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On March 12th, A Health Podyssey's Rob Lott invited Yashaswini Singh of Brown University to the program for a virtual podcast taping to discuss her paper on the effect of private equity on physician turnover. The two discussed the paper and took questions from the audience in attendance.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:31):
Hello, and welcome to a health podocy. I'm your host,
Rob Lott. Today, we have a veryspecial episode of the podocy.
That's because we're recordingwith a live audience. This
(00:51):
conversation is still fullyvirtual, but this time instead
of just me and a guest on Zoomwith our producer Jeff, now as
we record, it's March 12.
We've got a whole crowd oflisteners. And in a few minutes,
we're going to put them to workby asking them to weigh in with
their own questions. And Iespecially want to thank our
(01:12):
guest, Doctor. Yasha SweeneySingh, a healthcare economist
and assistant professor ofhealth services policy and
practice at Brown University.She's the lead author of a paper
in the brand new March 2025issue of Health Affairs.
The article's title is also itsmain finding, quote, physician
(01:34):
turnover increase in privateequity acquired physician
practices. It's the latest amongquite a few that Health Affairs
has published on the topic ofprivate equity over the last few
years. But Doctor. Singh and herco authors are nevertheless with
this paper, Pushing theBoundaries of Our Knowledge of
Private Equity. This is one ofthe very first papers in health
(01:57):
affairs, or anywhere really, toprovide a solid base of evidence
about the explicit and directimpact of private equity on the
physician workforce.
Alright, so without further ado,let's dig in. Doctor. Yashaswini
Singh, welcome to HealthOdyssey.
Speaker 2 (02:16):
Thank you so much for having me. I'm so excited to
talk about this paper. And Ithank the audience and listeners
who have joined us to talk aboutthe study. And I look forward to
our conversation. Thanks againso much for having me.
Speaker 1 (02:28):
Of course, awesome. Thanks for being here. Why don't
we just dive right in? I thoughtwe could start with a little bit
of background. As I'vementioned, we've published quite
a few pieces on private equityand health care.
Just a few weeks ago, we hostedDoctor. Zeri Song on this
podcast, where he pointed torecent estimates of private
(02:52):
equity in healthcare. More thanfour fifty hospitals have been
acquired by private equity, over6,000 physician practices,
potentially with upwards of 10%of physicians in private equity
owned practices. Is thatconsistent with your own
(03:12):
understanding of the changingfootprint of private equity in
health care? And what do you seeas some of the factors driving
that growth?
Speaker 2 (03:21):
Yeah, that's a great question to kick us off. I must
start by saying it's reallydifficult to precisely estimate
how many deals or how manyinvestments have been happening
in health care that have beenbacked by PE firms. A large
reasoning behind this is thelack of systematic reporting or
disclosure requirements. So justwith that caveat, the numbers
shared by Doctor. Song arecertainly consistent with trends
(03:44):
that we've been seeing as well.
Over the last decade or so, PEfirms have invested
1,000,000,000,000 in theAmerican health care system and
investments have ranged everysetting of care from cradle to
grave, as one co author pointedout. So this includes neonatal
services, fertility services,primary care, hospitals and
(04:05):
emergency rooms, as Doctor. Sunpointed out, but also other
areas like nursing homes,assisted living facilities,
hospice, and home health. Sothere isn't any segment within
health care that has beenunaffected by these trends. Now
when we think about factors thathave led to the evolution and
growth of PE in health care,it's a little harder to answer
(04:27):
that question because there area complex interplay of factors
here that are relevant.
So first, we have an agingsociety and an aging population.
As people get older, they demandmore health care services. And
for PE firms that signalsustained demand in an industry
where returns are almostguaranteed because you have a
demand in place that's expectedto grow. Second, I would say,
(04:51):
and I'm sure a lot of us on thiscall would agree, The US
Healthcare system is oftencharacterized by a lot of
attributes that make it reallyfrustrating as consumers to
interact with the system. It'scharacterized by a lot of waste
and redundancies, a lot ofinefficiencies, high
administrative costs, and highadministrative burden.
(05:13):
And so some might say orproponents of these trends might
say that PE firms are drawn tohealthcare as a way to offer a
solution to some of theattributes that can be so
frustrating for consumers. Firmstend to focus on driving
efficiencies and if there's onearea where those improvements
are desirable, it's certainlywithin the healthcare system.
The other thing I have tomention is historically interest
(05:36):
rates have been low. Sooperating in a historically low
interest rate environment meansthat PE firms have been able to
access debt at relativelycheaper rates. So that's fueled
their expansion.
But overall, I think thetakeaway is that PE firms have
embarked on this rapidremarkable pace of consolidation
and investment in healthcare inThe US spanning every segment.
(05:59):
And there are a variety ofdemand and supply push and pull
factors at play here.
Speaker 1 (06:04):
Got it. Well, with such rapid change comes, I
think, some opportunities tostudy what's behind it. A lot of
prior research has looked atsome of the effects of private
equity acquisition on providerpractices. And I'm wondering if
you can give us a quick sense ofwhat the literature over the
last few years has shown. Isthere a growing consensus about
(06:29):
the effects of private equityacquisition on things like
costs, utilization, evenoutcomes?
Speaker 2 (06:37):
Absolutely. So the literature, the academic
literature is fairly consistentin showing that when PE firms
acquire a hospital or aphysician practice, the cost of
care goes up. Prices go up,prices paid by commercial
insurers go up, and that hasimplications for the cost of
care for patients directly. Onthe utilization side, the
(06:59):
evidence is also emerging andlargely consistent. And there we
see that PE firms drive higherutilization of services that can
be profitable, ancillaryservices like imaging,
diagnostic imaging services orlab tests are often services
that we've seen go up followingacquisitions.
And then at the same time, we'veseen that PE firms can pare down
(07:23):
or cut back on services thatthey might deem as less
profitable even if they might becritical for patients. And so
the utilization piece iscertainly interesting. What's
less clear is what all of thismeans for patient well-being.
Patient outcomes are harder tostudy, at least using secondary
medical claims data, which a lotof researchers use. The patient
(07:46):
experience is often missing inthese secondary data sets.
And while research from thenursing home space and the
hospital space has shown thatpatient outcomes can worsen
following acquisitions of thistype, the evidence is less
conclusive when we look atphysician practice investments.
So this is an area that I know alot of researchers and
(08:07):
policymakers are payingattention to, but evidence at
present is still lacking.
Speaker 1 (08:12):
My understanding is that less is known about the
effect on physician turnover inprivate equity acquired
practices, at least before thispaper. Why is that a potentially
useful measure of the impact ofprivate equity?
Speaker 2 (08:30):
Sure. So turnover is a really critical but unexplored
dimension of this trend, right?At the center of all of these
trends is a physician or aphysician practice that makes
the decision to sell theirpractice to investors. A large
body of literature in healtheconomics and health policy and
health services research hasshown that physician stability
(08:54):
or workforce stability can bereally good for patients.
Patients value it when they cansee one doctor consistently over
time.
If they're able to see onedoctor consistently over time,
patients have fewerhospitalizations, better health
outcomes, better satisfactionoverall with the health care
system. So on the flip side,turnover is associated with
(09:14):
disruptions in care continuity,disruptions in patient health,
patient access as well. And sothis is a really critical space
to examine. I also want to sharea story, if I may, of how it's
important to study from anacademic lens, I wanted to share
a personal story of why it'simportant to me to I was invited
(09:36):
to speak on a panel last year onsimilar topics, the growth of
private equity, the growth ofcorporate actors in healthcare
and what this means for caredelivery. And one of my co
panelists on this panel was adoctor who was formerly employed
at a PE acquired practice.
But for a variety of reasons,and we can get into those later,
(09:57):
decided that that employmentcondition or arrangement wasn't
the right one for him and endedup leaving the practice. So this
was a former PE doctor who wasmy co panelist. And in
conversations with him, Irealized that when you have PE
firms invest in practices, thereare a lot of changes to the
practice of medicine thatmaterialize when you have
(10:18):
financial investors sort ofshaping the practice of
medicine. Not only can thatresult in physician turnover, as
was the case of my co panelists,but in many cases this can lead
to physicians leaving thecommunity as well. So the doctor
I was on a panel with ended upmoving state lines in search of
his subsequent employment Andthat fact made me realize that
(10:39):
not only is this an example ofdoctors quitting PE practices
but in many cases they might bequitting medicine entirely or
leaving entire regions in searchof alternate employment.
So it's pretty important trendfor us to monitor. There's been
renewed attention on looking atthe workforce implication of
(10:59):
consolidation more broadly. AndI think PE investors, PE
investments with their potentialto cause this type of workforce
disruption is a particularlyimportant time for us to be
having this conversation.
Speaker 1 (11:13):
Okay, great. So I'm imagining you walking away from
this panel and saying, well,this
Speaker 2 (11:18):
is a really important question, a good topic to study.
What did you find? So our studyhad two key takeaways. First, we
found that followingacquisition, the number of
clinicians at PE acquiredpractices increased by almost
forty six percent. Now this is astriking number and it
highlights PE's growingfootprint across The United
(11:40):
States health care system.
It's also reflective of privateequity's growth strategy in
physician practices. PE firmsoften use something that is
referred to as a platform andadd on model of growth where
they initially might start outwith a platform acquisition, a
large physician practice thatenjoys perhaps good brand
recognition, a loyal stream ofpatients. And then the incentive
(12:03):
is to gradually increase marketshare by rolling up smaller
physician practices under thesame parent entity or the same
platform entity. So we see theincrease in the number of
clinicians by 46% as beingreflective of this pattern of
aggressive growth andconsolidation that we've known
to be so unique to PE firms. Thesecond finding, which is also
(12:26):
the title of our paper, was thatprivate equity acquisitions
increased physician turnover atacquired practices.
Now the baseline turnover beforeany acquisition, before any
investment was hovering around5% at these practices. And after
acquisition, this increased toover 20%. Now in percentage
(12:47):
terms, that's an increase ofover 260%. And interestingly, we
found turnover persisted tothree years after acquisition.
So this wasn't just a case ofsenior physicians who sell their
practices and then make thedecision to enter retirement.
To the contrary, we found that alot of the physicians who were
(13:08):
exiting practices making up thisgroup of physician turnover, a
lot of those physicians were 60.So around seventy percent of
physicians were 60. The averageage of the exiting physician was
around 50 years. And so thistold us that really this is a
trend that's affecting midcareer doctors and practices who
(13:28):
perhaps have disagreements withthe changes that might come
about after acquisitions.Changes in the culture of
medicine, the culture of thepractice, or the performance
oriented nature of practicepatterns that are shaped by
investors.
Something about the PE model wasmaking these doctors leave and
it was leading to a fifth of thepractice, twenty percent of the
(13:51):
doctors leaving in each yearafter acquisition.
Speaker 1 (13:55):
Wow, those are some pretty notable numbers. A lot to
dig into there. In a moment, Iwant to ask you a little more
about those findings, as wellas, maybe the policy
implications of those findings.But first, let's take a quick
break. And we're back.
(14:29):
You're listening to ourconversation with Doctor. Yasha
Sweeney Singh about the impactof private equity on physician
turnover. Doctor. Singh, how donon compete clauses fit into
this puzzle? What does your dataimply about the role of non
compete clause?
Speaker 2 (14:48):
That's such a great question. I'm so glad you asked
that. So I want to start byacknowledging that a lot of
employment contracts that areput in place after acquisitions
of this nature often have nondisclosure agreements and non
compete agreements. So theformer makes it really hard to
understand the latter. Again,just to maybe set the stage a
(15:12):
little bit for our listeners,non compete agreements are
agreements to not compete.
They are very common inemployment contracts. What they
do essentially is restrict theability of a physician to either
work for or get employed by orstart their own new practice
within a certain geography,within a certain time period. So
(15:33):
non compete clauses are fairlycommon within the healthcare
industry. They're used prettypervasively regardless of
ownership type or investmenttype. But they've caught the
attention of federal antitrustauthorities in recent years
because there is reason tobelieve that expansive use of
non competes can restrict workermobility.
(15:55):
It can make it harder fordoctors to leave undesirable
employment conditions. It canmake it harder for them to set
up shop in the nearby location.And in some cases, if a doctor
is interested in leaving a PEpractice, for example, it can
make it really difficult to findsubsequent employment within the
same region. So non competes area really big deal because they
(16:18):
can influence where physiciansgo. In our study, we were able
to identify how far doctorstravel in search of subsequent
employment once they leave a PEpractice.
And we found that regardless ofwhether a doctor was leaving a
PE practice or a non PEpractice, doctors often need to
(16:38):
travel great distances in searchof alternate employment. For
doctors leaving PE practices inparticular, they often needed to
move about 100 miles on average.And I must say I presented this
work to a group of doctors, aboard of directors of a
physician professionalassociation last week. And when
I mentioned this number, a 100mile move in search of
(17:01):
subsequent employment, there wasan audible gasp in the room
because it's so difficult tounderstand the parameters of non
compete agreements becausethey're often paired with non
disclosure agreements. So I'mglad that the renewed focus on
PE has brought this kind ofspotlight on the use of non
competes in healthcare becausein many cases, we're seeing not
(17:22):
only our doctors switching jobs,but they might be leaving entire
regions entirely.
Speaker 1 (17:28):
That 100 mile radius, is your sense that your co
panelist who moved to anotherstate, is that part of what was
behind his decision to shiftlocations?
Speaker 2 (17:40):
There can be many factors that shape where
physicians go in search ofalternate employment
arrangements, the presence andparameters of non compete
agreements is certainly onefactor and we'll never know for
sure. But the other perhaps moreimportant factor that we should
be aware of is, again, theplatform and add on
(18:01):
consolidation model really meansthat for some physicians and
some specialties, there mightnot be a lot of non PE
employment opportunitiesavailable in certain regions. If
a PE firm has alreadyconsolidated a local market and
we have examples of some statesand some specialties having 80%
PE penetration, 70% PEpenetration. That means for a
(18:25):
doctor who wants to leave a PEpractice, they might not have
any option but to perhaps moveacross the country, move across
state lines, or quit practicingmedicine entirely. And
unfortunately, I've had somevery disturbing conversations
with folks who've had to makethose difficult choices as well.
Speaker 1 (18:42):
Okay, well, let's turn to our first listener
question. I have a raised handfrom Lori Andress.
Speaker 3 (18:48):
Great. Thank you. I'm in public health. And so my
familiarity with this topic isonly from teaching healthcare
finance one hundred one, plusI'm in public health again. But
I'd like to, if possible, hearsome comments about how this
(19:09):
impacts the average community orconsumer and then a discussion
about regulations and policiesthat are in place to deal with
this if there are any.
Thank you.
Speaker 2 (19:24):
Absolutely, thank you so much for that great question.
From the patient perspective orthe community perspective, one
thing that we haven't talkedabout yet, but that's very
relevant to consider is that noncompetes can often make it
difficult for physicians toinform their patients when
they're leaving a practice ortake their patients with them if
(19:44):
they're quitting a practice tojoin a competing practice. For
the patient, this means thatyour doctor might one day just
stop practicing at a locationthat you might have a history
with, and nobody will be able totell you why that is the case.
In addition to that, nobody willbe able to tell you where the
doctor went. And so it makes itreally hard to establish
(20:05):
continuity in the patientphysician relationship, which
again makes it really hard toestablish trust between the
physician patient relationship,which is such an essential
component of care delivery andpatient outcomes.
Speaker 1 (20:19):
Okay, next question we have in the Q and A is from
Cheryl Danberg. She asks, do youknow whether some of the
departures are from olderphysicians who view this as an
opportunity to get a largepayout and leave practice?
Speaker 2 (20:34):
Thank you so much for that question, Cheryl. So that
is certainly part of the picturehere. For other listeners who
might be less familiar,oftentimes when you have a
physician partner who makes thedecision to sell their practice,
they're often rewarded a largefinancial payout as their
(20:54):
ownership stake in the practicethat they sell to investors. And
this kind of payout canencourage early retirement
decisions or make them slowlywind down their operations
practice. So it certainly is oneaspect of driving physician
turnover.
We didn't examine this questiondirectly but we did look at the
age composition of physicianswho are exiting practices. And
(21:15):
we found that the majority ofphysicians who are quitting PE
acquired practices tend to beyounger mid career
professionals, so around 50years old on average. And so
this to me, even though wedidn't directly examine the
physicians who might beretiring, this finding to me
suggests that it's more thanjust the group of physicians
(21:36):
entering retirement and seems tobe a trend that's more focused
on mid career doctors who mightnot see a path to ownership or
partnership within the practiceanymore after these changes.
Speaker 1 (21:47):
Our next question is a raised hand from Ijeoma
Nodimapara.
Speaker 4 (21:52):
Well, hi. My name is Doctor. Ijeoma Nodimapara. I'm a
physician, scientist, andcommunity advocate, and I thank
you very much for this topic. Myquestion is around patient
outcomes.
Have we noticed any impacts ofthis change or this trend on
patient outcomes and otherhealthcare or public health
metrics?
Speaker 2 (22:14):
Thank you for that question. I think center to all
of this is what happens to thepatient. So it's a very
important question.Unfortunately, because of the
secrecy that often accompanies alot of these transactions, There
hasn't been any direct researchthat examines what the changes
in workforce turnover orcomposition after acquisition
(22:35):
mean for patient outcomes. Sothat direct link hasn't been
established.
But there's a growing body ofwork that shows patient outcomes
don't appear to improve after PEfirms get involved in care
delivery. We've seen this to betrue in the hospital setting,
the nursing home setting, and soon. And at the same time with
this study and another recentstudy published last week, we
(22:58):
know that there are changes tothe workforce. So they're
independent facts at this point.But again, putting this in the
context of the broaderliterature, we know that an
important aspect of physicianturnover is diminished care
continuity.
And we know that care continuityfrom a variety of settings is so
essential for patient health andpatient well-being. When
(23:18):
patients see the same doctor,they have fewer
hospitalizations, feweremergency admissions, better
care experience. And so there'sreason to believe that the flip
side, when physicians are madeto see fragmented providers or
are not able to establish trustwith their providers, there's
reason to believe that thatwould affect patient outcomes in
undesirable ways.
Speaker 1 (23:38):
We have another question in the Q and A focused
on reimbursement denials. Thisquestioner is sort of pointing
to perhaps an increase in deniedreimbursement or perhaps lower
rates. And the question ofwhether or not that changes the
attractiveness of a healthpractice to a potential private
(23:59):
equity acquisition, or arepayers also being acquired by
private equity? I guess theunderlying question is about
sort of the incentives orpotential attractiveness of PE
acquisition related to paymentrates and spending?
Speaker 2 (24:23):
Yeah, thank you for that question. I'll do my best
to answer it. But if I don't getto all of the points raised,
please feel free to rephrase orre ask. So any PE investments of
insurers but I have seen jointventures or partnerships of PE
acquired physician practices andprimary care in particular with
(24:44):
health insurers. So these jointventures mainly target senior
focused primary care practicesthat are maybe more incentivized
by Medicare Advantage paymentincentives.
We could have a whole separateconversation on that topic. So
that's all I'll say about thatfor now. And then on the topic
of payment denials or PE somehowfiguring out different payment
(25:08):
incentives that exist when itcomes to interactions with
insurers, there's beenconsistent evidence now that
private equity acquisitions withtheir emphasis on platform and
add on roll up consolidationincreases the bargaining
leverage that practices have tonegotiate higher, more favorable
reimbursement rates fromcommercial insurers. So we know
(25:29):
the cost of care goes up about10% to 26% depending on the
clinical area you look at. Andat the same time, we know that
in certain areas like emergencymedicine, for example, where PE
firms might be deploying an outof network billing strategy.
We've seen from the No SurprisesAct public data that a lot of
the disputes being filed to gethigher sort of out of network
(25:53):
rates have been also led by PEbacked entities. So I must
emphasize, and I love to saythis, if you've seen one PE
acquisition, you've seen one PEacquisition. And I mean that to
say the strategy to deliverprofitability and high returns
is very context specific. And sowe know that overall the cost of
(26:14):
care goes up but the mechanismto drive higher cost of care can
differ across settings. It mightlook like out of network billing
and denials in one setting butit might look like higher
negotiated prices in another.
Speaker 1 (26:29):
Great. We have another question in the Q and A
from Suhun Kwok that asked howPE acquisition of physician
practices has evolved since theearly 2010s. And now I know we
covered the sort of generalincrease in the volume of PE
acquisition, but I'm wonderingif you can say a little more
about perhaps how thosetechniques or focus areas have
(26:52):
changed.
Speaker 2 (26:53):
Absolutely. So PE investments in physician
practices was a trend that beganto materialize around 2014, '20
'15. The early investments werein procedural specialties such
as dermatology,gastroenterology, ophthalmology,
so on, where really the emphasisfor revenue generation was tied
(27:14):
to fee for service paymentincentives and on increasing the
provision of a lot ofprocedures. As I mentioned, an
aging population makes thesesettings very attractive to
investors. A lot of people asthey age will need skin biopsies
and colonoscopies and cataractsurgery.
So it's no surprise that thesewere some of the specialties
(27:35):
that caught PE's attention inthat twenty fourteen, twenty
fifteen timeframe. Now, if welook more recently sort of
around the period and the onsetof the COVID-nineteen pandemic,
investors have focused insteadon value based areas of care
like primary care, cardiologyand oncology where there might
be a little different focus onmaybe looking at comprehensive
(27:59):
care or holistic care for thepatient across the care
continuum rather than providingor delivering procedures. And so
in primary care, for example,we've seen acquisitions grow
starting 2019, '20 '20. And thisis still an area where
investments and exits continueto materialize, so will be
important to monitor goingforward.
Speaker 1 (28:18):
We've got another question in the Q and A from
Greg Block. Greg, good to seeyou here. He asked if we've seen
any evidence of collectivephysician action via medical
specialty societies or othermeans to basically saying no,
no, to signing a non competeagreement?
Speaker 2 (28:40):
So that's a good question. And I want to be a
little cautious in maybehighlighting how little we know
about these trends andinvestments that might not
warrant a blanket no. So folksmight disagree with me on this,
but I think a starting pointbefore we can decide whether
this is something to say yes orno to is to just be aware of
(29:03):
these trends. And in myconversations with policymakers
and regulators and professionalsocieties, it's not clear to me
that these importantstakeholders have the necessary
data and information they wouldneed to even understand whether
this is something that thereneeds to be better regulation or
checks and balances around. Sowe can get into talking about
(29:25):
policy levers and policyremedies here.
But as a spoiler, the first andforemost principle here is to
ask for greater ownershiptransparency because you can't
solve a problem you can't see.You can't solve a problem if you
can't agree on the magnitude ofthe problem. And an essential
component to doing so is havingbetter data on ownership
(29:45):
structures of physicianpractices and other entities
that are receiving corporateinvestments, including from PE
firms.
Speaker 1 (29:52):
Great. Well, that's maybe a good segue to return to
one of the original questions aswell as some other concepts
we've kind of hinted at. Whatare our policy options to
address some of these changes?What have we seen implemented so
far, if anything at all?
Speaker 2 (30:12):
Ravi, now I could have an entire separate
conversation on this I spend alot of my time thinking about
that question. So I'm happy toshare some of my thoughts around
this with you. A lot of ourconversation around private
equity investments in physicianpractices has been centered
around the platform and add onconsolidation strategy. So if
(30:35):
I've convinced you thatconsolidation is the key concern
here, then the policy remedieslie in greater antitrust
enforcement. Now, this wassomething that the federal
antitrust authorities paidcloser attention to, the Federal
Trade Commission and Departmentof Justice.
And in the last few years, we'veseen a greater appetite to bring
(30:56):
lawsuits against PE firms and PEbacked entities that embark on
this pattern of consolidation.So that's promising. It's
certainly a step in the rightdirection. Now, at the same
time, what's been new andinteresting and important for us
to monitor going forward is howstates are also going to be
leading the charge in generatinggreater market oversight to
(31:19):
understand if there aretransactions that are altering
the competitiveness ofhealthcare markets. We've seen
many states introducelegislation, take greater
action, put greater enforcementauthority in the office of the
attorney general, for example,to hold PE firms more
accountable.
So as a first policy lever, Isee antitrust enforcement or
(31:40):
antitrust scrutiny as somethingthat can help catch acquisitions
that are particularly likely toresult in higher consolidation
or higher prices or restrictedaccess. And that's a role that
historically was played byfederal agencies but now we're
seeing states do more of. Now ifthe concern is around physician
(32:01):
autonomy and clinical judgmentand physician mobility and
concerns around well-being ofthe workforce, then antitrust
tools might not be enough toremedy those concerns. So if
that is a concern, then we'veseen states reconsider their
corporate practice of medicinedoctrines to kind of bring them
into 2025 to reflect the currentrealities of healthcare markets.
(32:25):
We've also seen different statestake up bills to ban non
competes or make them lessrestrictive or less enforceable
in the context of healthcareworkers.
So that also is a promisingdirection. And then finally, and
I alluded to this earlier,underpinning all of this is a
desire for greater ownershiptransparency. Many times state
(32:48):
policymakers and federalpolicymakers are convinced that
this is an area that warrantsgreater attention. But they're
unsure how much of this is aproblem that's affecting their
local constituencies or theirlocal markets. And so having
better data on ownershipstructures, on ownership
changes, and incentives that canshape the way medicine is
(33:10):
practiced, I think all of thiswill go a great way into helping
researchers and policymakers andphysicians understand who is the
ultimate owner who theninfluences the way medicine is
being practiced.
Speaker 1 (33:24):
What a great overview of kind of the policy landscape
there. One question we have inthe Q and A from my colleague
Michael Gerber asks about theresults of your study and more
generally, what is unique to PEacquisition versus, say, more
traditional consolidation andacquisition and mergers overall?
Speaker 2 (33:49):
So you'll have to stay tuned for my next paper for
that.
Speaker 1 (33:52):
All right.
Speaker 2 (33:53):
No, but I'm kidding. I can give you an answer. But
also, this is an importantquestion. So we're taking a
closer look at itsystematically. But I can tell
you PE in many ways has notinvented the playbook of
consolidation.
We've seen for the last decadeor so the dominant trend in
consolidation of physicianpractices has been the
(34:14):
acquisitions of physicianpractices by hospitals and
health systems. More recently,we've seen other players like
health insurers and retailcompanies and healthcare
conglomerates get involved inbuying up physician practices.
And so the question raises agood point, right? Like how much
of what we're talking about isunique to private equity and
should we be disproportionatelyconcerned about these trends if
(34:36):
they're backed by PE firms?That's a great question.
The answer we're still waitingfor and it's an empirical
question so that's the goodnews. But I can tell you there
are specific attributes of PEthat perhaps warrant a closer
look. So the first is these areinvestors that are acquiring the
(34:56):
majority stake investment inentities with the desire to
exit. And so exit incentivesseem very specific to PE firms
where if you have a hospitalthat's buying up a physician
practice, they might not belooking to sell the practice
within a three year horizon. Butfor PE firm involvement, it is
essential for firms to exit inorder to generate their own
(35:20):
expected payoffs.
And some of my earlier work inHildecker Scholar actually has
shown that PE firms when theyinvest in physician practices,
they tend to exit within a threeyear horizon and exit takes the
form of sale to other PE firms.So that kind of restarts the
cycle of buying to sell andmight be one sort of amplifying
factor in care continuity andcare disruptions that follow
(35:44):
consolidation. The other factorthat's unique to PE is the use
of borrowed money. A lot ofthese investments are made by
using large amounts of debt,often 60% to 90% of the deal
value is made up of debt orborrowed money. And the debt is
placed on the balance sheet ofthe acquired entity, not the
(36:06):
firm itself.
And so this can create financialpressures for the practice to
not only service debt paymentsbut have this huge burden that's
placed on their balance sheetwhich can then change or
reprioritize what kind ofservices they offer, what kind
of patient populations they seekand so on. So my thinking is a
(36:27):
lot of the things we've talkedabout as being specific to PE
might be concerns that applymore broadly to different types
of entities that are spurringconsolidation. But at the same
time, are some unique featuresthat warrant closer attention.
Speaker 1 (36:41):
Great. Well, you have your work cut out for you with
future research topics. That'sreally promising. We're going to
turn to a question from RobertSchreiber, who asks whether
there are geographic regionswhere this is happening in
particular. And are thereacquisitions happening where
managed care and value basedcare is less prevalent?
Speaker 2 (37:05):
The regions that are most affected by these trends
seem to be states in theSoutheast, but also in the
Northeast. Northeast. So we'veseen Texas, Arizona, and Florida
standing out as regions thathave attracted a
disproportionate number ofacquisitions relative to the
rest of the country. And thencertain pockets of the Northeast
(37:26):
also emerge as lucrativetargets. There's some variation
across specialties, but I wouldsay in general terms, are the
regions that have been veryattractive.
And the second part of thequestion was investments outside
of value based care.
Speaker 1 (37:40):
Yeah, I think the question was, is the prevalence
of value based or managed carepractices, does that sort of
affect the likelihood of privateequity coming in?
Speaker 2 (37:54):
Yes, I'm so glad you raised that point. So that's
certainly consistent with whatI've heard in my conversations
with doctors who are more opento entering into these
partnerships with investors. Thereality is that the practice of
medicine has become increasinglycomplicated. And with the
proliferation of value basedcontracting in place, a lot of
(38:14):
times practices need size andcapital to expand and to compete
for these types of contracts.They need capital to invest in
technology infrastructure tomaintain their ability to
compete for these contracts.
And so there hasn't been anysystematic research that
documents the link between thesetwo. But anecdotally, I've heard
(38:35):
from several leaders in thefield that the growth of value
based care has beenincentivizing this larger trend
towards practising in biggergroups, but also this newer
trend of venture capital firmsand private equity firms
emerging as a way to providecapital in order to compete for
(38:55):
these contracts, which isincreasingly a reality of
certainly in primary care, wherein the last few years, we've
seen a lot of investments.
Speaker 1 (39:05):
Great. A question here from Patrick Burke. A
little bit of a tangent from thequestion of turnover, but I
think relevant. Patrick asks, isthere evidence of higher prices,
meaning that they're selectingprivate payers rather than
government payers? Are theypulling practices out of
Medicare and or Medicaidcontracts, which would then
(39:28):
potentially worsen the gapbetween patients with commercial
versus government paid care.
Speaker 2 (39:35):
That's a really good question. I think changes in
payer mix that might serve toimprove the profitability or
bottom line of these practices,that's a very real concern. I'm
not aware of any research todate that has examined those
questions in part because it'sreally difficult to come across
an all payer claims databasethat would allow you to examine
(39:56):
changes across different typesof payers. So it's a great one.
It's a great question to get tothe bottom of, but
unfortunately, we don't have alot of research on this point to
date.
Speaker 1 (40:08):
Great. Well, Doctor. Singh, we've, I think, answered
all the really wonderfulquestions from our listeners
here today. This has been such awonderful experience.
Speaker 2 (40:20):
Absolutely. Thank you so much for this conversation.
And I really thank everybodywho's been sharing such great
questions and giving me ideasfor future work. It's been so
wonderful to share this studywith you all. So I just wanted
to say that.
Speaker 1 (40:34):
Wonderful. Well, so much to look forward to. I want
to thank our live recordinglisteners for joining us here
today and offering such greatquestions. And a huge thanks to
Doctor. Yashasuni Singh forbeing our first live guest on
Health Odyssey, and encourageeveryone to check out her paper
(40:57):
in the March 2025 issueavailable online now.
So folks who enjoyed thisepisode, please recommend it,
share it with a friend, and tunein next week.
Speaker 2 (41:10):
Thank you so much, Rob. Thank you so much,
everybody.
Speaker 1 (41:12):
Thank you. Thanks for listening. If you enjoyed
today's episode, I hope you'lltell a friend about a health
policy.
Hello, and welcome to a health podocy. I'm your host,
Rob Lott. Today, we have a veryspecial episode of the podocy.
That's because we're recordingwith a live audience. This
(00:51):
conversation is still fullyvirtual, but this time instead
of just me and a guest on Zoomwith our producer Jeff, now as
we record, it's March 12.
We've got a whole crowd oflisteners. And in a few minutes,
we're going to put them to workby asking them to weigh in with
their own questions. And Iespecially want to thank our
(01:12):
guest, Doctor. Yasha SweeneySingh, a healthcare economist
and assistant professor ofhealth services policy and
practice at Brown University.She's the lead author of a paper
in the brand new March 2025issue of Health Affairs.
The article's title is also itsmain finding, quote, physician
(01:34):
turnover increase in privateequity acquired physician
practices. It's the latest amongquite a few that Health Affairs
has published on the topic ofprivate equity over the last few
years. But Doctor. Singh and herco authors are nevertheless with
this paper, Pushing theBoundaries of Our Knowledge of
Private Equity. This is one ofthe very first papers in health
(01:57):
affairs, or anywhere really, toprovide a solid base of evidence
about the explicit and directimpact of private equity on the
physician workforce.
Alright, so without further ado,let's dig in. Doctor. Yashaswini
Singh, welcome to HealthOdyssey.
Speaker 2 (02:16):
Thank you so much for having me. I'm so excited to
talk about this paper. And Ithank the audience and listeners
who have joined us to talk aboutthe study. And I look forward to
our conversation. Thanks againso much for having me.
Speaker 1 (02:28):
Of course, awesome. Thanks for being here. Why don't
we just dive right in? I thoughtwe could start with a little bit
of background. As I'vementioned, we've published quite
a few pieces on private equityand health care.
Just a few weeks ago, we hostedDoctor. Zeri Song on this
podcast, where he pointed torecent estimates of private
(02:52):
equity in healthcare. More thanfour fifty hospitals have been
acquired by private equity, over6,000 physician practices,
potentially with upwards of 10%of physicians in private equity
owned practices. Is thatconsistent with your own
(03:12):
understanding of the changingfootprint of private equity in
health care? And what do you seeas some of the factors driving
that growth?
Speaker 2 (03:21):
Yeah, that's a great question to kick us off. I must
start by saying it's reallydifficult to precisely estimate
how many deals or how manyinvestments have been happening
in health care that have beenbacked by PE firms. A large
reasoning behind this is thelack of systematic reporting or
disclosure requirements. So justwith that caveat, the numbers
shared by Doctor. Song arecertainly consistent with trends
(03:44):
that we've been seeing as well.
Over the last decade or so, PEfirms have invested
1,000,000,000,000 in theAmerican health care system and
investments have ranged everysetting of care from cradle to
grave, as one co author pointedout. So this includes neonatal
services, fertility services,primary care, hospitals and
(04:05):
emergency rooms, as Doctor. Sunpointed out, but also other
areas like nursing homes,assisted living facilities,
hospice, and home health. Sothere isn't any segment within
health care that has beenunaffected by these trends. Now
when we think about factors thathave led to the evolution and
growth of PE in health care,it's a little harder to answer
(04:27):
that question because there area complex interplay of factors
here that are relevant.
So first, we have an agingsociety and an aging population.
As people get older, they demandmore health care services. And
for PE firms that signalsustained demand in an industry
where returns are almostguaranteed because you have a
demand in place that's expectedto grow. Second, I would say,
(04:51):
and I'm sure a lot of us on thiscall would agree, The US
Healthcare system is oftencharacterized by a lot of
attributes that make it reallyfrustrating as consumers to
interact with the system. It'scharacterized by a lot of waste
and redundancies, a lot ofinefficiencies, high
administrative costs, and highadministrative burden.
(05:13):
And so some might say orproponents of these trends might
say that PE firms are drawn tohealthcare as a way to offer a
solution to some of theattributes that can be so
frustrating for consumers. Firmstend to focus on driving
efficiencies and if there's onearea where those improvements
are desirable, it's certainlywithin the healthcare system.
The other thing I have tomention is historically interest
(05:36):
rates have been low. Sooperating in a historically low
interest rate environment meansthat PE firms have been able to
access debt at relativelycheaper rates. So that's fueled
their expansion.
But overall, I think thetakeaway is that PE firms have
embarked on this rapidremarkable pace of consolidation
and investment in healthcare inThe US spanning every segment.
(05:59):
And there are a variety ofdemand and supply push and pull
factors at play here.
Speaker 1 (06:04):
Got it. Well, with such rapid change comes, I
think, some opportunities tostudy what's behind it. A lot of
prior research has looked atsome of the effects of private
equity acquisition on providerpractices. And I'm wondering if
you can give us a quick sense ofwhat the literature over the
last few years has shown. Isthere a growing consensus about
(06:29):
the effects of private equityacquisition on things like
costs, utilization, evenoutcomes?
Speaker 2 (06:37):
Absolutely. So the literature, the academic
literature is fairly consistentin showing that when PE firms
acquire a hospital or aphysician practice, the cost of
care goes up. Prices go up,prices paid by commercial
insurers go up, and that hasimplications for the cost of
care for patients directly. Onthe utilization side, the
(06:59):
evidence is also emerging andlargely consistent. And there we
see that PE firms drive higherutilization of services that can
be profitable, ancillaryservices like imaging,
diagnostic imaging services orlab tests are often services
that we've seen go up followingacquisitions.
And then at the same time, we'veseen that PE firms can pare down
(07:23):
or cut back on services thatthey might deem as less
profitable even if they might becritical for patients. And so
the utilization piece iscertainly interesting. What's
less clear is what all of thismeans for patient well-being.
Patient outcomes are harder tostudy, at least using secondary
medical claims data, which a lotof researchers use. The patient
(07:46):
experience is often missing inthese secondary data sets.
And while research from thenursing home space and the
hospital space has shown thatpatient outcomes can worsen
following acquisitions of thistype, the evidence is less
conclusive when we look atphysician practice investments.
So this is an area that I know alot of researchers and
(08:07):
policymakers are payingattention to, but evidence at
present is still lacking.
Speaker 1 (08:12):
My understanding is that less is known about the
effect on physician turnover inprivate equity acquired
practices, at least before thispaper. Why is that a potentially
useful measure of the impact ofprivate equity?
Speaker 2 (08:30):
Sure. So turnover is a really critical but unexplored
dimension of this trend, right?At the center of all of these
trends is a physician or aphysician practice that makes
the decision to sell theirpractice to investors. A large
body of literature in healtheconomics and health policy and
health services research hasshown that physician stability
(08:54):
or workforce stability can bereally good for patients.
Patients value it when they cansee one doctor consistently over
time.
If they're able to see onedoctor consistently over time,
patients have fewerhospitalizations, better health
outcomes, better satisfactionoverall with the health care
system. So on the flip side,turnover is associated with
(09:14):
disruptions in care continuity,disruptions in patient health,
patient access as well. And sothis is a really critical space
to examine. I also want to sharea story, if I may, of how it's
important to study from anacademic lens, I wanted to share
a personal story of why it'simportant to me to I was invited
(09:36):
to speak on a panel last year onsimilar topics, the growth of
private equity, the growth ofcorporate actors in healthcare
and what this means for caredelivery. And one of my co
panelists on this panel was adoctor who was formerly employed
at a PE acquired practice.
But for a variety of reasons,and we can get into those later,
(09:57):
decided that that employmentcondition or arrangement wasn't
the right one for him and endedup leaving the practice. So this
was a former PE doctor who wasmy co panelist. And in
conversations with him, Irealized that when you have PE
firms invest in practices, thereare a lot of changes to the
practice of medicine thatmaterialize when you have
(10:18):
financial investors sort ofshaping the practice of
medicine. Not only can thatresult in physician turnover, as
was the case of my co panelists,but in many cases this can lead
to physicians leaving thecommunity as well. So the doctor
I was on a panel with ended upmoving state lines in search of
his subsequent employment Andthat fact made me realize that
(10:39):
not only is this an example ofdoctors quitting PE practices
but in many cases they might bequitting medicine entirely or
leaving entire regions in searchof alternate employment.
So it's pretty important trendfor us to monitor. There's been
renewed attention on looking atthe workforce implication of
(10:59):
consolidation more broadly. AndI think PE investors, PE
investments with their potentialto cause this type of workforce
disruption is a particularlyimportant time for us to be
having this conversation.
Speaker 1 (11:13):
Okay, great. So I'm imagining you walking away from
this panel and saying, well,this
Speaker 2 (11:18):
is a really important question, a good topic to study.
What did you find? So our studyhad two key takeaways. First, we
found that followingacquisition, the number of
clinicians at PE acquiredpractices increased by almost
forty six percent. Now this is astriking number and it
highlights PE's growingfootprint across The United
(11:40):
States health care system.
It's also reflective of privateequity's growth strategy in
physician practices. PE firmsoften use something that is
referred to as a platform andadd on model of growth where
they initially might start outwith a platform acquisition, a
large physician practice thatenjoys perhaps good brand
recognition, a loyal stream ofpatients. And then the incentive
(12:03):
is to gradually increase marketshare by rolling up smaller
physician practices under thesame parent entity or the same
platform entity. So we see theincrease in the number of
clinicians by 46% as beingreflective of this pattern of
aggressive growth andconsolidation that we've known
to be so unique to PE firms. Thesecond finding, which is also
(12:26):
the title of our paper, was thatprivate equity acquisitions
increased physician turnover atacquired practices.
Now the baseline turnover beforeany acquisition, before any
investment was hovering around5% at these practices. And after
acquisition, this increased toover 20%. Now in percentage
(12:47):
terms, that's an increase ofover 260%. And interestingly, we
found turnover persisted tothree years after acquisition.
So this wasn't just a case ofsenior physicians who sell their
practices and then make thedecision to enter retirement.
To the contrary, we found that alot of the physicians who were
(13:08):
exiting practices making up thisgroup of physician turnover, a
lot of those physicians were 60.So around seventy percent of
physicians were 60. The averageage of the exiting physician was
around 50 years. And so thistold us that really this is a
trend that's affecting midcareer doctors and practices who
(13:28):
perhaps have disagreements withthe changes that might come
about after acquisitions.Changes in the culture of
medicine, the culture of thepractice, or the performance
oriented nature of practicepatterns that are shaped by
investors.
Something about the PE model wasmaking these doctors leave and
it was leading to a fifth of thepractice, twenty percent of the
(13:51):
doctors leaving in each yearafter acquisition.
Speaker 1 (13:55):
Wow, those are some pretty notable numbers. A lot to
dig into there. In a moment, Iwant to ask you a little more
about those findings, as wellas, maybe the policy
implications of those findings.But first, let's take a quick
break. And we're back.
(14:29):
You're listening to ourconversation with Doctor. Yasha
Sweeney Singh about the impactof private equity on physician
turnover. Doctor. Singh, how donon compete clauses fit into
this puzzle? What does your dataimply about the role of non
compete clause?
Speaker 2 (14:48):
That's such a great question. I'm so glad you asked
that. So I want to start byacknowledging that a lot of
employment contracts that areput in place after acquisitions
of this nature often have nondisclosure agreements and non
compete agreements. So theformer makes it really hard to
understand the latter. Again,just to maybe set the stage a
(15:12):
little bit for our listeners,non compete agreements are
agreements to not compete.
They are very common inemployment contracts. What they
do essentially is restrict theability of a physician to either
work for or get employed by orstart their own new practice
within a certain geography,within a certain time period. So
(15:33):
non compete clauses are fairlycommon within the healthcare
industry. They're used prettypervasively regardless of
ownership type or investmenttype. But they've caught the
attention of federal antitrustauthorities in recent years
because there is reason tobelieve that expansive use of
non competes can restrict workermobility.
(15:55):
It can make it harder fordoctors to leave undesirable
employment conditions. It canmake it harder for them to set
up shop in the nearby location.And in some cases, if a doctor
is interested in leaving a PEpractice, for example, it can
make it really difficult to findsubsequent employment within the
same region. So non competes area really big deal because they
(16:18):
can influence where physiciansgo. In our study, we were able
to identify how far doctorstravel in search of subsequent
employment once they leave a PEpractice.
And we found that regardless ofwhether a doctor was leaving a
PE practice or a non PEpractice, doctors often need to
(16:38):
travel great distances in searchof alternate employment. For
doctors leaving PE practices inparticular, they often needed to
move about 100 miles on average.And I must say I presented this
work to a group of doctors, aboard of directors of a
physician professionalassociation last week. And when
I mentioned this number, a 100mile move in search of
(17:01):
subsequent employment, there wasan audible gasp in the room
because it's so difficult tounderstand the parameters of non
compete agreements becausethey're often paired with non
disclosure agreements. So I'mglad that the renewed focus on
PE has brought this kind ofspotlight on the use of non
competes in healthcare becausein many cases, we're seeing not
(17:22):
only our doctors switching jobs,but they might be leaving entire
regions entirely.
Speaker 1 (17:28):
That 100 mile radius, is your sense that your co
panelist who moved to anotherstate, is that part of what was
behind his decision to shiftlocations?
Speaker 2 (17:40):
There can be many factors that shape where
physicians go in search ofalternate employment
arrangements, the presence andparameters of non compete
agreements is certainly onefactor and we'll never know for
sure. But the other perhaps moreimportant factor that we should
be aware of is, again, theplatform and add on
(18:01):
consolidation model really meansthat for some physicians and
some specialties, there mightnot be a lot of non PE
employment opportunitiesavailable in certain regions. If
a PE firm has alreadyconsolidated a local market and
we have examples of some statesand some specialties having 80%
PE penetration, 70% PEpenetration. That means for a
(18:25):
doctor who wants to leave a PEpractice, they might not have
any option but to perhaps moveacross the country, move across
state lines, or quit practicingmedicine entirely. And
unfortunately, I've had somevery disturbing conversations
with folks who've had to makethose difficult choices as well.
Speaker 1 (18:42):
Okay, well, let's turn to our first listener
question. I have a raised handfrom Lori Andress.
Speaker 3 (18:48):
Great. Thank you. I'm in public health. And so my
familiarity with this topic isonly from teaching healthcare
finance one hundred one, plusI'm in public health again. But
I'd like to, if possible, hearsome comments about how this
(19:09):
impacts the average community orconsumer and then a discussion
about regulations and policiesthat are in place to deal with
this if there are any.
Thank you.
Speaker 2 (19:24):
Absolutely, thank you so much for that great question.
From the patient perspective orthe community perspective, one
thing that we haven't talkedabout yet, but that's very
relevant to consider is that noncompetes can often make it
difficult for physicians toinform their patients when
they're leaving a practice ortake their patients with them if
(19:44):
they're quitting a practice tojoin a competing practice. For
the patient, this means thatyour doctor might one day just
stop practicing at a locationthat you might have a history
with, and nobody will be able totell you why that is the case.
In addition to that, nobody willbe able to tell you where the
doctor went. And so it makes itreally hard to establish
(20:05):
continuity in the patientphysician relationship, which
again makes it really hard toestablish trust between the
physician patient relationship,which is such an essential
component of care delivery andpatient outcomes.
Speaker 1 (20:19):
Okay, next question we have in the Q and A is from
Cheryl Danberg. She asks, do youknow whether some of the
departures are from olderphysicians who view this as an
opportunity to get a largepayout and leave practice?
Speaker 2 (20:34):
Thank you so much for that question, Cheryl. So that
is certainly part of the picturehere. For other listeners who
might be less familiar,oftentimes when you have a
physician partner who makes thedecision to sell their practice,
they're often rewarded a largefinancial payout as their
(20:54):
ownership stake in the practicethat they sell to investors. And
this kind of payout canencourage early retirement
decisions or make them slowlywind down their operations
practice. So it certainly is oneaspect of driving physician
turnover.
We didn't examine this questiondirectly but we did look at the
age composition of physicianswho are exiting practices. And
(21:15):
we found that the majority ofphysicians who are quitting PE
acquired practices tend to beyounger mid career
professionals, so around 50years old on average. And so
this to me, even though wedidn't directly examine the
physicians who might beretiring, this finding to me
suggests that it's more thanjust the group of physicians
(21:36):
entering retirement and seems tobe a trend that's more focused
on mid career doctors who mightnot see a path to ownership or
partnership within the practiceanymore after these changes.
Speaker 1 (21:47):
Our next question is a raised hand from Ijeoma
Nodimapara.
Speaker 4 (21:52):
Well, hi. My name is Doctor. Ijeoma Nodimapara. I'm a
physician, scientist, andcommunity advocate, and I thank
you very much for this topic. Myquestion is around patient
outcomes.
Have we noticed any impacts ofthis change or this trend on
patient outcomes and otherhealthcare or public health
metrics?
Speaker 2 (22:14):
Thank you for that question. I think center to all
of this is what happens to thepatient. So it's a very
important question.Unfortunately, because of the
secrecy that often accompanies alot of these transactions, There
hasn't been any direct researchthat examines what the changes
in workforce turnover orcomposition after acquisition
(22:35):
mean for patient outcomes. Sothat direct link hasn't been
established.
But there's a growing body ofwork that shows patient outcomes
don't appear to improve after PEfirms get involved in care
delivery. We've seen this to betrue in the hospital setting,
the nursing home setting, and soon. And at the same time with
this study and another recentstudy published last week, we
(22:58):
know that there are changes tothe workforce. So they're
independent facts at this point.But again, putting this in the
context of the broaderliterature, we know that an
important aspect of physicianturnover is diminished care
continuity.
And we know that care continuityfrom a variety of settings is so
essential for patient health andpatient well-being. When
(23:18):
patients see the same doctor,they have fewer
hospitalizations, feweremergency admissions, better
care experience. And so there'sreason to believe that the flip
side, when physicians are madeto see fragmented providers or
are not able to establish trustwith their providers, there's
reason to believe that thatwould affect patient outcomes in
undesirable ways.
Speaker 1 (23:38):
We have another question in the Q and A focused
on reimbursement denials. Thisquestioner is sort of pointing
to perhaps an increase in deniedreimbursement or perhaps lower
rates. And the question ofwhether or not that changes the
attractiveness of a healthpractice to a potential private
(23:59):
equity acquisition, or arepayers also being acquired by
private equity? I guess theunderlying question is about
sort of the incentives orpotential attractiveness of PE
acquisition related to paymentrates and spending?
Speaker 2 (24:23):
Yeah, thank you for that question. I'll do my best
to answer it. But if I don't getto all of the points raised,
please feel free to rephrase orre ask. So any PE investments of
insurers but I have seen jointventures or partnerships of PE
acquired physician practices andprimary care in particular with
(24:44):
health insurers. So these jointventures mainly target senior
focused primary care practicesthat are maybe more incentivized
by Medicare Advantage paymentincentives.
We could have a whole separateconversation on that topic. So
that's all I'll say about thatfor now. And then on the topic
of payment denials or PE somehowfiguring out different payment
(25:08):
incentives that exist when itcomes to interactions with
insurers, there's beenconsistent evidence now that
private equity acquisitions withtheir emphasis on platform and
add on roll up consolidationincreases the bargaining
leverage that practices have tonegotiate higher, more favorable
reimbursement rates fromcommercial insurers. So we know
(25:29):
the cost of care goes up about10% to 26% depending on the
clinical area you look at. Andat the same time, we know that
in certain areas like emergencymedicine, for example, where PE
firms might be deploying an outof network billing strategy.
We've seen from the No SurprisesAct public data that a lot of
the disputes being filed to gethigher sort of out of network
(25:53):
rates have been also led by PEbacked entities. So I must
emphasize, and I love to saythis, if you've seen one PE
acquisition, you've seen one PEacquisition. And I mean that to
say the strategy to deliverprofitability and high returns
is very context specific. And sowe know that overall the cost of
(26:14):
care goes up but the mechanismto drive higher cost of care can
differ across settings. It mightlook like out of network billing
and denials in one setting butit might look like higher
negotiated prices in another.
Speaker 1 (26:29):
Great. We have another question in the Q and A
from Suhun Kwok that asked howPE acquisition of physician
practices has evolved since theearly 2010s. And now I know we
covered the sort of generalincrease in the volume of PE
acquisition, but I'm wonderingif you can say a little more
about perhaps how thosetechniques or focus areas have
(26:52):
changed.
Speaker 2 (26:53):
Absolutely. So PE investments in physician
practices was a trend that beganto materialize around 2014, '20
'15. The early investments werein procedural specialties such
as dermatology,gastroenterology, ophthalmology,
so on, where really the emphasisfor revenue generation was tied
(27:14):
to fee for service paymentincentives and on increasing the
provision of a lot ofprocedures. As I mentioned, an
aging population makes thesesettings very attractive to
investors. A lot of people asthey age will need skin biopsies
and colonoscopies and cataractsurgery.
So it's no surprise that thesewere some of the specialties
(27:35):
that caught PE's attention inthat twenty fourteen, twenty
fifteen timeframe. Now, if welook more recently sort of
around the period and the onsetof the COVID-nineteen pandemic,
investors have focused insteadon value based areas of care
like primary care, cardiologyand oncology where there might
be a little different focus onmaybe looking at comprehensive
(27:59):
care or holistic care for thepatient across the care
continuum rather than providingor delivering procedures. And so
in primary care, for example,we've seen acquisitions grow
starting 2019, '20 '20. And thisis still an area where
investments and exits continueto materialize, so will be
important to monitor goingforward.
Speaker 1 (28:18):
We've got another question in the Q and A from
Greg Block. Greg, good to seeyou here. He asked if we've seen
any evidence of collectivephysician action via medical
specialty societies or othermeans to basically saying no,
no, to signing a non competeagreement?
Speaker 2 (28:40):
So that's a good question. And I want to be a
little cautious in maybehighlighting how little we know
about these trends andinvestments that might not
warrant a blanket no. So folksmight disagree with me on this,
but I think a starting pointbefore we can decide whether
this is something to say yes orno to is to just be aware of
(29:03):
these trends. And in myconversations with policymakers
and regulators and professionalsocieties, it's not clear to me
that these importantstakeholders have the necessary
data and information they wouldneed to even understand whether
this is something that thereneeds to be better regulation or
checks and balances around. Sowe can get into talking about
(29:25):
policy levers and policyremedies here.
But as a spoiler, the first andforemost principle here is to
ask for greater ownershiptransparency because you can't
solve a problem you can't see.You can't solve a problem if you
can't agree on the magnitude ofthe problem. And an essential
component to doing so is havingbetter data on ownership
(29:45):
structures of physicianpractices and other entities
that are receiving corporateinvestments, including from PE
firms.
Speaker 1 (29:52):
Great. Well, that's maybe a good segue to return to
one of the original questions aswell as some other concepts
we've kind of hinted at. Whatare our policy options to
address some of these changes?What have we seen implemented so
far, if anything at all?
Speaker 2 (30:12):
Ravi, now I could have an entire separate
conversation on this I spend alot of my time thinking about
that question. So I'm happy toshare some of my thoughts around
this with you. A lot of ourconversation around private
equity investments in physicianpractices has been centered
around the platform and add onconsolidation strategy. So if
(30:35):
I've convinced you thatconsolidation is the key concern
here, then the policy remedieslie in greater antitrust
enforcement. Now, this wassomething that the federal
antitrust authorities paidcloser attention to, the Federal
Trade Commission and Departmentof Justice.
And in the last few years, we'veseen a greater appetite to bring
(30:56):
lawsuits against PE firms and PEbacked entities that embark on
this pattern of consolidation.So that's promising. It's
certainly a step in the rightdirection. Now, at the same
time, what's been new andinteresting and important for us
to monitor going forward is howstates are also going to be
leading the charge in generatinggreater market oversight to
(31:19):
understand if there aretransactions that are altering
the competitiveness ofhealthcare markets. We've seen
many states introducelegislation, take greater
action, put greater enforcementauthority in the office of the
attorney general, for example,to hold PE firms more
accountable.
So as a first policy lever, Isee antitrust enforcement or
(31:40):
antitrust scrutiny as somethingthat can help catch acquisitions
that are particularly likely toresult in higher consolidation
or higher prices or restrictedaccess. And that's a role that
historically was played byfederal agencies but now we're
seeing states do more of. Now ifthe concern is around physician
(32:01):
autonomy and clinical judgmentand physician mobility and
concerns around well-being ofthe workforce, then antitrust
tools might not be enough toremedy those concerns. So if
that is a concern, then we'veseen states reconsider their
corporate practice of medicinedoctrines to kind of bring them
into 2025 to reflect the currentrealities of healthcare markets.
(32:25):
We've also seen different statestake up bills to ban non
competes or make them lessrestrictive or less enforceable
in the context of healthcareworkers.
So that also is a promisingdirection. And then finally, and
I alluded to this earlier,underpinning all of this is a
desire for greater ownershiptransparency. Many times state
(32:48):
policymakers and federalpolicymakers are convinced that
this is an area that warrantsgreater attention. But they're
unsure how much of this is aproblem that's affecting their
local constituencies or theirlocal markets. And so having
better data on ownershipstructures, on ownership
changes, and incentives that canshape the way medicine is
(33:10):
practiced, I think all of thiswill go a great way into helping
researchers and policymakers andphysicians understand who is the
ultimate owner who theninfluences the way medicine is
being practiced.
Speaker 1 (33:24):
What a great overview of kind of the policy landscape
there. One question we have inthe Q and A from my colleague
Michael Gerber asks about theresults of your study and more
generally, what is unique to PEacquisition versus, say, more
traditional consolidation andacquisition and mergers overall?
Speaker 2 (33:49):
So you'll have to stay tuned for my next paper for
that.
Speaker 1 (33:52):
All right.
Speaker 2 (33:53):
No, but I'm kidding. I can give you an answer. But
also, this is an importantquestion. So we're taking a
closer look at itsystematically. But I can tell
you PE in many ways has notinvented the playbook of
consolidation.
We've seen for the last decadeor so the dominant trend in
consolidation of physicianpractices has been the
(34:14):
acquisitions of physicianpractices by hospitals and
health systems. More recently,we've seen other players like
health insurers and retailcompanies and healthcare
conglomerates get involved inbuying up physician practices.
And so the question raises agood point, right? Like how much
of what we're talking about isunique to private equity and
should we be disproportionatelyconcerned about these trends if
(34:36):
they're backed by PE firms?That's a great question.
The answer we're still waitingfor and it's an empirical
question so that's the goodnews. But I can tell you there
are specific attributes of PEthat perhaps warrant a closer
look. So the first is these areinvestors that are acquiring the
(34:56):
majority stake investment inentities with the desire to
exit. And so exit incentivesseem very specific to PE firms
where if you have a hospitalthat's buying up a physician
practice, they might not belooking to sell the practice
within a three year horizon. Butfor PE firm involvement, it is
essential for firms to exit inorder to generate their own
(35:20):
expected payoffs.
And some of my earlier work inHildecker Scholar actually has
shown that PE firms when theyinvest in physician practices,
they tend to exit within a threeyear horizon and exit takes the
form of sale to other PE firms.So that kind of restarts the
cycle of buying to sell andmight be one sort of amplifying
factor in care continuity andcare disruptions that follow
(35:44):
consolidation. The other factorthat's unique to PE is the use
of borrowed money. A lot ofthese investments are made by
using large amounts of debt,often 60% to 90% of the deal
value is made up of debt orborrowed money. And the debt is
placed on the balance sheet ofthe acquired entity, not the
(36:06):
firm itself.
And so this can create financialpressures for the practice to
not only service debt paymentsbut have this huge burden that's
placed on their balance sheetwhich can then change or
reprioritize what kind ofservices they offer, what kind
of patient populations they seekand so on. So my thinking is a
(36:27):
lot of the things we've talkedabout as being specific to PE
might be concerns that applymore broadly to different types
of entities that are spurringconsolidation. But at the same
time, are some unique featuresthat warrant closer attention.
Speaker 1 (36:41):
Great. Well, you have your work cut out for you with
future research topics. That'sreally promising. We're going to
turn to a question from RobertSchreiber, who asks whether
there are geographic regionswhere this is happening in
particular. And are thereacquisitions happening where
managed care and value basedcare is less prevalent?
Speaker 2 (37:05):
The regions that are most affected by these trends
seem to be states in theSoutheast, but also in the
Northeast. Northeast. So we'veseen Texas, Arizona, and Florida
standing out as regions thathave attracted a
disproportionate number ofacquisitions relative to the
rest of the country. And thencertain pockets of the Northeast
(37:26):
also emerge as lucrativetargets. There's some variation
across specialties, but I wouldsay in general terms, are the
regions that have been veryattractive.
And the second part of thequestion was investments outside
of value based care.
Speaker 1 (37:40):
Yeah, I think the question was, is the prevalence
of value based or managed carepractices, does that sort of
affect the likelihood of privateequity coming in?
Speaker 2 (37:54):
Yes, I'm so glad you raised that point. So that's
certainly consistent with whatI've heard in my conversations
with doctors who are more opento entering into these
partnerships with investors. Thereality is that the practice of
medicine has become increasinglycomplicated. And with the
proliferation of value basedcontracting in place, a lot of
(38:14):
times practices need size andcapital to expand and to compete
for these types of contracts.They need capital to invest in
technology infrastructure tomaintain their ability to
compete for these contracts.
And so there hasn't been anysystematic research that
documents the link between thesetwo. But anecdotally, I've heard
(38:35):
from several leaders in thefield that the growth of value
based care has beenincentivizing this larger trend
towards practising in biggergroups, but also this newer
trend of venture capital firmsand private equity firms
emerging as a way to providecapital in order to compete for
(38:55):
these contracts, which isincreasingly a reality of
certainly in primary care, wherein the last few years, we've
seen a lot of investments.
Speaker 1 (39:05):
Great. A question here from Patrick Burke. A
little bit of a tangent from thequestion of turnover, but I
think relevant. Patrick asks, isthere evidence of higher prices,
meaning that they're selectingprivate payers rather than
government payers? Are theypulling practices out of
Medicare and or Medicaidcontracts, which would then
(39:28):
potentially worsen the gapbetween patients with commercial
versus government paid care.
Speaker 2 (39:35):
That's a really good question. I think changes in
payer mix that might serve toimprove the profitability or
bottom line of these practices,that's a very real concern. I'm
not aware of any research todate that has examined those
questions in part because it'sreally difficult to come across
an all payer claims databasethat would allow you to examine
(39:56):
changes across different typesof payers. So it's a great one.
It's a great question to get tothe bottom of, but
unfortunately, we don't have alot of research on this point to
date.
Speaker 1 (40:08):
Great. Well, Doctor. Singh, we've, I think, answered
all the really wonderfulquestions from our listeners
here today. This has been such awonderful experience.
Speaker 2 (40:20):
Absolutely. Thank you so much for this conversation.
And I really thank everybodywho's been sharing such great
questions and giving me ideasfor future work. It's been so
wonderful to share this studywith you all. So I just wanted
to say that.
Speaker 1 (40:34):
Wonderful. Well, so much to look forward to. I want
to thank our live recordinglisteners for joining us here
today and offering such greatquestions. And a huge thanks to
Doctor. Yashasuni Singh forbeing our first live guest on
Health Odyssey, and encourageeveryone to check out her paper
(40:57):
in the March 2025 issueavailable online now.
So folks who enjoyed thisepisode, please recommend it,
share it with a friend, and tunein next week.
Speaker 2 (41:10):
Thank you so much, Rob. Thank you so much,
everybody.
Speaker 1 (41:12):
Thank you. Thanks for listening. If you enjoyed
today's episode, I hope you'lltell a friend about a health
policy.
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