Historically, doctors’ practices were relatively small, and owned by the doctors themselves. But that model is rapidly declining as the business of medicine has become more complex and the insurance companies negotiating with doctors about prices have become larger. Nearly 70 percent of all doctors will work at either a hospital or a corporation by 2021, according to a recent review from the Physicians Advocacy Institute.
“We’re seeing a fundamental shift in how medicine is done in the US,” said Richard Scheffler, a professor of health economics and public policy at Berkeley and director of the Petris Center.
Hospitals and insurance companies also buy many independent practices of physicians. Optum, an arm of publicly traded UnitedHealth Group, which also owns one of the nation’s largest insurers, employs about 70,000 physicians. Studies have shown that the types of concentrated ownership of physicians in a given market are also associated with higher price.
Private equity is often viewed by physicians as an attractive alternative to having their practice purchased by a hospital. In part, doctors are “getting more scale and getting efficiencies,” including help with office administration and technology, said Lisa Walkush, a national managing principal for professional services firm Grant Thornton. . “It can be a good thing, but private equity firms have to keep their promises and be accountable,” he said.
Michael Kroin, the founder and chief executive of Physician Growth Partners, a Chicago firm that advises independent practices, said private equity firms “provide the scale to allow independent practice groups to survive and maintain their autonomy.” If they could, given their rising costs and how poor they feel insurers are, “every independent group would want to raise their fees,” he said.
The private equity industry has begun to attract particular scrutiny from researchers and policy makers. Lawmakers in the House are considering law to require more reporting when companies buy health care companies. Currently, acquisitions can be difficult to track. The authors of the new paper relied on data on deals from a company called PitchBook, which they then matched with doctors in a health care claims database to measure payments from private health insurer.
The researchers can’t be sure whether the payment increases they measured occurred because doctors were performing more complex procedures or simply negotiating higher prices, but they suspect prices explained much of the effect. .