New report exposes breadth of physician practices owned by private equity

The practice leads to higher consumer prices

The American Antitrust Institute (AAI), in collaboration with the University of California at Berkeley (UCB) Petris Center on Health Care Markets and Consumer Welfare, and the Washington Center for Equitable Growth (Equitable Growth), announced the release of a new report on private equity ownership in healthcare.

The report, Monetizing Medicine: Private Equity and Competition in Physician Practice Markets, highlights private equity’s voracious acquisition of physician practices over the last several years. The analysis evaluates market penetration across 10 physician practice specialties within markets across the U.S., the impact on market shares and concentration, and on prices and expenditures.

Lead author on the report, Professor Richard Scheffler, Distinguished Professor of Health Economics and Public Policy, and Director of the Petris Center at UCB, noted “This report provides convincing evidence that incentives to put profits before patients have grown stronger with an increase in private equity ownership of physician practices. This will fundamentally change the way medicine is practiced.”

The report’s findings should draw significant attention by competition enforcers and healthcare policymakers. For example, the number of private equity acquisitions of physician practices has grown six-fold between 2012 and 2021. Some markets have been highly penetrated by private equity, with a single private equity firm holding more than 30% in one or more physician specialties. The study compares price increases in those markets to all markets and finds they are almost 1.5 to over 3 times higher. This is true for key areas of medicine, including: gastroenterology, dermatology and obstetrics & gynecology. Results for price increases across other physician practices featuring private equity ownership can be found in the full report.

The policy implications surrounding the report’s analysis of private equity ownership of physician practices are significant. Report co-author, Laura Alexander, Director of Markets and Competition Policy at Equitable Growth explained: “Our findings underline the vast implications that rapid, stealth consolidation of physician markets by private equity funds have had for competition, patients, and anyone who pays for healthcare practices. It’s clear that there is a need for attention and action from competition enforcers and policymakers to address these accelerating acquisitions.”

The report clearly frames a set of immediate policy steps that would strengthen competition enforcement and healthcare policy in physician practice markets. For example, reporting and scrutiny of small healthcare provider acquisitions, particularly by private equity funds. Key adjustments to the Hart Scott Rodino (HSR) Act reporting requirements would support stronger antitrust enforcement. Mandatory reporting to increase transparency of ownership of physician practices is also critical. Other policy implications include closing regulatory loopholes that distort competition in healthcare and expanding liability to private equity funds for misconduct by portfolio companies.

Finally, the analysis in the report should draw needed attention to lowering barriers to entry in concentrated physician markets and developing additional funding sources for capital investments. Diana Moss, President of AAI, noted “The report makes clear that physicians need more options for restructuring their practices so they can continue to do what they do best–practice medicine. Selling out to private equity or other large corporate entities shouldn’t be the only options on the table.”

Funding for the project was generously provided by Arnold Ventures. The report was authored by: Richard M. Scheffler, PhD, Distinguished Professor of Health Economics and Public Policy; Director of the Nicholas C. Petris Center on Health Care Markets and Consumer Welfare, University of California, Berkeley; Laura Alexander, JD, Director of Markets and Competition, Washington Center for Equitable Growth; Brent D. Fulton, PhD, MBA, Associate Research Professor of Health Economics and Policy; Associate Director of the Petris Center; Daniel R. Arnold, PhD, Assistant Research Economist; Research Director of the Petris Center; and Ola A. Abdelhadi, PhD, Post-doctoral Scholar, Petris Center.

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