Figure 1.

When private equity (PE) firms back gastroenterology practices, they may form a management services organization (MSO) that is responsible for the administrative aspects of a practice. PE investors own a majority share of this MSO and can offer the leadership of the practices an ownership stake as well. In exchange for having an MSO to take care of back-office tasks, the practices pay a fee to the MSO. The same MSO can service multiple gastroenterology practices as PE firms seek to enhance the performance of various practices through mergers and acquisitions. Part of the strategy to attract a lot of gastroenterology practices involves partnering with a large group first, called the platform practice, and then acquiring smaller add-on practices—leveraging the same MSO for all entities, which is illustrated by the real-world example highlighted in Figure 3.