Doctors Bite the Private Equity Hand That Feeds Them

I accept that two things can be true at the same time, but that doesn’t mean I have to like it.

Similar to working for someone who’s mean, manipulative, verbally abusive, incompetent, unethical and void of any original thought yet beloved by people outside of the organization. Amirite!

That’s the feeling I got after reading two studies on private equity (PE) ownership of physician practices. On one hand physician practices are selling out to PE firms. On the other hand, doctors say PE ownership is worse than other types of practice ownership.

The first study appeared this month in Health Affairs. Four researchers from the University of California at Berkeley and the Federal Trade Commission took a look at how the market penetration of PE-acquired physician practices changed over a 10-year period, from 2012 through 2021. The researchers included 10 types of medical specialties in their study pool. They also compared key characteristics of PE-acquired practices with non-PE practices in 2021.

Here’s what they found:

• The number of PE-owned practice sites increased to 5,779 in 307 metropolitan statistical areas (MSAs) in 2021 from 816 in 119 MSAs in 2012. That’s a more than seven-fold increase.
• Of the 5,779 PE-owned practice sites in 2021, nearly a quarter — 24.9% — were primary care sites, which included internal medicine, pediatrics or family medicine. That was the highest of any of the 10 medical specialties in the study pool. The lowest was cardiology at 2.8%.
• Nearly half — 47.9% — of the PE-owned practice sites in 2021 were in the South. The lowest was the West at 13.3%.

“Our analysis revealed a substantial increase in PE acquisitions of physician practices over time, with PE now controlling a significant share of physician practice specialties in MSAs, including many MSAs in which a single PE firm holds greater than 30% or even 50% market shares,” the researchers concluded.

In short, more physicians are selling their practices to PE firms. Doctors are willing sellers to eager PE buyers.

The second study also appeared this month in JAMA Internal Medicine. It’s a two-page research letter by four researchers with the Oregon Health and Science University and the American College of Physicians (ACP). The ACP represents internal medicine physicians and various internal medicine sub-specialities.

The study is based on the researchers’ survey of 525 ACP members of whom 351 were general internal medicine physicians. Fifty-two of the surveyed physicians, or 9.9%, said a PE firm had approached them about buying their practice. Twenty-nine, or 5.5%, said they already work for a PE-owned practice.

Here’s what the survey found:

• 60.8% of the respondents said PE in healthcare generally was negative compared with 28.8% who said it was neutral and only 10.5% who said it was positive.
• They said PE ownership in healthcare was particularly negative for physician well-being (57.7%), healthcare costs (57.0%) and health equity (51.2%).
• They said PE ownership of physician practices was worse than independent ownership (52.0%) and even not-for-profit hospital or health system ownership (49.3%).

“Physicians expressed largely negative views about PE’s effects on the healthcare system,” the researchers said.

In short, physicians — especially primary care physicians — think PE is bad for healthcare, themselves and patients. Yet, more physicians — especially primary care physicians — are selling their practices to PE? How can these two things be true at the same time?

The ACP punted on the answer in its press statement on the research letter, saying only: “ACP’s survey offers a limited glimpse at some ways that private equity is impacting physicians, patient care, and the overall healthcare sector, however there are numerous other aspects that should be examined.”

Here’s an aspect that I think answers the question. Doctors do think PE hurts doctors, patients and the healthcare system generally. But they don’t care enough to stop them from cashing a big fat check from a PE firm.

After all, medical practices are businesses just like any other business in any other industry. It’s about the money.

Thanks for reading.