From the Journals

Private equity firms acquiring more physician group practices



Private equity firms are increasingly acquiring physician practices across a range of specialties, a recent analysis shows.

Dr. Jane Zhu

Lead author Jane M. Zhu, MD, of Oregon Health & Science University, Portland, and colleagues examined physician group practice acquisitions by private equity firms using the Irving Levin Associates Health Care M&A data set, which includes manually collected and verified transactional information on health care mergers and acquisitions. Investigators linked acquisitions to the SK&A data set, a commercial data set of verified physicians and practice-level characteristics of U.S. office-based practices.

Of about 18,000 unique group medical practices, private equity firms acquired 355 physician practice acquisitions from 2013 to 2016, a trend that rose from 59 practices in 2013 to 136 practices in 2016, Dr. Zhu and colleagues reported on Feb. 18 , 2020, in a research letter published in JAMA.

Acquired practices had a mean of four sites, 16 physicians in each practice, and 6 physicians affiliated with each site, the data found. Overall, 81% of these medical practices reported accepting new patients, 83% accepted Medicare, and 60% accepted Medicaid. The majority of acquired practices were in the South (44%).

Anesthesiology (19%) and multispecialty (19%) were the most commonly represented medical groups in the acquisitions, followed by emergency medicine (12%), family practice (11%), and dermatology (10%). In addition, from 2015 to 2016, the number of acquired cardiology, ophthalmology, radiology, and ob.gyn. practices increased. Within acquired practices, anesthesiologists represented the majority of all physicians, followed by emergency medicine specialists, family physicians, and dermatologists.

Dr. Zhu and colleagues cited a key limitation: Because the data are based on transactions that have been publicly announced, the acquisition of smaller practices might have been underestimated.

Still, the findings demonstrate that private equity acquisitions of physician medical groups are accelerating across multiple specialties, Dr. Zhu said in an interview.

“From our data, acquired medical groups seem to have relatively large footprints with multiple office sites and multiple physicians, which mirrors a typical investment strategy for these firms,” she said.

Dr. Zhu said that more research is needed about how these purchases affect practice patterns, delivery of care, and clinician behavior. Private equity firms expect greater than 20% annual returns, and such financial incentives may conflict with the need for longer-term investments in practice stability, physician recruitment, quality, and safety, according to the study.

“In theory, there may be greater efficiencies introduced from private equity investment – for example, through administrative and billing efficiencies, reorganizing practice structures, or strengthening technology supports,” Dr. Zhu said. “But because of private equity firms’ emphasis on return on investment, there may be unintended consequences of these purchases on practice stability and patient care. We don’t yet know what these effects will be, and we need robust, longitudinal data to investigate this question.”

Dr. Zhu and colleagues reported that they had no disclosures.

SOURCE: Zhu JM et al. JAMA. 2020 Feb 18;323(17):663-5.

Next Article: