Private Equity and Physician Medical Practices — Navigating a Changing Ecosystem

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      From a societal standpoint, the net effect of private-equity investments in physician practices on downstream costs, value, and quality of care is unclear. The experiences of some private-equity–backed clinics suggest that there is pressure to expand certain revenue streams by conducting more elective procedures and providing more ancillary services, and to engage in “upcharging.” Practices acquired by private-equity firms may also be given incentives to prioritize care for commercially insured patients to maximize reimbursement; to deliver more streamlined, low-complexity care (e.g., perform more skin biopsies or screening colonoscopies) rather than meeting complex care needs; or to situate new offices in higher-income communities instead of in socioeconomically disadvantaged ones. These possibilities raise important questions about the implications of such investments for health equity and larger health system goals.

      All states should have a comprehensive corporate practice of medicine doctrine, which prohibits medical management companies from exerting control over clinical judgment and practice. Nearly 20 states don’t have such a rule, and those that do vary substantially in the types of financial and contractual arrangements that they permit. As a result, private-equity firms frequently exploit loopholes, such as by structuring a parent company to have financial control of a practice while naming the physicians as owners.

      Physicians should be aware that private equity’s growth is emblematic of broader disruptions in the physician-practice ecosystem and is a symptom of medicine’s transformation into a corporate enterprise. For some practices, outside investment may help facilitate growth and extend a lifeline that allows them to compete with larger players in an increasingly consolidated market. But this trend may also contribute to practices getting squeezed. As more investors enter health care and drive value creation, it’s worth considering for whom value is being created. How physicians respond — and the extent to which they retain core values in the service of patients — will ultimately determine the ecosystem’s resilience in the face of stressors.

      Comment by Don McCanne of PNHP:   Private equity takeover of medical practices is here, and the momentum may change medicine forever. The business community may think that the changes taking place are beneficial, but traditional professional values are being buried under private equity’s steam roller.

      Private capital is certainly playing a major role here. Stepping back and looking at what is happening can’t help but make you wonder if maybe public capital should be taking over that role. Maybe instead of looking up north to Canada, we should be looking across the sea to the United Kingdom. Rereading this article while substituting the term “National Health Service” for “private equity” would require substitution of the more nefarious consequences that are distributed throughout this article. We are now decades into the unsuccessful quest for a single payer version of an improved Medicare for All, and private capital seems to be making that goal more elusive.

      If nothing else, perhaps discussion of a National Health Service might scare the opponents into considering a single payer system. But then it might be too late. The disruption required could be an almost insurmountable hurdle to overcome. Better take a closer look at H.R.1976 – “To establish an improved Medicare for All national health insurance program.” Its passage could not be more urgent.

      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

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