coast of US. It’s easily considered one of the world’s best. The doctors don’t really have a problem patients showing up. It’s what happens after they do.

Here’s where they are stuck.

They see a patient. Order a test. Or schedule a procedure. The billing office calls the insurance to get “prior authorization” for the procedure. Insurances make it difficult to provide prior auths. The game goes on for several days. The billing office is overwhelmed by the many prior auth requests. Finally after 30+ days (on average), the patient ends up on the procedure table. Getting the care she rode in for.

Now imagine in the above everyday scenario, the doctor or her staff does call Uber for their patient. Possibly via their EHR. Of course, the integration is cool (for tech folks, not necessarily for doctors). It won’t necessarily help the patient get care faster. It won’t help doctors get paid for that care or service.

In fact, what it is is this. It’s convenient. Like ordering food online. It may not really solve our clinical or economic burden in healthcare. It adds a layer of easy. And that’s a good thing too.

May be we should say just that.


Originally published on LinkedIn,  by Praveen Suthrum, President & Co-Founder, NextServices. 

Image Credit: Pexels

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