It’s no secret that private equity (PE) firms have made a sizable investment in physician practices over the past 10+ years. The practice specialties that have been the focus of PE investments include primary care, dermatology, obstetrics-gynecology, gastroenterology, ophthalmology, oncology, urology, radiology, orthopedics, and cardiology.  During the period of January 2012 and December 2021, dermatology practices were most commonly acquired by PE firms (34% of all acquisitions), followed by ophthalmology (25%) and gastroenterology (11%).

There was a surge in acquisitions in 2021, post-COVID-19 pandemic, raising concerns about market concentration. PE firms now hold significant market shares in several specialties across metropolitan areas, potentially limiting patient choice and competition. More specifically, PE firms hold over 30% of the market share in over 100 MSAs and 50% in 60 MSAs. PE firms are attracted to physician practices, especially across certain specialties, because of the opportunities to consolidate practices, streamline processes with technology, and meet patient demand, particularly as the aging population grows.

Concerns about short-term profit motives and lack of healthcare industry experience among PE firms have emerged, along with the observation that PE investments often lead to higher consumer prices without improving care quality. In response, regulatory bodies like the Justice Department, FTC, and HHS have initiated inquiries into PE’s role in healthcare transactions to safeguard competition and quality of care.

Although research remains mixed on how PE ownership affects the quality of care, there is clear evidence that private equity ownership increases prices. These firms aim to secure high returns on their investments — upwards of 20% in just three to five years — which can conflict with the goal of delivering affordable, accessible, high-value health care.

Although there is widespread concern over the consequences of PE’s control over healthcare, there is now more attention to why physicians are so eager to sell their practices. Many doctors are eager to hand off their practices, and it’s not just for the money. Running a private practice has become increasingly unsustainable, and alternative employment options, such as working for hospitals, are often unappealing. According to a study by the Physicians Advocacy Institute, nearly 75% of physicians now work for a hospital or corporate owner.

The American Medical Association found that the top reason physicians sell their practices (to any entity) is that they need higher reimbursement rates to remain financially viable. On their own, they find that they cannot negotiate those rates effectively with insurers. Physicians also need more and better access to capital in order to keep up with the high costs of operating a medical practice.  A successful medical practice requires sizable investments in legal advice, trained and competent staff, and technology.
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