Betting on ‘Golden Age’ of colonoscopies, private equity invests in gastro docs

Studies show that private equity investment in healthcare results in more surprise bills and overall higher costs for patients. Surprise billing is the practice of charging insured patients for out-of-network care unknowingly received, including in emergencies and at otherwise in-network facilities.

Before a federal ban on surprise billing took effect this year, it was common for patients to get slapped with an expensive bill after being treated by an emergency room doctor employed by a private equity-owned staffing service — a problem that policy experts say was not a glitch but rather a business model for private equity companies.

Nearly 10% of the nation’s 14,000 gastroenterologists were partners in or employed by a private-equity backed organization as of last fall, according to a report by Physician Growth Partners, which represents independent physician groups in transactions with private equity.

In 2021, the number of private equity acquisitions of gastroenterology practices grew by 28% over the previous year, according to Spherix Global Insights and Fraser Healthcare.

Complex government regulations, technological innovations, and insurance industry practices have driven many gastroenterologists to sell shares in their practices, said Praveen Suthrum, who runs a consulting company for physician practices. Many physicians argue reimbursement rates are too low to keep up with complex negotiations with insurers and the other rising costs of operating an independent practice.

Private equity typically purchases a stake in a healthcare practice, then adjusts its operations to make it more profitable. It may switch to cheaper suppliers, shorten appointment windows, bill aggressively, or lay off staff, to name a few strategies — the kind of changes that save money at the expense of patient care.

In December, NBC News reported on how one private equity-owned group of dermatology practices overbooked patients, lost test results, and leaned on cheaper labor from physician assistants and nurse practitioners who may miss critical diagnoses.

Not a Modern Healthcare subscriber? Sign up today.

A study out last year from the National Bureau of Economic Research showed that when private equity owned a nursing home, patients were more likely to die in their first months there and much more likely to be prescribed antipsychotic drugs — which are known to increase mortality among the elderly. Taxpayer spending per procedure or service in a private equity-owned facility goes up about 11%.

Private equity has shown a lot of interest in healthcare practices that perform high-volume procedures, especially those with growth potential.

“Lots of people are needing injections in the eye for macular edema, and lots of people need colonoscopies, and lots of people need skin biopsies,” said Dr. Jane Zhu, a health services researcher at Oregon Health and Science University in Portland who has studied the role of private equity in healthcare. “And these are things that will only grow in volume over time as the population ages.”

Zhu said usually the investors start by acquiring a well-performing practice, or group of practices, in one geographic area — called a “platform practice.”

“It’s well established. It has some brand recognition,” Zhu said. “It has good market reach. There may be multiple sites. It has lots of patients that are already affiliated with that practice, and they buy that up, and there are opportunities for consolidation.”

Mergers create larger groups with more power to negotiate rates with insurance companies and charge what they’d like. The possibility of capitalizing on the good name of a respected practice alone may make it a valuable investment.

Zhu said these medical practices are considered a short- to medium-term investment, with an average period of three to eight years before the investors sell.

Suthrum said private equity firms are good at making their case to doctors, assuring them they’ll let the doctors do the medicine while the businesspeople do the business.

Doctors think, “If I’m going to survive, then I will either have to sell myself to the hospital or, what is the alternative?” Suthrum said in an interview. “The alternative is private equity.”

Kaiser Health News is a national health policy news service. It is an editorially independent program of the Henry J. Kaiser Family Foundation which is not affiliated with Kaiser Permanente.



Source link

Previous post Rocker Ronnie Hawkins, Dies at 87, Patron of Canadian Rock | Entertainment News
Next post AEW Double or Nothing 2022 predictions, card, matches, start time, PPV preview, location, date