JA Busam, EC Shah. Gastroenterology & Hepatology 2023; 19: 264-271. Open Access! The Rise of Private Equity in Gastroenterology Practices

This article provides a good review of the investment of private equity in gastroenterology practices. Key points:

• “In addition to finding that many gastroenterologists were willing to join a PE-backed practice, PE firms found such an investment attractive because of the returns they could earn through consolidating the market.^6,33…Dermatology,³⁹ eye care,^40,41 fertility,⁴²  orthopedics,⁴³  urology,^44,45  and oncology⁴⁶ are also showing increased PE activity.”
• “The effects of PE ownership in gastroenterology are only recently being studied. Notable conclusions include increased costs of services, more visits by new patients, and increased esophagogastroduodenoscopy utilization absent any increase in total number of polyps or tumors removed.⁵⁰…To increase revenue, one needs to increase either prices or volume of services provided, and it appears as if PE-backed practices are effectively doing both.”
• “Increased volume could reflect overutilization of profitable services, unnecessary/low-value care, and/or more effective marketing, among other tactics. Higher prices could relate to more efficient charge capture, higher intensity coding, higher negotiated prices, patients being offered higher-priced services, or other causes.”

Related article: NY Times 7/10/23 Who Employs Your Doctor? Increasingly, a Private Equity Firm.

Some excerpts:

A new study finds that private equity firms own more than half of all specialists in certain U.S. markets…The medical groups were associated with higher prices in their respective markets, particularly when they controlled a dominant share, according to a paper by researchers at the Petris Center at the University of California, Berkeley, and the Washington Center for Equitable Growth, a progressive think tank in Washington, D.C. When a firm controlled more than 30 percent of the market, the cost of care in three specialties — gastroenterology, dermatology, and obstetrics and gynecology — increased by double digits...

Nearly 70 percent of all doctors were employed by either a hospital or a corporation in 2021, according to a recent analysis from the Physicians Advocacy Institute...If they could, given their rising costs and how squeezed they feel by insurers, “every independent group would want to increase its fees”…

 “This builds the case for strong antitrust tools for these incrementally small but collectively larger consolidation trends,” said Erin Fuse Brown, the director of the Center for Law, Health and Society at Georgia State University.

My take: Private equity’s acquisition of medical practices is likely to drive up healthcare costs without significant improvement in patient outcomes. However, few if any other stakeholders in medical care are incentivized to provide high value care.

Related blog posts:

• Consolidation and Competition in Health Care
• Changing Business of Medicine: Private Equity
• Changing Business of Medicine: Hospital Consolidation of Physician Practices
• “Socialism” is Already Here & Increasing in U.S. Health Care
• No One Would Design U.S. Healthcare System This Way
• “How Can You Tell If You Have Good-Quality Health Care?”
• Worse Outcomes After Hospital Mergers
• Healthcare: “Where the Frauds Are Legal”
• “Gaming” U.S. Patent System by Big Pharma
• “Health Insurance Is Broken”