Association of Private Equity Acquisition of Physician Practices With Changes in Health Care Spending and Utilization

Abstract

IMPORTANCE Private equity acquisitions of physician practices in the US have been increasing rapidly; however, the implications for health care delivery and spending are unclear.OBJECTIVE To examine changes in prices and utilization associated with private equity acquisitions of physician practices across multiple specialties. DESIGN, SETTINGS, AND PARTICIPANTSThis was a difference-in-differences event study of US physician practices specialized in dermatology, gastroenterology, and ophthalmology that were acquired by private equity firms from 2016 to 2020. Within each specialty, each private equity−acquired (PE-acquired) practice was matched with as many as 5 control practices based on the preacquisition number of unique patients, encounters, risk score, share of services billed out-ofnetwork, and spending. The PE-acquired practices were compared with matched controls through year 2 after acquisition, using a difference-in-differences event study. Data analyses were performed from March 2021 to February 2022. EXPOSURES Private equity acquisition of physician practices.MAIN OUTCOMES AND MEASURES Measures of spending and utilization, including the charge and price (amount paid) per claim, new and unique patients, and total encounters. RESULTSCompared with the 2874 control practices, the 578 PE-acquired physician practices exhibited an average increase of $71 (+20.2%) charged per claim (95% CI, 13.

Outside Equity and Healthcare Firm Behavior

“…While charges do not represent the negotiated price paid by private insurers or the administrative price paid by public insurers, they do influence price negotiations (which commonly include "percent of charges" price agreements) and are therefore a strategic lever that can financially impact these firms (Cooper et al 2018;Weber et al 2021;Linde and Egede 2022). Additionally, when examining private equity stakes in physician practices, Singh et al (2022) find both a 20% increase in practices' charges and an 11% increase in actual reimbursements paid by insurers--in agreement with the well-known industry linkage between list prices from providers' chargemasters and transaction prices for their services.…”

“…The existing literature devoted to private equity in healthcare is relatively new and largely confined to hospitals, nursing homes, and physician practices (e.g., Braun et al 2020;Gandhi et al 2020;Braun et al 2021aBraun et al , 2021bGao et al 2021;Gupta et al 2021;Offodile et al 2021;Singh et al 2022). While these investments are important and can be individually large, they still represent an incomplete view of aggregate private equity activity across the sector.…”

Financial Health of Private Equity-Backed Ophthalmology and Optometry Groups: an Analysis of Debt Valuations

“…31 Recently, a difference-in-differences study of PE−acquired dermatology, gastroenterology, and ophthalmology physician practices and independent practices found the former was associated with differential increases in allowed amount and charges per claim, volume of encounters, and new patients seen, as well as some changes in billing and coding. 32 Further data is required to evaluate PE-backed investments in ophthalmology and optometry, such that quality of care does not decline.…”

When Investors Buy Medical Practices, Costs Rise

“…Zhu is the senior author of a study of 578 medical practices that were acquired by private equity firms from 2016 to 2020. In that study,1 lead author Yashaswini Singh, MPA, and colleagues compared those groups with 2874 control practices that did not have private equity ownership.…”