Private equity firms have been buying up medical practices at a rapidly increasing rate over the past decade, building up market share and increasing prices, according to a study released this week.
“Increased attention to the competition impacts of PE in physician markets is urgently needed,” the report says, adding, “The pace at which PE is entering these markets and monetizing medicine makes a quick response imperative.”
The report, titled “Monetizing Medicine: Private Equity and Competition in Physician Practice Markets,” was the result of a joint project by the American Antitrust Institute, the University of California at Berkeley and the Washington Center for Equitable Growth. It found that private equity acquisitions of physicians’ practices were associated with price increases in eight of the 10 specialty areas studied, with hikes ranging from 4% in primary care and dermatology to 14% for gastroenterology and 16% in oncology.
“Price increases associated with PE acquisitions are exceptionally high where a PE firm controls a competitively significant share of the local market,” the report says. In cases where a private equity firm controls more than 30% of the market, gastroenterology prices rose 18%, obstetrics and gynecology increased 16%, and dermatology 13%.
Per-patient spending also went up in six of the 10 specialty areas.
The report’s authors recommend eight immediate policy actions, including increased reporting and scrutiny of private equity acquisitions of small medical practices, greater transparency about ownership, lower barriers to entry for healthcare providers, closing regulatory loopholes and expanding private equity’s legal liability for the actions of their portfolio companies. The authors also recommend restructuring Medicare payments for doctors. “Making practices better able to cover costs will make them less susceptible to acquisition,” it says.
>What’s next: The private equity industry argues that its investments in medical practices have increased administrative efficiency and freed up doctors to focus on their patients, but The Washington Post’s Peter Whoriskey reports that antitrust regulators have signaled concerns, noting that Deputy Assistant Attorney General Andrew Forman said this in a June 2022 speech: “To the extent that private equity transactions and conduct are focused on short-term gains and aggressive cost-cutting in the health care space, they can lead to disastrous patient outcomes.”
