The health care sector is witnessing a significant transformation as private equity (PE) firms step up their acquisition of physician practices. This trend reflects a broader shift within the health care industry of corporate investors acquiring health care providers, driven by the allure of short-term profitability and efficiency gains. It also raises questions about the implications for health care quality, accessibility and the overall impact on the U.S. health care system.
A new study led by Yashaswini Singh, assistant professor of health services, policy, and practice and a member of Brown’s Center for Advancing Health Policy Through Research, will explore this phenomenon and the effects of PE acquisitions on health care accessibility. Funded by the National Institute for Health Care Management Foundation, the study, “Spillover Effects of Private Equity Acquisitions of Physician Practices on Local Market Competitors: Implications for Access to Care,” represents a pioneering investigation into a critically under-examined area.
Singh’s prior research shows that PE acquisitions of physician practices often lead to increased health care spending and utilization, changes in workforce composition and a reshaping of services based on profitability. Yet the extended impact of these changes, especially the “spillover effects” on competing practices within the same locale, remains largely unexplored.
Singh’s new study will consider a core concern: the propensity of PE firms to prioritize short-term financial gains, potentially at the expense of offering comprehensive care. This strategy may lead to the curtailment or discontinuation of less lucrative services, disproportionately burdening independent medical practices, as they may have to accommodate an increased demand from patients turned away from PE-owned offices.
Singh and her study co-author, Durgar Borkar, assistant professor of ophthalmology at Duke University, are focusing on the field of ophthalmology, merging hand-collected data on PE ownership with longitudinal medical claims data. Their work is set to make a significant contribution to the field, providing the first policy-relevant empirical evidence on the market-wide effects of PE acquisitions.
We spoke to Professor Singh about her upcoming study.
What are the general developments surrounding PE firms and physician practices in the U.S.?
Over the last decade, there’s been a rapid increase in institutional investors, such as private equity funds, acquiring physician practices, primarily through consolidation. Private equity aims to generate approximately 20% annual returns over short investment periods of three to seven years. This raises concerns about whether private equity’s financial incentives can coexist with physician incentives to deliver affordable, accessible, high-value care for patients.
In the past five years, acquisitions have occurred in several specialties, including dermatology and ophthalmology, and more recently, primary care. A growing body of literature is examining the impact of these acquisitions on health care spending, quality and access outcomes, which is the focus of my research and this grant.
According to one report, PE ownership of physician practices quadrupled between 2010 and 2020. Nonetheless, it’s difficult to get an accurate count. Why is this the case?
That’s in the ballpark, indicating a rapid trend in corporate consolidation in the last five to ten years. However, specific numbers are hard to confirm due to the private nature of these transactions. Private equity companies are exempt from Securities and Exchange Commission disclosure requirements, and most physician practice acquisitions go unreported to antitrust authorities like the Federal Trade Commission.This lack of transparency is a key policy issue, making it hard for researchers, policymakers, physicians and patients to understand the real magnitude of these trends.
