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Private equity acquisition of physician practices leads to higher prices for patients


Researchers examine trends toward ‘Monetizing Medicine.’

handwritten private equity chalk word cloud: © XtravagantT -

© XtravagantT -

Prices for patients increase when market competition decreases due to private equity investments in health care.

A new study examined the effects of private equity investors acquiring physician firms over the last decade. The number of acquisitions is increasing, as are costs for patients when communities have less competition among physicians.

“Do private equity acquisitions of physician practices lead to price increases? The answer appears to be yes, in almost all specialties,” said the report, “Monetizing Medicine: Private Equity and Competition in Physician Practice Markets.”

“This report provides convincing evidence that incentives to put profits before patients have grown stronger with an increase in private equity ownership of physician practices. This will fundamentally change the way medicine is practiced,” lead author Richard Scheffler, PhD, said in a news release. Scheffler is distinguished professor of health economics and public policy and director of the Petris Center at the University of California, Berkeley.


Among the findings:

  • Private equity deals grew from 75 in 2012 to 484 in 2021. Dermatology (376), ophthalmology (276), gastroenterology (120), and primary care (120) accounted for 890 of the total 1,094 deals in the study period.
  • Around the nation, a single PE firm controls more than 30% market share of full-time-equivalent physicians, 28% of metropolitan statistical areas (MSAs).
  • A single PE firm controls more than 50% of market share in 13% of the MSAs across the country.
  • PE acquisitions led to price increases in eight of 10 physician practice specialties. Price increases ranged from 4% in primary care and dermatology, to 16% in oncology.

A possible solution?

Scheffler and coauthors recommended changing federal antitrust reporting requirements to monitor deals and ensure transparency about physician practice ownership.

Currently, the Hart-Scott-Rodino Act (HSR) requires businesses to inform the Federal Trade Commission and U.S. Department of Justice about large mergers and acquisitions before they happen. PE firms have used a “buy-and-build” or “roll up” strategy to acquire one practice, then competitors in adjacent markets, in a series of deals small enough to escape the federal reporting requirements, the report said.

“Our findings underline the vast implications that rapid, stealth consolidation of physician markets by private equity funds have had for competition, patients, and anyone who pays for healthcare practices,” coauthor Laura Alexander, JD, said in the news release. Alexander is director of markets and competition policy at the Washington Center for Equitable Growth. “It’s clear that there is a need for attention and action from competition enforcers and policymakers to address these accelerating acquisitions.”

Tough business

The researchers noted at least two difficult business conditions for physicians.

Health care is complex and doctors need capital and large scales to manage clinical and financial risk, especially in value-based care. Meanwhile, “the Medicare physician fee schedule has not kept up with physician practice expenses, and Medicaid reimbursement rates are notoriously low,” the report said.

At the same time, lack of price transparency, with “regulatory burdens, complex compensation models, and inelastic demand mean that competition functions imperfectly, at best, in health care markets,” the study said.

“Adding PE investment has the potential to make the situation much worse, as private equity pushes to monetize physician practices,” the report said.

The study was published July 10, 2023, by the American Antitrust Institute.

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