Private equity-owned doc practices shut out of small business bailout
Skip to main content
MDHC_Logotype_white
Subscribe
  • My Account
  • Login
  • Subscribe
  • News
    • This Week's News
    • COVID-19
    • Providers
    • Insurance
    • Government
    • Finance
    • Technology
    • Safety & Quality
    • People
    • Regional News
    • Digital Edition
    • Mikelle Moore
      The promising future of rural healthcare, even amid the COVID-19 pandemic
      Alicia Wilson
      Q&A: Emerging leader Alicia Wilson on staying close to home
      Presbyterian Hospital in Albuquerque, UNM Sandoval Regional Medical Center in Rio Rancho, N.M., Lovelace Medical Center in Albuquerque and Christus St. Vincent Regional Medical Center in Santa Fe, N.M.
      Providers weigh long-term risks, rewards of post-COVID collaboration
      46.7% of surveyed adults reported delaying dental treatment due to COVID-19. 74.7% delayed a routine checkup.
      Data Points: Dental visits during the pandemic
    • Why healthcare should also fight for $15
      46.7% of surveyed adults reported delaying dental treatment due to COVID-19. 74.7% delayed a routine checkup.
      Data Points: Dental visits during the pandemic
      Mikelle Moore
      The promising future of rural healthcare, even amid the COVID-19 pandemic
      A provider wearing PPE looking at a wall with patient notes.
      Rethinking quality and safety in the age of COVID
    • The Check Up: Dr. Imran Andrabi
      The Check Up: Dr. Imran Andrabi of ThedaCare
      Dr. Imran Andrabi
      Q&A: ThedaCare CEO says lessons from COVID-19 will inform new approaches to population health management
      Hospitals confront water shortages in winter storm aftermath
      beaumont-hospital-royal-oak_i_i_i.jpg
      Beaumont says nearly 2,000 second-shot vaccinations canceled due to vaccine shortage
    • CMS: Group health plans must cover COVID-19 diagnostic testing
      High MLRs inspire insurers to focus on quality improvements
      Blue Cross and Blue Shield of Oklahoma, OU Health Physicians mired in contract dispute
      Beyond the Byline: Insurers are betting on virtual-first plans as COVID-19 shifts care pathways
    • CMS: Group health plans must cover COVID-19 diagnostic testing
      Another Pennsylvania health network vaccinates employee kin
      Why AstraZeneca and J&J's vaccines, in use elsewhere, are still on hold in America
      Lawmakers probe if Cuomo's policy fueled nursing home deaths
    • UPMC's patient volumes stabilize, boosting 2020 profits
      Genomics firms taking advantage of SPACs trend to go public faster
      COVID-19 could dent hospital revenue by at least $53 billion in 2021, AHA says
      deloitte GDP image chart graph going up
      Sponsored Content Provided By Deloitte
      Breaking the cost curve
    • Teladoc reports $383.3M in fourth-quarter revenue, up 145%
      man and woman looking at ipad wearing face masks stock image
      Sponsored Content Provided By Surescripts
      Improvements to benefits data can enhance ePrescribing and the patient experience
      Oscar Health's $1B IPO sets the stage for more health tech exits in 2021
      A map of the U.S. with images of the coronavirus.
      The digital divide becomes a new social determinant of health
    • Fighting COVID on three fronts
      46.7% of surveyed adults reported delaying dental treatment due to COVID-19. 74.7% delayed a routine checkup.
      Data Points: Dental visits during the pandemic
      A provider wearing PPE looking at a wall with patient notes.
      Rethinking quality and safety in the age of COVID
      exam room-main_i.jpg
      Nurse practitioner with not-for-profit clinic in Detroit church expands to COVID-19 vaccines
    • Alicia Wilson
      Q&A: Emerging leader Alicia Wilson on staying close to home
      Michael Jordan, Novant team up to address health equity
      Former Ascension CEO, the first to lead the health system, passes away
      Biden's pick to head CMS would be first Black woman to hold post
    • Midwest
    • Northeast
    • South
    • West
  • Insights
    • ACA 10 Years After
    • Best Practices
    • Special Reports
    • Innovations
    • The Affordable Care Act after 10 years
    • Dr. John Fischer
      Patient-reported outcomes tool for hernia surgery helps physicians improve care
      New care model helps primary-care practices treat obesity
      doctor with patient
      COVID-19 treatment protocol developed in the field helps patients recover
      Rachel Wyatt
      Project to curb pressure injuries in hospitals shows promise
    • What's next for on-demand telehealth companies?
      A CalOptima PACE vaccination clinic.
      Will COVID-19 be the catalyst for creating a more sustainable healthcare system?
      A map of the U.S. with images of the coronavirus.
      The digital divide becomes a new social determinant of health
      Ascension’s St. Mary’s Hospital Surgery Center at Towne Centre and Allegheny Health Network’s Bethel Park surgery center
      Hospitals see opportunity, risk in ambulatory surgery centers
    • Dr. Daniel Hall
      UPMC pilots machine learning, telehealth to inform patient transfers
      A woman being recorded using her inhaler on a smartphone.
      Digital check-ins, connected inhalers help control asthma
      A phone screen showing the question, "Mary we hope this information was helpful and we'd like to keep guiding you. Are you interested in knowing when it's your turn to receive the vaccine?"
      Chatbots, texting campaigns help manage influx of COVID vax questions
      A woman with a wearable sensor talking to her provider.
      Wearable sensors help diagnose heart rhythm problems in West Virginia
  • Transformation
    • Patients
    • Operations
    • Care Delivery
    • Payment
    • What's next for on-demand telehealth companies?
      Rising prescription copays drop adherence, spike mortality, research shows
      Dr. John Fischer
      Patient-reported outcomes tool for hernia surgery helps physicians improve care
      Highmark Health inks six-year cloud, tech deal with Google
    • Hospitals' Medicare billing practices suggest upcoding, OIG says
      California hospitals prepare ethical protocol to prioritize lifesaving care
      Amazon, JPMorgan Chase, Berkshire Hathaway disband Haven
      Digital pathways poised to reshape healthcare continuum in 2021
    • Dr. Daniel Hall
      UPMC pilots machine learning, telehealth to inform patient transfers
      A woman being recorded using her inhaler on a smartphone.
      Digital check-ins, connected inhalers help control asthma
      Humana partners with in-home provider for 24/7 care
      A phone screen showing the question, "Mary we hope this information was helpful and we'd like to keep guiding you. Are you interested in knowing when it's your turn to receive the vaccine?"
      Chatbots, texting campaigns help manage influx of COVID vax questions
    • Coordinated payment policies could speed transition to value, experts say
      CMMI's geographic direct contracting model needs an overhaul, experts say
      Hospitals fight UnitedHealthcare policies over lab test, specialty drug payments
      Cigna eliminates prior authorization for coronary CT scans
  • Data/Lists
    • Rankings/Lists
    • Interactive Databases
    • Data Points
    • Health Systems Financials
      Executive Compensation
      Physician Compensation
  • Op-Ed
    • Bold Moves
    • Breaking Bias
    • Commentaries
    • Letters
    • Vital Signs Blog
    • From the Editor
    • Dr. Alan Kaplan
      The risks, rewards of taking organizations 'where they haven’t gone before'
      Wellstar CEO calls adapting for the pandemic her bold move
      Howard P. Kern
      Recognizing the value of telehealth in its infancy
      Dr. Stephen Markovich
      A bold move helped take him from family doctor to OhioHealth CEO
    • Dr. Stephen Markovich
      Making sure we're aligned along the path to achieving inclusion
      Barry Ostrowsky
      Ending racism is a journey taken together; the starting point must be now
      Laura Lee Hall and Gary Puckrein
      Increased flu vaccination has never been more important for communities of color
      John Daniels Jr.
      Health equity: Making the journey from buzzword to reality
    • Mikelle Moore
      The promising future of rural healthcare, even amid the COVID-19 pandemic
      In-person visitation must be part of the national COVID-19 response
      We've lost so much to the pandemic, but we've also made gains that will endure
      Medical groups key to meeting president's vaccine pledge
    • Letters: Eliminating bias in healthcare needs to be ‘deliberate and organic’
      Letters: Maybe dropping out of ACOs is a good thing for patients
      Letters: White House and Congress share blame for lack of national COVID strategy
      Letters: VA making strides to improve state veterans home inspections
    • Sponsored Content Provided By Optum
      How blockchain could ease frustration with the payment process
      Sponsored Content Provided By Optum
      Three steps to better data-sharing for payer and provider CIOs
      Sponsored Content Provided By Optum
      Reduce total cost of care: 6 reasons why providers and payers should tackle the challenge together
      Sponsored Content Provided By Optum
      Why CIOs went from back-office operators to mission-critical innovators
  • Awards
    • Award Programs
    • Nominate
    • Previous Award Programs
    • Other Award Programs
    • Best Places to Work in Healthcare Logo for Navigation
      Nominations Open - Best Places to Work in Healthcare
      Nominations Open - 50 Most Influential Clinical Executives
    • 100 Most Influential People
    • 50 Most Influential Clinical Executives
    • Best Places to Work in Healthcare
    • Health Care Hall of Fame
    • Healthcare Marketing Impact Awards
    • Top 25 Emerging Leaders
    • Top 25 Innovators
    • Minorities in Healthcare
      • - Luminaries
      • - Top 25 Minority Leaders
      • - Minorities to Watch
    • Women in Healthcare
      • - Luminaries
      • - Top 25 Women Leaders
      • - Women to Watch
    • Excellence in Nursing Awards
    • Design Awards
    • Top 25 COOs in Healthcare
    • 100 Top Hospitals
    • ACHE Awards
  • Events
    • Conferences
    • Galas
    • Webinars
    • COVID-19 Event Tracker
    • podium march webinar logo lockup
      Sponsored Content Provided By Podium
      Webinar: Critical Touchpoints for Every Patient’s Journey — How Technology Plays an Important Role
      scp health logo lockup march 2021
      Sponsored Content Provided By SCP Health
      Webinar: COVID’s call to action — Reset for success in 2021
    • Women Leaders in Healthcare Conference
    • Social Determinants of Health Symposium
    • Healthcare Transformation Summit
    • Leadership Symposium
    • Virtual Briefings
      • - Hospital of the Future
      • - Mental Health
      • - Patient Safety & Quality
      • - Strategic Marketing
      • - Virtual Health
      • - Workplace of the Future
    • Best Places to Work Awards Gala
    • Health Care Hall of Fame Gala
    • Top 25 Minority Leaders Gala
    • Top 25 Women Leaders Gala
  • Listen
    • Podcast - Next Up
    • Podcast - Beyond the Byline
    • Sponsored Podcast - Healthcare Insider
    • Video Series - The Check Up
    • Sponsored Video Series - One on One
    • Next Up Podcast: Educating patients on the COVID-19 vaccine with Tanya Andreadis
      Dr. Joseph Cacchione
      Next Up Podcast: Educating patients on the COVID-19 vaccine with Dr. Joseph Cacchione
      Dr. Karen DeSalvo
      Next Up Podcast: What to expect with telehealth and healthcare technology in the next four years
      Carter Dredge
      Next Up Podcast: Ready, set, innovate! Innovation and disruption in healthcare
    • Beyond the Byline: Insurers are betting on virtual-first plans as COVID-19 shifts care pathways
      Beyond the Byline: How residents' stories shape our coverage of the vaccination rollout in nursing homes
      Beyond the Byline: Regulators aim to boost value push with fraud and abuse law updates
      An older man wearing a mask receiving a vaccine.
      Beyond the Byline: Verifying information on the chaotic COVID-19 vaccine rollout
    • Outreach during COVID-19
      Leading intention promote diversity and inclusion
      Introducing Healthcare Insider Podcast
    • The Check Up: Dr. Imran Andrabi
      The Check Up: Dr. Imran Andrabi of ThedaCare
      The Check Up: Tanya Blackmon
      The Check Up: Tanya Blackmon of Novant Health
      The Check Up: Dr. Patrick Hwu
      The Check Up: Dr. Patrick Hwu of the Moffitt Cancer Center
      The Check Up: Suresh Gunasekaran
      The Check Up: Suresh Gunasekaran of the University of Iowa Hospitals & Clinics
    • ivana naeymi-rad one on one intelligent medical objects
      Video: Ivana Naeymi Rad of Intelligent Medical Objects
  • MORE +
    • Advertise
    • Media Kit
    • Newsletters
    • Jobs
    • People on the Move
    • Reprints & Licensing
MENU
Breadcrumb
  1. Home
  2. Finance
April 14, 2020 03:10 PM

Private equity-owned doc practices shut out of small business bailout

Rachel Cohrs
  • Tweet
  • Share
  • Share
  • Email
  • More
    Print
    Modern Healthcare Illustration / Getty Images

    Private equity funds that invest in healthcare companies hoped to piggyback on venture capital's bid to get a share of COVID-19 small business bailout funds, but the Trump administration has snubbed them so far.

    Congress set aside $350 billion for small business assistance in the Coronavirus Aid, Relief, and Economic Security Act. Qualifying companies must have 500 employees or fewer. Under a set of standards called "affiliation rules," the administration determined that most private equity-owned companies, including healthcare practices hard hit by cancellations of elective procedures, won't qualify.

    The original rules left out both venture capital-backed startups and private equity-owned businesses. But venture capital had an odd couple of heavyweight allies on their side from California: House Speaker Nancy Pelosi, the most powerful Democrat in the country, and conservative Republican House Minority Leader Kevin McCarthy.

    Pelosi and Rep. Ro Khanna (D-Calif.) penned a letter dated March 31 to Treasury Secretary Steve Mnuchin, her negotiating partner from the Trump administration through rounds of COVID-19 relief legislation, and Jovita Carranza, administrator of the Small Business Administration, asking them to relax the affiliation rules for startup businesses with equity investors.

    The letter caught the attention of private equity firms that invest in healthcare companies. The Healthcare Private Equity Association, which has 80 member funds, posted the Pelosi-Khanna letter on the homepage of its website.

    Ira Coleman, McDermott Will & Emery chairman and HCPEA general counsel, said making a distinction between companies backed by funds from venture capital and private equity is "splitting hairs."

    "It's silly to say there is a big difference if you are partnered with a venture fund or if a health system wants to partner with a private equity fund," Coleman said.

    He also said Pelosi may have asked to waive rules for venture capital investors instead of private equity funds because her husband owns a real estate and venture capital investment and consulting firm.

    Pelosi spokesman Henry Connelly said Pelosi urged the changes on behalf of the 1,300 startups in San Francisco with fewer than 500 employees to help them survive the pandemic.

    "The speaker is opposed to the use of taxpayer assistance to reward the market behavior of certain firms that profiteer from layoffs, which runs contrary to the law's main purpose of preserving jobs," Connelly said.

    Despite lobbying by private equity's advocacy group in Washington, the American Investment Council, the SBA ultimately chose to allow venture capital-backed firms to qualify for the Paycheck Protection Program, but the fix didn't apply to private equity-owned companies.

    The Treasury Department could still issue additional guidance, but it's likely too late for healthcare practices owned by private equity, as the program's funds are quickly running out.

    Private equity funds have bought an increasing number of physician practices in recent years, according to a research letter in JAMA published in February. Anesthesiologists and emergency physician practices represent 31.5% of the 355 acquisitions from 2013 to 2016, but the rest included multispecialty practices (19%), family medicine (11%), dermatology (10%), pediatrics (6%), internal medicine (3%), and ophthalmology practices (3%).

    It's unclear how much private equity funds will choose to help their subsidiary physician practices fill gaps left by other forms of aid, and it may depend on how long shutdowns stretch, experts said.

    Eileen Applebaum, co-director of the Center for Economic and Policy Research and a leading expert on private equity investments in healthcare, said some private equity funds may choose to use unspent cash reserves—"dry powder" in industry parlance—to help their practices get through to the recovery period. But others may choose to save funds for new investments.

    "They may hold on for opportunities that may materialize when this all settles," Applebaum said.

    Joseph Francis and Sailesh Konda, dermatologists at the University of Florida who have studied private equity investments in their field, said that some funds are asking dermatologists to sign contract addenda agreeing to suspend their base pay and only receive compensation through a collections-based model. That often means a big pay cut as patient volume decreases due to city- and state-wide lockdowns.

    Konda said that the funds may have other options to potentially get money to pay the doctors, and are instead pressuring dermatologists into accepting pay cuts. Francis said that approach doesn't make a convincing argument that the federal government should pay salaries instead with forgivable Paycheck Protection Program loans specifically designed for companies that keep paying employees.

    "It's another reason they shouldn't be getting the money," Francis said.

    Dan Shoenholz, co-head of the healthcare practice of EY-Parthenon, said that private equity companies have an interest in keeping practices going because they have already sunk equity into them, and he expects demand for elective procedures to come back "with a vengeance" after restrictions are lifted.

    But Bob Kocher, a partner at Venrock focused on healthcare investments, said that private equity funds that took out a lot of debt are going to feel pressure to cut costs, and may try to sell practices back to doctors at a loss.

    Coleman, HCPEA's general counsel, called the idea that private equity funds have readily available reserve funds to save struggling practices "very easy and naive."

    "There are not unlimited resources, and a certain level of return is expected even when the market is down. It's too simplistic to think we could put it all in the businesses," Coleman said.

    A survey conducted by Pitchbook on March 31 and April 1 found that private market investors are taking a wait-and-see approach on new investments until the length of social distancing restrictions becomes clear.

    If physician practices aren't able to access small business assistance, they still have other options to tide them over until the lockdowns relax. Any provider that bills Medicare received grant funding from a provider relief fund created in the CARES Act, and the CMS expanded eligibility for Medicare accelerated payments. Many providers are also trying to increase credit lines through existing relationships with lenders.

    Lobbying certainly will continue as Congress pumps out more bills on coronavirus relief, and the regulatory process continues at a breakneck pace. Congressional leaders are currently tussling over an interim spending package to boost funds for small business assistance before the programs run dry. The Federal Reserve recently announced a midsize business loan program for businesses with up to 10,000 employees, and it isn't clear if or how affiliation rules might apply to those loans.

    Trade groups including the Chamber of Commerce and AIC wrote the Treasury Department, SBA and Federal Reserve on April 10 asking for the affiliation rules to be relaxed. American Investment Council President and CEO Drew Maloney said that private equity firms aren't asking for special treatment in relaxing the affiliation rules.

    "What we've highlighted is these employees are suffering just as much as other employees on Main Streets across America. The virus is not discriminating against businesses based on ownership structures," Maloney said in a statement.

    Letter
    to the
    Editor

    Send us a letter

    Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.

    Recommended for You
    UPMC's patient volumes stabilize, boosting 2020 profits
    UPMC's patient volumes stabilize, boosting 2020 profits
    Genomics firms taking advantage of SPACs trend to go public faster
    Genomics firms taking advantage of SPACs trend to go public faster
    Sponsored Content
    Get Free Newsletters

    Sign up for free enewsletters and alerts to receive breaking news and in-depth coverage of healthcare events and trends, as they happen, right to your inbox.

    Subscribe Today

    The weekly magazine, websites, research and databases provide a powerful and all-encompassing industry presence. We help you make informed business decisions and lead your organizations to success.

    Subscribe
    Connect with Us
    • LinkedIn
    • Twitter
    • Facebook
    • RSS
    • Instagram

    Stay Connected

    Join the conversation with Modern Healthcare through our social media pages

    MDHC_Logotype_white
    Contact Us

    (877) 812-1581

    Email us

     

    Resources
    • Contact Us
    • Advertise with Us
    • Ad Choices Ad Choices
    • Sitemap
    Editorial Dept
    • Submission Guidelines
    • Code of Ethics
    • Awards
    • About Us
    Legal
    • Terms and Conditions
    • Privacy Policy
    • Privacy Request
    Modern Healthcare
    Copyright © 1996-2021. Crain Communications, Inc. All Rights Reserved.
    • News
      • This Week's News
      • COVID-19
      • Providers
      • Insurance
      • Government
      • Finance
      • Technology
      • Safety & Quality
      • People
      • Regional News
        • Midwest
        • Northeast
        • South
        • West
      • Digital Edition
    • Insights
      • ACA 10 Years After
      • Best Practices
      • Special Reports
      • Innovations
    • Transformation
      • Patients
      • Operations
      • Care Delivery
      • Payment
    • Data/Lists
      • Rankings/Lists
      • Interactive Databases
      • Data Points
    • Op-Ed
      • Bold Moves
      • Breaking Bias
      • Commentaries
      • Letters
      • Vital Signs Blog
      • From the Editor
    • Awards
      • Award Programs
        • 100 Most Influential People
        • 50 Most Influential Clinical Executives
        • Best Places to Work in Healthcare
        • Health Care Hall of Fame
        • Healthcare Marketing Impact Awards
        • Top 25 Emerging Leaders
        • Top 25 Innovators
        • Minorities in Healthcare
          • - Luminaries
          • - Top 25 Minority Leaders
          • - Minorities to Watch
        • Women in Healthcare
          • - Luminaries
          • - Top 25 Women Leaders
          • - Women to Watch
      • Nominate
      • Previous Award Programs
        • Excellence in Nursing Awards
        • Design Awards
        • Top 25 COOs in Healthcare
      • Other Award Programs
        • 100 Top Hospitals
        • ACHE Awards
    • Events
      • Conferences
        • Women Leaders in Healthcare Conference
        • Social Determinants of Health Symposium
        • Healthcare Transformation Summit
        • Leadership Symposium
        • Virtual Briefings
          • - Hospital of the Future
          • - Mental Health
          • - Patient Safety & Quality
          • - Strategic Marketing
          • - Virtual Health
          • - Workplace of the Future
      • Galas
        • Best Places to Work Awards Gala
        • Health Care Hall of Fame Gala
        • Top 25 Minority Leaders Gala
        • Top 25 Women Leaders Gala
      • Webinars
      • COVID-19 Event Tracker
    • Listen
      • Podcast - Next Up
      • Podcast - Beyond the Byline
      • Sponsored Podcast - Healthcare Insider
      • Video Series - The Check Up
      • Sponsored Video Series - One on One
    • MORE +
      • Advertise
      • Media Kit
      • Newsletters
      • Jobs
      • People on the Move
      • Reprints & Licensing