Betting on ‘golden age’ of colonoscopies, investors buy up gastroenterology practices
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In 2018, one of the nation’s largest independent gastroenterology practices, Texas Digestive Disease Consultants, announced a deal with the Chicago-based private equity firm Waud Capital to expand by offering management services to other physicians. At the time, the Dallas-based practice had 110 locations, mostly in Texas—including San Antonio. Today its management group, the GI Alliance, operates in a dozen states with more than 400 locations—and is growing fast.
With market dominance comes the business opportunity to set and maintain high prices. “It’s pretty much the only game in town,” Mariel said.
Private equity, known for making a profit on quick-turnaround investments in struggling businesses across many industries, has taken an increasingly active interest in health care in the past decade. It has invested in gastroenterology practices in recent years to tap into the revenue potential in meeting growing demand. “We are in the Golden Age of older rectums,” one investment manager wrote in 2017.
Tired of having to manage the increasingly complicated business of running a practice and, often, lured by the sweet deals investors offer, more and more doctors have partnered with or even sold their practices to private equity funds. So investment managers now control the financial decisions for many medical offices caring for patients with digestive ailments. With profit the primary driver, patients may find they pay much more for the same—or less—care.
Comment by Don McCanne of PNHP: Our very expensive health care system, which should be serving everyone well, is not. There are two particularly important reasons why not. One is our dysfunctional, fragmented health insurance system that leaves so many under-insured or completely uninsured. The other is the increasing shift of wealth to the top, especially enabled by private equity which increasingly is moving health care dollars away from health care and into the creation of personal wealth.
The financing of health care would easily be remedied by the establishment of a bona fide single payer system as described recently in Health Justice Monitor, if we could only negotiate the political barriers.
In an age when “billionaire” has become a commonplace term as deficient wages, homelessness, food insecurity, and other forms of poverty surround us, it is clear that we need to adopt new economic tools to make socioeconomic adjustments that are more equitable. In health care that means doing something about private equity that is moving funds away from health care for the masses and into the coffers of the wealthy.
What about the physician, say a gastroenterologist? When he has built a practice and is ready to retire, should he be able to accept a generous offer from private equity that essentially removes these funds from the health system and the benefit of patients? Or should he be limited to selling his practice to another physician or physician group? For that matter, should he be allowed to sell to a private equity firm and accept a limited partnership thereby drawing off profits that would otherwise go to patient care (if the general partner doesn’t skim off the funds first)? Or should he be able to choose the option of having the private equity firm take over the business management while enjoying the pleasure of practicing pure medicine as he was trained to do (an option that likely would be regretted since private equity managers have mastered how to convert such opportunities into much greater profits for themselves). (Public ownership is another option, but that is a discussion reserved for another day.)
You can see that a significant potential problem is that physicians might be opposed to government control or elimination of private equity if that would remove business options for them while not being convinced, in spite of the overwhelming evidence, of the detrimental effect on their patients.
The HJM on private equity posted last week, based on Laura Katz Olson’s book, “Ethically Challenged,” really made it clear that private equity should have no place in medicine, as she clarifies in the Q & A above. If the private option is eliminated, and the physician is faced with only morally justified choices, what option does he have then?
So the solution to the two problems mentioned is clear: eliminate private equity and establish a bona fide single payer financing system. Though the solution is clear, politics are a challenge. Let’s work hard on meeting that challenge now, immediately, before any more damage is done.
Jesus: Hey, Dad? God: Yes, Son? Jesus: Western civilization followed me home. Can I keep it? God: Certainly not! And put it down this minute--you don't know where it's been! Tom Robbins in Another Roadside Attraction
June 10, 2022 at 12:46 PM #490809
June 10, 2022 at 12:47 PM #490810djean111Participant
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or most of the other tests. But I should call my doctor if I thought I had a problem. That Direct Contract thingy encourages insurance companies to spend LESS, because they get a lump sum and keep whatever they do not spend on the patient. Wonder if they took that into consideration.
I am convinced that the government, the insurance industry, and private equity care absolutely nothing about “detrimental effects on patients”. In fact, “detrimental effect” is now a feature. Totally a profit-driven numbers game for all of them. The doctors know that, too.
America is not a country, it's just a business. (Brad Pitt, Killing Them Softly)
"Sometimes when I try to understand a person's motives, I play a little game. I assume the worst. What's the worst reason they could possibly have for saying what they say and doing what they do? Then I ask myself, 'How well does that reason explain what they say and what they do?'" GRRM
A YouTube comment – we need new conspiracy theories – the old ones have all come true.
June 10, 2022 at 10:06 PM #4909133fingerbrownParticipant
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Now we’ll get it up the ass both ways.
All governments lie to their citizen's, but only Americans believe theirs.
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