Private Equity Acquisitions Led to Higher Prices at Physician Practices

Private equity acquisitions of physician practices are becoming more common, leading to price increases ranging from 4 percent to 16 percent, data from the American Antitrust Institute (AAI) found.

The report, Monetizing Medicine: Private Equity and Competition in Physician Practice Markets, was developed in collaboration with the University of California at Berkeley (UCB) Petris Center on Health Care Markets and Consumer Welfare and the Washington Center for Equitable Growth (Equitable Growth).

Researchers assessed healthcare claims from 2012 to 2021 from the Healthcare Cost Institute (HCCI) Commercial Claims Research Dataset to determine how private equity acquisitions of physician practices have impacted prices and spending per patient. The report focused on ten physician practice specialties.

Between 2012 and 2021, the number of physician practice acquisitions involving private equity firms grew from 75 to 484, indicating a more than six-fold increase in ten years.

Through these deals, private equity firms are acquiring competitively significant shares of physician practice markets at the local level. For example, in 28 percent of metropolitan statistical areas (MSAs), a single private equity firm has more than 30 percent market share by full-time equivalent physicians. In 13 percent of MSAs, the single private equity firm market share is more than 50 percent.

In eight out of the ten physician practice specialties, private equity acquisitions were associated with price increases. Dermatology practices had the lowest price growth at 4 percent, while price increases for oncology practices were the highest at 16.4 percent.

Private equity acquisitions were also tied to price increases at gastroenterology (14 percent), OB/GYN (8.8 percent), ophthalmology (8.7 percent), radiology (8.2 percent), orthopedics (7.1 percent), and primary care practices (4.1 percent).

In six of ten specialties, private equity acquisitions led to increases in per-patient spending, ranging from 4.1 percent at dermatology practices to 16.4 percent at gastroenterology practices.

Price increases were higher in markets where one private equity firm controlled more than 30 percent of the market, the report found. Prices grew 18 percent for gastroenterology, 16 percent for OB/GYN, and 13 percent for dermatology practices.

In these markets, spending per patient was around twice as high at urology, OB/GYN, and primary care practices relative to practices in MSAs that a private equity firm did not acquire.

“Our findings underline the vast implications that rapid, stealth consolidation of physician markets by private equity funds have had for competition, patients, and anyone who pays for healthcare practices,” Laura Alexander, report co-author and director of Markets and Competition Policy at Equitable Growth, said in a press release. “It’s clear that there is a need for attention and action from competition enforcers and policymakers to address these accelerating acquisitions.”

According to the researchers, most private equity acquisitions in the report occurred without federal antitrust scrutiny and with limited state antitrust scrutiny. The report outlined several policies to strengthen competition enforcement and help protect consumers from rising prices.

Policymakers should amend the reporting requirements under the Hart-Scott-Rodino (HSR) Act, which requires parties to submit premerger information on large transactions to the Federal Trade Commission (FTC) and the US Department of Justice Antitrust Division.

FTC recently proposed a rule that would require entities to submit additional details for competition reviews. The report urged Congress and FTC to include more measures that trigger reporting requirements, such as the resulting market share of a transaction.

HHS should also expand its mandatory ownership reporting requirements to all healthcare providers, not just nursing homes. This would help antitrust agencies gain insight into acquisition patterns and competitive landscapes.

Additionally, policymakers should work to close regulatory loopholes that allow private equity firms to earn profit without providing value to patients. Efforts could include expanding requirements for site-neutral payment models in Medicare and banning anticompetitive contracting practices like anti-steering clauses.