Hartford Business Journal

HARTFORDBUSINESS.COM | JULY 10, 2023 21 OPERATIONS. MISSION. It takes balance. ©2023 CliftonLarsonAllen LLP. Investment advisory services are offered through CliftonLarsonAllen Wealth Advisors, LLC, an SEC-registered investment advisor. CPAs | CONSULTANTS | WEALTH ADVISORS 860-561-4000 West Hartford CLAconnect.com We'll get you there. specialty with 82 physicians, 45 advanced practice providers, and 400 overall employees providing care in 25 procedure locations. GI Alliance is also seeking permission from state regulators to make a minority investment in Coastal Digestive, a New London-based gastroenterology group. "We wanted to have a national footprint and really felt we needed to be in the Northeast," said GI Alliance CEO and founder Dr. Jim Weber. He said Connecticut has become a regional hub from where his company will continue to expand. After growing his own practice organically for many years, Weber formed GI Alliance in 2018, with a controlling investment from Chicago-based Waud Capital. At that point, the company employed some 130 doctors in Texas and Louisiana. "Physicians really are good at running a medical practice, maybe not running all the intricate back-office business stuff," Weber said. "I didn't want to go down that route, but I said, if we can be patient first, quality-centric, physician-led, I will do this." He recognizes the poor reputation some private equity deals have had in health care. "There's a litany of bad ones," he said. "And most of those, what happens is that the doctors do it as what I call a retirement plan. They want to get a little money for what they've built, but then they back off from really running the practice. And that's a problem." His model is different, relying on his funding partners for back-office expertise. "They did help us find some really great business people for our executive team and provided the capital resources to be able to hire those people," he said. "Private equity doesn't help a doctor be a better doctor, or run the practice better from a clinical standpoint." He points to revenue cycle management, financial planning and analysis, accounting and analytics as areas where an outside eye and investment can add value to a physician practice. GI Alliance made another strategic move last year, when it announced a physician-led buyout facilitated by a $785 million, non-controlling invest- ment from another private equity player, Apollo Hybrid Value funds. Weber said having built the business expertise he needed, he wanted to once again take control of the group. "I didn't need (Waud Capital) anymore," he said. "Apollo helped us to get the capital to buy Waud Capital out, and we let them have just a minority share of equity." Weber said doctors now own 85% of the management services organization, while he's serving as CEO and board chair, "not somebody from a private equity company." He also said GI's national scale is redressing the balance of power for his physicians. "As hospital systems and payers and others are consolidating, now we can go to the table with one voice, whether it's in our local metropolitan area, in our state, or even nationally, and they'll actually listen to us as physicians because we're not just a group of three doctors and they don't care — we're a group of 800 doctors in multiple states," he said. Profit vs. patient So, can physicians use private equity as a tool to gain more power in a rapidly consolidating market- place, or is it a dangerous bargain? "In the healthcare field, you are either answer- able to the patient or to the stockholders," said state Sen. Saud Anwar (D-South Windsor). "And that's a big decision that people would have to make at some point." Anwar is a physician and co-chair of the legis- lature's Public Health Committee. During this year's legislative session, he co-sponsored a bill that would have required a study on the impact of banning private equity investment in hospice care. "Private equity by definition is there to make profit for the investors whose primary objective is only profit," he said. "And when we are dealing with humans, and at a critical time, you have to make a decision between the value of human life and profit." He would rather see the healthcare system, regulators and policymakers work together to solve inefficiencies and the need for investment in other ways, like tackling wasteful duplication and paper- work in the insurance system, curbing malpractice lawsuits and improving Medicaid rates. Meantime, state regulators do have purview over some healthcare deals involving private equity firms. But there is concern that some acquisitions still fly under the radar, and a Connecticut physicians' working group in February called for closer regulatory scrutiny on ownership trans- fers involving private equity firms as well as payer/provider organizations. Connecticut is a "corporate practice of medicine" state, meaning that clinical decision-making must legally remain in the hands of physicians, regard- less of the ownership model, said Menchel, the Halloran Sage attorney. Ghumman, the East Granby physician who served on the working group, said there should also be restrictions on the amount of debt private equity firms take on to leverage healthcare-practice buyouts. And, he believes the current trend toward physician group consolidation may be due for a drastic reverse. "This is just not sustainable, and we are watching it unfold and not doing anything. And I think that's a big loss," he said. "We are helping create 'too big to fail' today. And then, who's going to come to the rescue? Taxpayers — you and I."

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