Private equity investment: Could it help physicians?

Private equity (PE) investment in health care organizations has come under the microscope for potential ill effects on patient care.

In some cases, scrutiny are needed as a check against measurable deterioration of quality indicators at facilities such as hospitals, emergency departments and nursing facilities.

But those studies don’t tell the whole story about private equity investment. In some cases, PE provides the financial base that physicians need to maintain independent practice. That in turn is a form of health care delivery with marked benefits — namely, better patient care at a lower cost than patients might find in other facilities.

This video introduces some analysts and advocates for independent medical practice who state their case against sweeping judgments about PE investment in health care.

Jared Rhoads, MS, MPH, is the founder and director of the Center for Modern Health, a research and educational organization that aims to develop and promote ideas that move health policy toward freedom, choice, and competitive markets.

Paul Berggreen, MD, is the immediate past president of the American Independent Medical Practice Association. AIMPA is the first national, multi-specialty advocacy group that focuses on challenges and opportunities of independent medical practices.

Paul Merrick, MD, is chief physician executive and chairman of Duly Health and Care operating around the area of Chicago, Illinois. Dan Greenleaf, MBA, is CEO of Duly Health and Care. It is one of the largest physician-directed medical practices in the nation.

AIMPA and Duly Health and Care have commissioned studies to examine patient outcomes and costs involving independent practice physicians and other sites of care.

This transcript has been edited lightly.

In recent years, physicians other health care leaders and policymakers have denounced the effects of private equity investment in health care, arguing patient care may suffer under that form of ownership. But advocates say a more nuanced view is needed.

Jared Rhoads, MS, MPH: The settings, when you look at them, they're very different, and it might play out differently in nursing homes versus anesthesiology practices versus dermatology practices versus big hospitals versus small hospitals. And what we're seeing is, I think, opinions are getting formulated based on kind of scattered evidence that's getting put together very piecemeal. It's very heterogeneous, the subjects that are getting studied and the findings, and the findings themselves are sometimes mixed. And so I just think it's too early to have that strong of an opinion, the kinds of opinions that we see in some of the commentaries out there that really, I think kind of vilify private equity.

Differentiating the type of investment and the health care setting is crucial when examining the effects of private equity investment. In fact, advocates say it can help physicians remain in independent practice.

Paul Berggreen, MD: Investments by private equity firms in medical groups are different. The business office of a medical group is called an MSO, management services organization, and they have significant input into what happens to the business office the strategic direction of the business. But they don't have input into the medical practices, right? The medical practices remain independent entities that make their own decisions on how to care for patients, how to structure their schedules, how to do any number of mundane things that we all have done running a medical practice. So when we see some of the negative press, and there certainly is plenty out there about hospital acquisitions or long-term care facility acquisitions, please let your let your readers know that investments in an MSO, a physician group, is a different animal, and needs to be viewed as such, because there's different dynamics and there's different strategic factors to look at when a medical group would take an investment from an outside entity like a private equity firm versus a private equity firm simply buying a hospital or buying a nursing home.

When private equity backed investors put money into a physician's group, it's possible for doctors to maintain clinical control over patient care and even gain access to far more business knowledge than they had before.

Paul Merrick, MD: What physicians in the independent models traditionally lack is the ability to scale and partner with elite business health care executives. That's probably the number one thing that private equity helps bring to our practice, is the recruitment and retention of elite health care business executives. Smaller, independent practices, candidly, they can't afford to have the level of business talent that we are privileged to work with, and that partnership of focus on patient care plus elite business performance is what allows growth and sustainability.

So what if private equity investment actually could support good business and good medicine? It does just that for Duly Health and Care, one of the largest independent physician directed medical practices in the country.

Dan Greenleaf, MBA: But it's really remarkable, like you know, the Avalere data, we’re 25% less expensive than the health systems. We have 15% fewer hospital admissions, we have 13% fewer ED visits, we have 5% better follow up on a patient 14 days after his or her discharge. You know our ability to drive quality is I would say, is second to none.