The Future of GI Practices: 5 Strategic Options for Owners

Gastroenterology practice owners face an uncertain future as long-standing challenges, such as complex regulatory requirements and lopsided payor negotiations, converge with the unprecedented pressures of increasing labor costs, physician shortages, and record inflation. No matter what the specialty, physicians who own a practice are finding it difficult and increasingly expensive to hire and retain new physicians, particularly candidates who share their entrepreneurial and partnership goals.

Still, gastroenterology has several specific market advantages, including rising demand for colonoscopies and polypectomies as the population grows older.¹ There are roughly 2,100 GI practices in the United States and most of them are small, with 65% employing fewer than three physicians and 77% with fewer than six.²

Approximately 30% of ambulatory surgery center (ASC) volume is served by GI groups. To meet that demand, many GI practices have established their own ASCs. However, this is an expensive and complicated process, not feasible for most GI groups with only one or two physicians.

Given the complexities of the market environment, GI practice owners must evaluate their strategic options to stay afloat in an increasingly complicated environment. Here are five potential pathways that independent groups should consider.

Pathway 1: Maintain the Status Quo

If maintaining complete independence is a practice owner’s highest priority, continuing normal operations is the only way to ensure it. The upside of this pathway is that it preserves autonomy over the business operations of the practice as well as the medical side, satisfying an owner’s entrepreneurial spirit and avoiding any obligation to compromise. Another advantage is that there is no need to share financial distributions with investors or outside partners.

The downside of independence is largely an opportunity cost. More than half of GI physicians spend in excess of 10 hours per week on bureaucratic tasks, contributing to an already high rate of professional burnout.³ With so much effort required simply to hire staff and complete paperwork, owners who stay the course may find it difficult to make any strategic investment in their future. In particular, owners may be less likely to add new service lines or develop or expand an ASC without an external force guiding new investments or encouraging longer-term thinking.

Pathway 2: Partner With an MSO

Partnering with a management services organization (MSO) or other third party with industry-specific expertise is a smart option for GI practice owners who may want to enhance services or capabilities. For many practices, MSOs will bring new capabilities and additional resources to the table—enabling a smaller practice to launch an ASC, for example, or add infusion services to the existing menu of medical services. Stepping beyond gastroenterology for a moment, MSOs can help any specialty modernize basic operational capacities with call centers, billing and revenue cycle management, and other ancillary additions.

The disadvantage of this assisted growth or modernization is mainly financial. MSOs may be instrumental in the early stages of launching an ASC, including handling logistics, licensing, and other regulatory requirements. But for this assistance, MSOs typically retain a 30% to 40% ownership stake in the center—even after the ASC has been up and running for years. Sacrificing such a sizeable annuity stream may not be a worthwhile trade-off for healthy, well-connected GI practices with a decent growth strategy.

Pathway 3: Merge With an Independent Physician-Owned Group

Another strategic pathway is to scale growth by merging with an established independent practice. This option steers clear of the financial downsides associated with hiring an MSO, as all revenues stay within the organization, but it also demands reconsideration of operational practices, pushing owners beyond the status quo. The two groups together should enjoy greater leverage in purchasing and negotiation and, in theory, the merger will generate operational efficiencies.

In reality, however, mergers can be thorny. Much of the challenge boils down to political conflict: Which CEO will take over the combined enterprise? How will the new entity decide which electronic health record system and workflows will be used? How will revenue and expenses be allocated? The financial implications of the merger are also surprisingly hard to predict. The hope is that the new whole will be greater than the sum of its parts, with increased revenue from expanded services, optimized systems, and economies of scale. The certainty, however, is that decision-making will be more political and operations more complex.

Pathway 4: Pursue External Capital

Private equity (PE) is the most recognized entity in this pathway, but banks and other lenders also are viable sources of capital, particularly for GI practice owners, who can make a strong business case for expansion. Nonetheless, since the first PE investment in an independent gastroenterology practice in March 2016, the specialty has undergone rapid consolidation, “with PE partnerships involving more than 10 platforms spanning more than 20 states.”⁴

PE investment is an attractive option for owners due to the liquidity involved. Getting some of their equity out of the practice reduces owners’ risk profile and enables them to diversify their investments.

In addition to the immediate financial upside, PE promises both resources and strategic growth. These partnerships typically involve establishing new sites of care—most often ASCs—as well as ancillary services such as infusion labs, pathology labs, and other GI-specific services that owners may be reluctant or unable to invest in on their own.

The possible downside of this kind of relationship is that owners no longer have full control over business decisions, although they do retain full clinical autonomy. Providing an influx of capital generally means a say in how the money should be used, but this input can be beneficial to practice operations. It’s important for owners considering PE to choose a partner they can align with and to determine in advance how operational decisions will be handled.

Pathway 5: Join a National Physician Organization

This final pathway is in some ways the simplest. National organizations are built around finding and rolling up existing GI practices, so they have preset financing, ample capital, and all the infrastructure and capabilities required to operate a practice successfully. This simplicity comes with a slight loss of individuality—owners are essentially riding the organization’s coattails—but they also get to leverage the national organization’s leadership and specialty-specific expertise and off-load risk as they expand their service lines. Owners also get a substantial check up front, without sacrificing an equity rollover in the future.

The disadvantage here echoes the downside associated with external capital investment, which is no surprise, considering that most of these national platforms have PE backing. Owners will have to share some of the business-related decision-making with the leaders of the larger platform and reimagine their practice as just one part of a large collective. Most owners do, however, retain full control over their clinical decision-making and authority.

In some ways, this adjustment is indicative of a larger generational trend, with fewer physicians going into private practice every year as more find employment in larger medical practices and hospitals.⁵ In 2021, about 1,000 gastroenterologists were part of PE-supported practices, and the number appears to be increasing.⁴

Building the Future You Want

Where do I want the practice to be in 5 to 10 years? What capabilities, staff, and scale does the practice need to achieve that vision?

GI practice owners will answer these questions differently according to their individual priorities. Across the specialty, however, factors such as growing demand, a sturdy menu of ancillary services, and a relatively fragmented market means that owners have an array of good options from which to choose.

The future success of a practice depends on clearly and fully considering long-term objectives early and throughout the decision-making process. Regardless of the desired strategic path, GI groups will want to enlist a trusted and experienced financial advisor to help guide them throughout this complex journey.

Mr. Colbert specializes in advising physician groups on strategic and financing alternatives, including professional services agreements, mergers/acquisitions, health-system partnerships, joint ventures, MSOs, strategic partnerships, PE deals, and capital investments. More information is available at www.ziegler.com/physician-groups.

References

1. Kaltenbach T, Anderson JC, Burke CA, et al. Endoscopic removal of colorectal lesions—recommendations by the US Multi-Society Task Force on Colorectal Cancer. Gastroenterology. 2020;158(4):1095-1129.
2. Levin D, Janiga N. 2023 Industry Outlook: Gastroenterology practices and ancillary services. Published October 2, 2023. Accessed April 21, 2025. healthcareappraisers.com/2023-industry-outlook-gastroenterology-practices-and-ancillary-services/
3. ModMed research. modmed.com/resources/blog/physician-burnout-and-the-gastroenterologist-lifestyle-how-to-maintain-work-life-balance
4. Gilreath M, Patel NC, Suh J, et al. Gastroenterology physician practice management and private equity: thriving in uncertain times. Clin Gastroenterol Hepatol. 2021;19(6):1084-1087.
5. American Medical Association. AMA analysis shows most physicians work outside of private practice. Published May 5, 2021. Accessed April 21, 2025. ama-assn.org/press-center/press-releases/ama-analysis-shows-most-physicians-work-outside-private-practice