Stop Weeping for Physician Practices

4sight Health published a blog post last month in which I said it was disingenuous of physicians to complain about private equity (PE) acquisitions of medical practices because it’s physicians who are selling their practices to PE firms. They’re crying at the same time that they’re putting the money in their pockets.

Here’s more gas on that fire.

The Physicians Advocacy Institute (PAI) released a 39-page report on trends in hospital, health system and corporate entity acquisitions of physician practices. Corporate entities include health insurers, PE firms and “umbrella” corporate entities that own multiple physician practices.

Here’s what the PAI report said:

• Hospital and health systems acquired 7,600 physician practices over a five-year period, January 2019 through January 2024, to bring the total number of hospital- or health system-owned physician practices to 69,500.
• Corporate entities acquired 36,000 physician practices over the same five-year period, January 2019 through January 2024, to bring the total number of corporate entity-owned physician practices to 73,800.

Using my rudimentary chart-making skills, which I just acquired this week, I plotted out the PAI data, and here’s what it looks like:

It shows that in January 2022, the total number of practices owned by corporate entities surpassed the total number of practices owned by hospitals or health systems. By January 2024, according to the PAI report, corporate entities owned 30.1% of all physicians practices compared with 28.4% by hospitals or health systems.

Why? If physician practices are businesses just like businesses in any other industry, and they are, they would sell their practices to the high bidder. And in January 2022, that became deep-pocketed corporate entities like health insurers and PE firms.

Another study reveals just how motivated PE firms are to buy up physician practices. The study is an accepted manuscript published this month in Health Affairs Scholar, an open-access journal. Done by three researchers affiliated with Brown University and the Oregon Health and Science University, the study looked at how long PE firms own practices before they resell them to make their profit.

The researchers’ study pool consisted of 807 practices acquired by PE firms over a five-year period, from 2016 through 2020. The medical specialties of the acquired practices were dermatology, ophthalmology and gastroenterology.

More than half of the 807 practices — 51.6% — were resold within just three years of initial investment, according to the study. The buyers? Almost all — 97.8% — were other PE firms that rolled the practices up into larger practices.

“PE’s abbreviated investment timeline and exit incentives may deter long-term investments in care delivery and workforce needed for high-quality care,” the researchers said.

Who really cares? Physicians, but only after the check cashes.

Thanks for reading.