Other types of physician groups being targeted by private equity investors include orthopedics, urology, gastroenterology and ophthalmology—all specialties with high potential for revenue from elective procedures and ancillary services. There were 181 private equity deals for all types of physician practices last year, according to an analysis published in Bloomberg Law.
Experts have questioned the trend, particularly because there are no published studies so far on the impact of private equity ownership on patient outcomes and healthcare spending. They wonder how the rush of profit-hungry investors into physician practice management fits with policymakers' imperative to lower healthcare spending.
Large private equity-owned medical groups such as TeamHealth and EmCare recently have drawn fire from insurers and others during the congressional battle over legislation to end surprise out-of-network billing. Yale University researchers reported last year that out-of-network rates soared by more than 80 percentage points after EmCare took over the management of emergency services at hospitals with previously low out-of-network rates.
An accompanying editorial in JAMA Dermatology called for a halt to private equity acquisitions of dermatology practices until data are available on how these deals affect quality of care and affordability for patients and payers.
"The whole healthcare system needs to pay attention to these trends in the subspecialties, because this does not seem to be a step in the direction of value-based, lower-cost care," said Dr. Joshua Sharfstein, vice dean for public health practice at Johns Hopkins University and co-author of the editorial.
Advocates argue that private equity investment facilitates larger, better capitalized groups with sophisticated technology and management that can provide higher-quality and more efficient care. It gives entrepreneurial physicians struggling to survive independently an opportunity to increase in size and scale with minimal administrative and management responsibilities, according to a February white paper by BakerHostetler.
Medical groups that bulk up through private equity investment also have stronger bargaining clout with insurers.
"The goal is to develop market leverage," said Bill Brown, a healthcare strategist with Nashville-based A2B Advisors. "It's a war of who can get big enough in any area to get payers to treat you with respect."
But previous studies have raised concerns about private equity ownership of dermatology practices leading to loss of physician autonomy, conflicts of interest, increased utilization of high-cost services and inadequate supervision of midlevel clinicians.
"The overarching theme is pressure on profits — seeing more patients, doing more procedures and hiring more physician extenders who receive little or no supervision in satellite clinics," said Dr. Sailesh Konda, an assistant clinical professor of dermatology at the University of Florida who co-authored a critical study last year on private equity ownership of dermatology practices.
There also are worries about what will happen to these physician practices over the longer term, given that private equity firms generally aim to sell assets at a large profit within three to five years. Younger physicians who didn't have an equity position at the time of the initial acquisition could get hurt financially, particularly because they typically have to sign noncompete agreements.
"It's new, it's cool, there's a lot of cachet, but it will take a couple of years to see if the doctors are happy or not," said Laurice Rutledge Lambert, an attorney at BakerHostetler who co-authored the firm's brief on private equity investment in physician practice management.
The authors of the JAMA Dermatology article called for researchers to study the impact of private equity ownership on physician and midlevel staffing, use of procedures and tests, payment rates, acceptance of Medicaid patients, and trends in provider compensation, autonomy, satisfaction and burnout.
They concluded that as value-based care becomes increasingly prevalent, outcomes data may play a bigger role in determining the valuation and strategic rationale for private equity consolidation of physician practices.
Sharfstein and his editorial co-author argued, however, that policymakers and medical leaders can't afford to wait for more data. "By focusing on short-term revenue opportunities, private equity acquisitions will likely add to the immense cost and stark inequality of our healthcare system," they wrote.