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Both the lay press and academic publications continue to critically evaluate the impact that private equity (PE) management has on health care outcomes and cost as its share of the marketplace grows. The industry continues to extend into numerous areas of health care delivery beyond hospitals and physician practices, including ambulatory surgery centers, nursing homes, and behavioral health facilities.
Given the sheer size of health care spending in the U.S. today, ever-expanding therapeutic options, and the demographics of an aging, health care–consuming population, the sector simply cannot escape the attention of the finance industry. If indeed there is value to be added and productivity gains to be realized through the strategies of financial, governance, and operational engineering that are typically employed by PE management, then patients should be the beneficiaries. The devil, however, is in the details, and the question that vexes us is the impact of for-profit management and decision-making on the care that patients receive.
A study published in JAMA Health Forum at the end of last year by a group of physicians and health policy researchers examined the impact of PE acquisition on health care spending and utilization by looking at claims data within dermatology, gastroenterology, and ophthalmology.1 What they found was an overall increase in health care spending and in several measures of utilization, including increased visit numbers by established patients and increased coding intensity. However, the investigators acknowledged that they did not have the data to assess the impact of this increased spending on patient satisfaction or outcomes.
Another recent study looked at workforce changes within practices, comparing PE-acquired versus non-PE-acquired groups. It found a higher rate of clinician replacement in PE-acquired groups and a significant increase in non-physician providers.2 Again, the authors were unable to comment on the impact on patient care and outcomes. Moreover, practices acquired by PE are not randomly selected—they are selected on the basis of features that are distinct from the norm to begin with and so, with this type of study, one cannot prove PE to be the cause of all subsequent measured differences.
We must acknowledge that there are many tools by which elements of our care delivery and reimbursement system can be engineered in ways that impact revenues, costs, and margin but for which we have woefully inadequate data regarding quality and outcomes. It has been observed that in many ways for-profit hospitals can be virtually indistinguishable from not-for-profit hospitals except for the capital structure. The question is whether the PE context increases the risk of irresponsible or unethical application of these tools.
All practices need to run a financially sustainable business, and we have a shared responsibility for promoting a system of care that offers access, equity, and quality delivered at the lowest cost. One specific concern presented by the PE model but faced by practically any corporate entity is the risk of a divorce of managerial decisions intended to maximize profits from the physician’s decisions that place a fundamental priority on the patient’s health outcomes. While management, PE or otherwise, strives to create value through operational decisions, including those with an impact on care and cost, there is a specific responsibility for physicians to be actively represented and engaged in the management decisions that ultimately dictate the care they deliver.
We also have an obligation to do a better job of collecting and critically examining the impact of various financial and operational practice models on more than just the bottom line. While cost may be the most publicly accessible data point, it is but one part of the value equation: quality divided by cost. Many entities do indeed go beyond cost, revenue, and access to track their quality metrics, but across all of ophthalmology a more widely adopted willingness to share quality outcomes would allow us to better assess the performance of all of our organizational and financial models.
Whether a group is PE financed, a for-profit hospital system, a not-for-profit, or traditional physician owned, the most important principle is that business decisions must be tempered by an acute sense of how each impacts the care of patients and the community that is served. In the health care space, we need PE to decide as doctors do, and only doctors can make PE do it.
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1 Singh YS et al. JAMA Health Forum. 2022;3(9):e222886-e222886.
2 Dov Bruch J et al. Health Aff (Millwood). 2023;42(1):121-129.