Who employs your doctor? Increasingly, private equity firm

In recent years, private equity firms have been gobbling up doctors’ practices to form powerful medical groups across the country, according to New report Released Monday.

in more than a quarter of the local markets – in places like Tucson, Arizona; Columbus, Ohio; And Providence, RI—One private equity firm owned more than 30 percent of practices in a particular specialty in 2021. In 13 percent of markets, companies owned groups that employed more than half of local professionals.

Medical groups were associated with higher prices in their respective markets, particularly when they commanded a dominant share, according to a paper by researchers at Beatrice Center at the University of California, Berkeley, and Washington Center for Equitable GrowthA progressive think tank in Washington, D.C. When the company controlled more than 30 percent of the market, the cost of care in three specialties — gastroenterology, dermatology, and obstetrics and gynecology — increased by double.

The paper documented large private equity purchases across multiple medical specialties over the past decade. Urology, ophthalmology, cardiology, oncology, radiology and orthopedics were also prime targets for such deals.

“It’s awful when you look at it,” said Laura Alexander, director of markets and competition policy at the Washington Center, who said that private equity firms dominated only a handful of markets a decade ago. By looking at individual markets, the researchers were able to document the local impact. “National prices mask this more acute problem in domestic markets,” she said.

Higher rates paid by private insurance companies contribute to higher premiums, and may increase patients’ out-of-pocket costs.

Private equity firms, which pool money from institutional and individual investors to form investment funds, tend to buy companies using debt, with an eye on reselling them within a few years. The industry has shifted to health care fairly recently, but it’s started buying up doctors’ offices at a steady clip, and combining smaller practices to form larger companies.

When it bought the private equity arm of a Canadian pension fund, OMERS Private Equity Digestive health, a large gastroenterology medical group, in 2021 set out to acquire nearly a dozen smaller practices, according to the researchers, who say the group is now dominant in markets including the Miami area. The company now operates in seven states, and employs more than 390 physicians. The researchers saw similar patterns in other markets, where a company buys one large practice, then increases market share by adding smaller nearby practices in the same medical specialty.

Historically, doctors’ practices were relatively small, and owned by the doctors themselves. But this model is rapidly declining as the trade in medicine becomes more complex and the insurance companies that negotiate prices with doctors become larger. Nearly 70 percent of all physicians were working for a hospital or company in 2021, according to final analysis From the Institute for the Advocacy of Physicians.

“We are seeing a fundamental change in how medicine is practiced in the United States,” said Richard Scheffler, professor of health economics and public policy at Berkeley and director of the Beatrice Center.

Hospitals and insurance companies have also bought many of the independent doctors’ offices. Optum, the arm of publicly traded UnitedHealth Group, which also owns one of the nation’s largest insurance companies, employs nearly 70,000 physicians. Studies have shown that these types of concentrated ownership of physicians in a particular market are also linked higher prices.

Private equity is often viewed by physicians as an attractive alternative to having their clinic bought out by a hospital. Physicians are “partially gaining greater scope and gaining competencies,” including helping with office management and technology, said Lisa Wokosch, director of national management for professional services firm Grant Thornton. “It could be a really good thing, but private equity firms have to keep their promises and be held accountable,” she said.

Private equity firms “provide scale that allows independent practice groups to survive and maintain their independence,” said Michael Kroen, founder and CEO of Physician Growth Partners, a Chicago firm that advises independent practices. If they can, given their high costs and how pressured they feel by insurance companies, “every independent group wants to increase their fees,” he said.

The private equity industry is beginning to attract particular scrutiny from researchers and policymakers. Lawmakers in the House of Representatives are studying legislation To request more reports when companies buy healthcare companies. Right now, it can be difficult to keep track of acquisitions. The authors of the new paper relied on data on deals from a company called PitchBook, which they then matched against physicians in a healthcare claims database to gauge payments from private health insurers.

The researchers couldn’t be sure whether the increases in payments they measured occurred because doctors were performing more complex procedures or simply negotiating higher prices, but they suspected that rates explained most of the effect.

Previous studies of acquired private equity Hospitals And physician practices Zirui Song, associate professor of health policy and medicine at Harvard Medical School, also documented the increase in revenue associated with purchases. In an interview, Dr. Song said he expects the industry to continue buying doctors’ offices in the coming years. “We still have a lot of small specialty practices that are physician-owned,” he said. “This is an opportunity for unification. It is an easy opportunity.”

Industry critics, including Professor Scheffler, have raised concerns about medical care provided by privately held healthcare companies, arguing that the industry’s focus on profits can cause harm to patients. Search for private equity ownership nursing home Shown evidence of lower levels of employment and higher rates of prescriptions for antipsychotic medications.

But little rigorous research has been published on patient care in the office medical specialties that the new paper focuses on.

How the change in ownership and autonomy affects doctors and how they treat patients has been “strongly understudied,” said Barack Richman, a Duke University law and business professor who reviewed the paper. But he said there is evidence that these companies are skilled at exploiting loopholes in existing regulations to maximize their profits.

“Private property is like a system on steroids,” said Sherry Glade, dean of the Wagner School of Public Service at New York University. “Every time there is an opportunity to make money, PE will move faster than anyone else. Consolidation is the way to do it.”

As federal regulators consider changes to how they oversee these deals, the researchers say the report underscores the need to pay attention to what happens when a company makes a series of seemingly modest acquisitions. “This builds the case for powerful antitrust tools for these growing small but collectively larger consolidation trends,” said Erin Fuse-Brown, director of the Center on Law, Health, and Society at Georgia State University.