The Physician Medical Group sector has posted blazing merger and acquisition activity in recent years. Annual deal volume in the sector hit 207 deals in 2017, followed by 253 deals in 2018 and 241 deals in 2019.
Enter COVID-19 in 2020. Social distancing is the new norm. Hospitals have been forced to postpone elective surgeries for the foreseeable future, so they and their physician groups are losing much-needed revenue as COVID-19 cases flood emergency rooms and ICUs. Needless to say, many physician practices have had to postpone treatment and delay revenue as patients stay home. All around the country, practices are struggling to stay afloat.
Needless to say, Physician Medical Group deals have dried up. Through mid-April, 31 transactions have been announced this year, 27 of them in the first quarter. Compared with the first quarter of 2019, which had 44 deals, deal volume fell 39% in Q1:2020. Compared with the previous quarter, Q4:2019, which had 63 deals, the first quarter tanked by 57%.
Looking on the positive side, Webster Equity Partners is still betting big on physician groups in 2020. Webster’s portfolio includes opioid treatment firm BayMark Health Services, Bristol Hospice, Discovery Behavioral Health and pediatric home care specialist Epic Health Services.
Now it’s moving to add more physician groups. In March, the private equity firm added Retina Consultants of America, a 50-physician group based in Southlake, Texas. The price was estimated at $350 million, consisting of a $100 million investment from Webster Equity Partners, plus a $250 million LP co-investment, according to PEHub.
In April, the firm moved began building yet another platform, this time in gastroenterology services. The target was Gastro One, a practice based in Germantown, Tennessee, with seven practices and three GI Diagnostic and Therapeutic Endoscopy Centers throughout Tennessee. It is the largest GI practice in the state, with 30 physicians and six advanced practice providers.
Webster Equity committed $80 million in total capital for the platform and renamed it One GI. Gastro One’s Michael Dragutsky, MD, and David Harano will lead One GI as chairman and president, respectively. The goal is to expand the platform, but in this climate, that may be a while coming.
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