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Private Equity Ownership of Physician Practices

By July 14, 2023Commentary

There has been more wailing and gnashing of teeth in recent months about financial buyers–venture capital and private equity firms acquiring physican practices.  This has been going on for over two years, so not sure why people are getting worked up now.  At the same time, health plan companies have also been buying physician practices, likely with the same impact, and one even more devious complication–by owning providers of care the health plans can evade medical loss ratio requirements–they just move the profits to the providers they own by paying them more.

Financial buyers want to make money, period.  But to do this, they all know they need to offer a good product, so they actually work to improve quality and certainly efficiency.  But because they want to make money they also focus on pricing, and that means raising prices, and it helps to raise prices if you have a large market share, so they tend to buy lots of practices in the same specialty in the same geographic market.  A new report from something called the Antitrust Institute, which on examination turns out to be very left-wing, ascribes all manner of evil to the financial buyer ownership of physician practices.   (AI Report)

They are right that this ownership is partly responsible for higher prices, but they ignore other factors which are as or more important, including the aforementioned health plan purchases of practices, and the real demon–hospital acquisitions of physicians, which are used to drive demand and prices for all manner of health care services owned by the hospital system.  I don’t disagree that the remedy is do try to restore some greater level of competition among physicians, but that will require broader changes that just looking at PE and VC ownership; it will require forced divestiture by hospitals and health plans.

Join the discussion One Comment

  • John Oh says:

    This is happening throughout the economy and not just health care. There is a huge pull towards centralization of just about everything. I don’t know why it’s happening, but it is and it will ultimately not benefit consumers. With centralization comes lobbyists and government regulation to further control the markets. You know the rest!

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