A new report published in Health Affairs confirms a troubling increase in the number of private equity-acquired physician practices between 2012-2021, raising further concerns about these firms’ penetration at the physician level into local markets and the potential impact on the quality and cost of health care for patients.

To better understand the impact of the increase in private equity ownership of physician practices, researchers analyzed data across ten physician specialties, including primary care, dermatology, obstetrics-gynecology, oncology, radiology, and orthopedics. The findings further reinforce the alarming trend of private equity-owned medical practices prioritizing their own financial benefit over delivering high-quality care that patients can afford.

Read the full study here and see below for highlights:

  • “In recent years, because of financial difficulties, a significant number of physician practices have considered selling their organizations to [private equity (PE)] firms.”
  • “The PE business model of ‘rolling up’ additional practices through acquisitions can exacerbate market concentration in the physician practice industry. When PE firms acquire multiple providers in the same specialty within a local or regional market, those firms can gain significant market power, which can lead to higher prices or lower quality, or both, as a result of reduced competitive pressure.”
  • “Of the 1,094 acquisitions in these ten specialties for the entire study period, dermatology practices were most commonly acquired by PE firms (34 percent of all acquisitions), followed by ophthalmology (25 percent) and gastroenterology (11 percent).”
  • “Our findings demonstrate an increase in PE ownership of physician practices, to the point of competitive concern in some MSAs. Remarkably, PE firms collectively held more than a 30 percent market share in 120 MSAs and more than a 50 percent market share in 60 {Metropolitan Statistical Areas (MSAs)].”
  • “This trend raises concerns about its potential impact on competition, patient care, and prices in those local markets. PE acquisitions in health care often result in higher prices for services, such as in dermatology practices, where prices can increase by 3–5 percent.”
  • “These acquisitions might not consistently improve the quality of care, as PE firms may prioritize cost-cutting measures such as hiring lower-paid physicians, potentially compromising service quality in favor of revenue generation. In addition, PE acquisitions can lead to increased health care use and spending and to workforce changes.”

Further, new federal data paints a clear picture how these private equity-backed out-of-network providers are now using the Independent Dispute Resolution (IDR) established under the No Surprises Act to drive up reimbursements, ultimately costing consumers and taxpayers. The vast majority of arbitration cases are being filed by a small number of provider organizations, with four private equity-backed companies accounting for two-thirds of all cases.

For more information on the impact of private equity-backed providers on overall health care costs, click here.