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Private Equity vs. Health Care

Private equity in health care is causing widespread problems. Regulation is not the solution. Comprehensive reform with a lead public role is.

March 11, 2024

Private Equity-Acquired Physician Practices and Market Penetration Increased Substantially. 2012-21
Health Affairs
March 2024
By Ola Abdelhadi et al.

Private equity (PE) firms have consistently shown an upward trend and an increased interest in acquiring various medical specialties within physician practices. Our analysis revealed evidence of a recent increase in PE market penetration at the physician level across multiple specialties, particularly gastroenterology, dermatology, and urology. We found that specialties such as primary care, obstetrics-gynecology, radiology, orthopedics, and oncology also showed considerable increases from 2012 to 2021. Acquisition of these practices may be attractive to PE firms because of the fragmentation of the practices and increasing patient demands as the result of an aging population and rising private insurance coverage.

This upsurge in acquisitions, particularly after 2010, has raised concerns about their impact on PE market penetration. Previous studies showed an increase in PE acquisitions of physician practices between 2013 and 2016, resulting in expansion and higher prices without any impact on the quality of health care services. Our findings indicate that in specific local markets, PE firms hold market shares exceeding 30 percent and 50 percent, sometimes by a significant margin. This trend raises concerns about its potential impact on competition, patient care, and prices in those local markets.

PE firms tend to prioritize short-term profit maximization over long term investment in patient care and infrastructure, implement aggressive acquisition strategies that may curtail patient choice and competition, use complex financial structures and leverage to finance acquisitions, and possess limited experience in the health care industry – all of which may lead to difficulties in managing and enhancing patient care.

The findings raise concerns about competition and call for closer scrutiny by the Federal Trade Commission, state regulators, and policy makers.

Private Capital, Public Impact: An FTC Workshop on Private Equity in Health Care
March 5, 2024

Opening Remarks

Lina M. Khan, Chair, Federal Trade Commission
Jonathan Kanter, Asst Attorney General of the Antitrust Division, Dept of Justice
Christi A. Grimm, Inspector General, Dept of Health and Human Services
Jonathan Blum, Principal Dep. Administrator & COO, Centers for Medicare & Medicaid Services

Comment by Patty Harvey:
The March 5 webinar on private equity et al. in health care carefully enumerated the drawbacks and dangers of privatized health care in the U.S. All of this was duly documented and verified by the speakers as well as by personal anecdotes. We all have had brushes with the downsides of a health-care system that prioritizes profit and the experiences of Atty General of R.I., Peter Neronha, were especially revelatory as he described endless battles against phalanxes of high powered and richly funded attorneys protecting the private equity juggernaut. He observes, briefly in conclusion, that ‘all private equity should be kept a thousand miles from health care.’ When panelists were asked for real remedies for this worrisome privatization scourge, the band aids proposed were: “increase transparency, close loopholes and levy fines for malfeasance.” What is strange is that the obvious was never suggested even while it was implied by Mr. Neronha: that no matter what regulations, punishments or vigilance is brought to profiteering, those who stand to profit will never cease to find ways to accomplish their goal. Given this reality, why are we ignoring the obvious solution; namely, a healthcare system that is publicly provided by a single payer, especially a governmental agency, that takes no profit and streamlines in its singularity all administrative activity, that would, at the same time, obviate the need and role for these predatory profit seekers? We don’t allow a profit motive in many of our public institutions—police, fire, public education, libraries and many more operate for the common good. How much more crucial to universal human need is the need for life-saving medical support? Why do we allow profit-seeking middlemen to take over this job, when the result is universally lower quality and higher cost? We need to petition the CMS to adopt pilot programs that explore the implementation of a universal, guaranteed, single-payer, not-for-profit healthcare system instead of grinding us down with these bogus, dangerous and destructive privatization programs. The March 5 webinar exposed many important realities. The neglect was to ignore the most obvious solution.


Comment by: Don McCanne & Jim Kahn

The negative consequences of the role of private equity in our health system are finally receiving much-needed attention. We can now see why health care costs have been increasing without the improvement in quality and expanded coverage that we would expect for what we spend.

What is sad is that Arnold Relman warned us so long ago about the medical-industrial complex, and we did nothing. Then, more recently, individuals such as Laura Katz Olson in her book “Ethically Challenged” sounded the alarm about private equity (HJM post), and we still haven’t done what is needed to correct these deficiencies.

While we dither, afraid of a core public role in health care, the private equity market is exploding, lucrative for investors and deleterious for health care providers and, above all, patients.

The US government workshop convened on March 5th focused attention on this profound problem. Yet, as Patty Harvey’s comment so poignantly highlights, there was no mention of the real solutions — a “universal, guaranteed, single-payer, not-for-profit healthcare system”.

Although single payer financing would resolve many issues in ensuring access to affordable health care for all, the issue of provider ownership must also be addressed to avoid the adverse consequences caused by private equity. Wouldn’t it be better for doctors and hospitals to be publicly owned wherein they deliver health care to patients without profits for passive investors? Everyone can receive care from public-spirited providers, without accruing medical debt, fairly funded by progressive taxes.

The article authors and webinar presenters argue for transparency and regulation of the private owners. But with public ownership, transparency would be automatic since we would all be owners.

The authors correctly state that rising private insurance coverage has made private health care system purchases more attractive to private equity. Yet private insurance itself has been a major contributor to our health care inequities and dysfunctions – one more compelling reason to switch to single payer.

Suppose we listen to those people who say that we don’t want the government involved in ownership. Who would pay the outrageous purchase prices that private equity firms want when they sell entities that they have drained of value? Where in the private sector is the money going to come from? Inevitably it would still be some form of private equity, with or without health care providers … buying money opportunities, not health care.

Regulators alone are not going to save us from the billionaire private equity predators. The only way we are going to take health care back is for all of us to take public ownership together. No? Then read the full Health Affairs article and listen to the workshop to understand what to expect in the near future – venture capitalists have all the money and we have a seriously underperforming, dysfunctional mess of a health care system. Not that we aren’t already well on our way there.

About the Commentator, Don McCanne

Don McCanne is a retired family practitioner who dedicated the 2nd phase of his career to speaking and writing extensively on single payer and related issues. He served as Physicians for a National Health Program president in 2002 and 2003, then as Senior Health Policy Fellow. For two decades, Don wrote "Quote of the Day", a daily health policy update which inspired HJM.

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