Private equity in healthcare: Cardiologists, government officials and advocacy groups share their perspective

Warren detailed the “corporate greed” she sees throughout our modern healthcare system, noting that the Medicare Advantage program may be the single worst offender of them all. She called out the practices of upcoding, for example, while exploring how care denials regularly allow “vertically integrated insurers to disadvantage competitors.”

Another key takeaway from Warren’s response was the fact that PE companies “often engage in a series of small acquisitions to fly under the radar of antitrust scrutiny.”

“Serial roll-ups have become pervasive in the healthcare industry and have resulted in market dominance leading to higher prices, particularly when PE  has been involved,” she wrote. “It is important that your agencies consider this trend in healthcare acquisitions and take a holistic view of market dominance in order to prevent harms to competition and patients.”

Another response that stood out was the 30-page evaluation filed by 11 U.S. attorneys general. California Attorney General Rob Bonta, Connecticut AG William Tong, Delaware AG Kathleen Jennings, Illinois AG Kwame Raoul, Minnesota AG Keith Ellison, New Jersey AG Matthew J. Platkin, Oregon AG Ellen Rosenblum, Pennsylvania AG Michelle A. Henry, Rhode Island AG Peter Neronha, Washington AG Bob Ferguson and Washington, D.C., AG Brian Schwalb all signed the response.

The officials shared their many concerns about consolidation in healthcare, noting that it could have a negative impact on patients. They also noted that PE firms often take full control of the companies they acquire, with “very little of their own funds at stake.” This can cause the firms to take larger risks than they would otherwise, the attorneys general wrote, “pushing the envelope” in a way that can be quite damaging.

The group also highlighted the “lack of transparency” that is often associated with PE investments.

“This is an intentional feature of the PE business model, and it can exacerbate many of the other incentives discussed by masking conduct from investors who may be more risk-averse than the PE firms, due to their larger investment in the funds,” the AGs wrote.

Another key concern of the group is the fact that physicians who have their practices sold to PE firms may be surprised to learn that the benefits are not as significant as they were led to believe.

“PE promises physician practices capital and technology that would otherwise be difficult for independent physician practices to acquire,” the attorneys general wrote. “However, the funding comes with significant concerns. PE firms tend to focus on short-term profits, which increases prices for consumers by having physicians increase the use of expensive treatments and services rather than seeking out lower cost options. Acquisition by PE increases the debt burden of physician practices, which heightens their risk of failure.”

Advocacy groups highlight physician concerns

The Physicians Advocacy Institute (PAI), a nonprofit group focused on advancing “fair and transparent payment policies,” issued its own 28-page evaluation of the negative impact consolidation and PE could have on patient care in the United States.

“Runaway healthcare consolidation poses enormous risks for patients and the physicians who serve them,” PAI CEO Kelly Kenney said in a statement highlighting the group’s response. “As corporate entities buy up more and more physician practices, physicians are rightly concerned that corporations’ allegiance is with shareholders first, putting patients at risk.”

The group fears that patient care, access and healthcare costs will all suffer if these trends continue, noting that the “nature of PE transactions can contribute to a deterioration in a practice’s financial stability.”  

PAI included multiple recommendations in its assessment. The institute suggested that physicians involved in these transactions should “retain clinical autonomy,” for example, and wrote that an increase in regulatory oversight is necessary to ensure PE firms don’t push too hard and do permanent damage to the practices they acquire. The group also recommended modifying payment policies so that consolidation does not make as much financial sense in the future. Passing the right legislation could even cause physicians to wish to return to private practice, PAI contended.

Another advocacy group, the Coalition for Patient-Centered Care (CPCC), presented its own thoughts on the topic. Drawing from the perspective of more than 13,000 physicians, CPCC shared its fear that the rise of PE could impact patient care in a negative way.

“We believe that everyone benefits when physicians have the freedom to exercise their best judgment as to the delivery of care and can work directly with their patients to make medical decisions and deliver patient-centered care,” the group wrote. “PE firms do not share this ideal.”

Cardiologist details positive experience with private equity

An electrophysiologist in New jersey shared his positive experience with PE, noting that after his group was acquired, it “has not changed or influenced one thing about the way we practice medicine.”

Edmund Karam, MD, wrote that he and his colleagues have seen considerable savings since the transaction was finalized, with the organization moving more exams to the outpatient setting. They are also able to negotiate better prices now, he said, “which helps our financial stability.”

“I am sure that you will hear negatives stories about PE involvement in healthcare, but it really all depends on the individual situation,” he wrote. “A failing practice is not going to be magically restored by private equity acquisition. There has to be good substrate to begin with: Physicians and team members who are committed to working hard, yet efficiently, for their patients.”