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Gastroenterology Serviceson the UpswingM&A Market Update Q3 20220
Gastroenterology Services Market: A Highly Attractive InvestmentOpportunityThe gastroenterology services market continues to show high levels of activity, with accelerating dealmomentum across the country as consolidation trends continue to take hold of the market.ATTRACTIVE MARKET TAILWINDS Professional and facility fees remain relatively similar to prior years,STABLEREIMBURSEMENTENVIRONMENTwith some reimbursement rates increasing given further hospitalprice transparency as ambulatory surgery center (ASC)reimbursement rates come more in line with hospital-basedoutpatient department (HOPD) rates1Aging Population, Including Increasing 65 Cohort2Increasing Diagnoses / Prevalence of GI Diseases3Decrease in Recommended Colorectal ScreeningAge From 50 to 454Continued Shift in Surgery Expansion to ASCs Expansion of ancillary service offerings, including ASCs, in-officeMARGIN IGHLY FRAGMENTEDMARKETendoscopy suites, anesthesia, and pathology, drive top-line growthwhile scale and workflow optimization enhancements drive bottomline margin expansion Advanced endoscopic technological innovations and other ancillaryservices improve efficiency metrics, patient satisfaction andoutcomes, and quality measures Despite recent emergence of several platforms, significantconsolidation opportunity remains, with over 1,300 unconsolidated practices across the country1
Gastroenterology Services Market SnapshotOVERVIEW AND KEY TAKEAWAYSGASTROENTEROLOGIST DYNAMICS Healthy growth driven by an aging population, increasingprevalence of chronic conditions, broad insurance coverage,and technological advancementsCompensation Early stage of consolidation, but is accelerating with privateequity buyers leading the charge American Cancer Society advocating screening at 45 yearsof age (not 50), as colorectal cancer is the third mostcommon internal cancer Non-discretionary nature has produced stabilization postpandemic, despite significant dip in March / April 20203Practices with main specialty of gastroenterology43 15255 3 Physicians2,100 GIPhysicianPractices inthe U.S. 1,381Compensation in the gastroenterology field is at thehigher end of the spectrum and will likely increase giventhe growing shortage of practicing gastroenterologistsrelative to the increasing demand for servicesRecruitment23 to 5 PhysiciansThe U.S. GI physician shortage is expected to exceed1,600 physicians in 2025, resulting from increaseddemand for screening and preventive medicine by anaging population(2)Given barriers, including startup costs and requiredtechnological infrastructure, gastroenterologists arebecoming more likely to join larger organizations torecognize benefits of scale 35M2021 GastrointestinalServices Market Size(4)60M – 70MPeople Affected byDigestive Diseases(5)Private Insurance20 to 44 PhysiciansMedicaid40%30%20%Workers' Compensation5%TriCare / CHAMPUS / VA5%Self-Pay and Sliding-Fee Schedule5%Uncompensated Care5%6. Association of American Medical Colleges7. Centers for Disease Control and Prevention8. Merritt Hawkins 2022 ReportIndustry CAGR(4)15,450 Active GastroenterologyPhysicians(6)U.S. GASTRO PAYOR MIX: MEDIAN % BY COVERAGE(3)Medicare1. Definitive Healthcare2. Merritt Hawkins3. National Commission on Certification of Physician Assistants4. Insights 20225. NIDDKInning ofConsolidation 3%6 to 19 Physicians 45 Physicians3rdSTATISTICSRetentionU.S. GI PHYSICIAN PRACTICES(1)4181Assessment71.6%2020 Colorectal CancerScreening Rate(7) 486kAvg. PhysicianCompensation(8)2KEY: Circle fill represents attractiveness toinvestor / consolidator2
Gastroenterology Landscape: Platform DynamicsConsolidation within the gastroenterology vertical remains in its infancy with growing interest frominstitutional capital.No SponsorSponsor-Backed All but three platforms have fewer than 100 clinics in their portfolio, but several scaling independent practices represent attractiveplatform opportunities GI Alliance is the largest platform of scale with 290 clinics and 1,195 physiciansMega PlatformsMedium PlatformsGrowing Platforms( 200 Clinics)(100 – 200 Clinics)( 100 Clinics) Two established platforms of this scale Integration is key to successfully continuing tobuild density across regions As smaller platforms consolidate and scale,some private-equity-backed platforms willachieve scale of 100 clinics Most platforms within this space fall within thiscategory Generally focused locally or regionallyMedium platforms will have revenuediversification, including robust ancillary serviceofferings Institutional capital beginning to make inroadsto create platforms of scale Investment in infrastructure and managementrequired//////None////NoneSource: Harris Williams market research3
Gastroenterology Landscape: How Did We Get Here?20172 0 1 6 (1)DouglasWeissman,GI rePeakPhysicians ofNorthern N.J.Center for2021GI AssociatesBethesdaEndoscopyCenterHudson BergenMedical CenterTemple HillsGastroenterologyCOVID-19Five ASCsContactSouth urneEndoscopyCenterCasesfor Complete DetailPottstownASCDespite a reduction in deals duringthe pandemic, platform and addon acquisitions re-accelerated inlate 2020 and early 2021North CoastEndoscopyPlatform AcquisitionDigestive DiseaseCenter of NJ1. Company acquisition data from Mergermarket, Becker’s Healthcare, Capital IQ, and Harris Williams proprietary information2. Acquisitions are meant to be illustrative and are not exhaustive4
Gastroenterology Platform Profiles////Company Description:Company Description:Company Description:Company Description: Provider of healthcare servicesintended for patients with digestiveproblems Provider of medical services intendedfor the treatment of gastrointestinaldisorders, nutrition, and digestivehealth The company's services includegastrointestinal disorders treatment,fast-track colonoscopy, colorectalsurgery, hepatology, pathology, andother such treatments Provider of ambulatory endoscopyservices Provider of gastroenterology servicesin Georgia and throughout thesoutheastKey Statistics(1):Vintage:Headquarters:# of Locations:# of Providers:# of Acquisitions:Key Statistics(1):Vintage:Headquarters:# of Locations:# of Providers:# of Acquisitions: The company's offerings include carefor patients with concerns involvingthe esophagus, stomach, small bowel,colon, rectum, gallbladder, pancreas,and liverKey Statistics(1):Vintage:Headquarters:# of Locations:# of Providers:# of Acquisitions:November 2018Southlake, TX290 1,195 30 Geographic Coverage:May 2021Miami, FL205 485 25 Geographic Coverage:Company LocationsCompany Locations The company specializes in thedevelopment and management offreestanding, single-specialtyendoscopic ambulatory surgerycenters in partnership with practicingphysicians and hospitalsAugust 2016Jamison, PA 100600 15 Geographic Coverage:Company Locations The company offers a strongoperational infrastructure forgastrointestinal practices, includingregulatory assistance, managed careresources, and a full-service backofficeKey Statistics(1):Vintage:Headquarters:# of Locations:# of Providers:# of Acquisitions:December 2018Atlanta, GA80 200 5 Geographic Coverage:Company Locations1. Company data from publicly available sources, as of July 1, 20225
Gastroenterology Platform Profiles (cont’d)////Company Description:Company Description:Company Description:Company Description: Largest provider of gastroenterologyservices and ancillary patientdiagnostic and remedial treatmentservices in Colorado and Wyoming The group treats commongastrointestinal disorders andprovides ancillary services, includinganesthesia, pain management, clinicalresearch, and pathology Provider of gastroenterology servicesacross New Jersey Provider of gastrointestinal disorderand nutritional problem treatmentoptions Collective of gastroenterology acrossPennsylvania The affiliates offer digestive andcolorectal health treatmentprocedures for colon polyps,diverticulosis, IBS, GERD, and otherroutine or more complex diagnosesKey Statistics(1):Vintage:December 2019Headquarters: Colorado Springs, CO# of Locations: 50# of Providers: 50# of Acquisitions:1Key Statistics(1):Vintage:January 2021Headquarters: West Long Beach, NJ# of Locations:40 # of Providers:100 # of Acquisitions:5 Key Statistics(1):Vintage:Headquarters:# of Locations:# of Providers:# of Acquisitions:Geographic Coverage:Geographic Coverage:Geographic Coverage:Company Locations The company offers services acrossgastroenterology, pathology,anesthesiology, nurse practitioner,and physician assistant servicesCompany Locations The company's services includecapsule endoscopy, esophageal pHtesting, fibroscan, single-balloonenteroscopy, and many othertreatmentsApril 2020Brentwood, TN 40100 5 Company LocationsKey Statistics(1):Vintage:Headquarters:# of Locations:# of Providers:# of Acquisitions:June 2019Exton, PA 40 1455 Geographic Coverage:Company Locations1. Company data from publicly available sources, as of July 1, 20226
Gastroenterology Platform Profiles (cont’d)//Company Description:Company Description: Provider of diagnostic endoscopicprocedures with locations acrossMichigan Provider of gastroenterology servicesin Orlando and Tampa The group provides a comprehensiverange of specialized gastrointestinaltreatment Pinnacle GI services includesultrasounds, liver disease studies,reflux diagnosis, and othermanagement and motility studiesKey Statistics(1):Vintage:Headquarters:# of Locations:# of Providers:# of Acquisitions:December 2020Rochester Hills, MI20 40 3Geographic Coverage:Key Statistics(1):Vintage:Headquarters:# of Locations:# of Providers:# of Acquisitions:November 2019Tampa, FL 10 201Geographic Coverage:Company LocationsCompany Locations1. Company data from publicly available sources, as of July 1, 20227
A Collaborative Approach to Consumer HealthcareWe pool the expertise in consumer, healthcare and life sciences, and technology to advise premiercompanies across the consumer healthcare landscape.Select Recent TransactionsFor more information on our experiencein the gastroenterology sector, contact us:Physical TherapyGeoff SmithNate RobertsonManaging Director and Co-HeadHealthcare & Life Sciences Groupgsmith@harriswilliams.com 1 804.915.0195DirectorHealthcare & Life Sciences Groupnrobertson@harriswilliams.com 1 lityBehavioralCorey BenjaminAndy DixonWhit KnierDan LinsalataBeau PierceManaging DirectorConsumer Groupcbenjamin@harriswilliams.com 1 804.932.1342Managing DirectorHealthcare & Life Sciences Groupadixon@harriswilliams.com 1 415.217.3419Managing DirectorHealthcare & Life Sciences Groupwknier@harriswilliams.com 1 804.932.1321Managing DirectorTechnology Groupdlinsalata@harriswilliams.com 1 617.654.2122DirectorConsumer Groupbpierce@harriswilliams.com 1 804.887.61138
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Association of American Medical Colleges 7. Centers for Disease Control and Prevention 8. Merritt Hawkins 2022 Report 1,381 255 418 43 15 . Douglas Weissman, GI Practice Orlando Torres Digestive Health Physicians Central Florida GI Digestive . GA 80 200 5 6 Company Description: Provider of gastroenterology services
