Private equity deals drive up healthcare use, costs among physician practices, JAMA study finds

Private equity investment in physician practices is ramping up but these deals also are associated with increases in healthcare spending and utilization, as well as some greater intensity of care, a new study has found.

The results of a recent study were published in JAMA Network. It aimed to understand the impact of private equity (PE) acquisitions on medical practices. Though there’s been a rise in investment deals, there is little empirical evidence available on the ways it impacts these particular operations, the study said. 

The study looked at changes in spending, utilization and practice patterns after private equity acquisitions of 578 physician practices from 2016 to 2020. It used data from PitchBook and manually verified and added any transactions that were not captured. It found that both the average allowed amount per claim and the average charges per claim increased post-acquisition. 

PE acquisitions may institute specialty-specific operational changes, like increasing the intensity of specific procedures, the study found. PE-acquired practices saw an increase of $71 (20%) in charges per claim, as well as an increase of $23 (11%) in the allowed amount per claim. There was also an increase in patient utilization from both established patients coming in more often and from the addition of new patients. 

This could be explained by changes in management and operations, like expanding practice hours, marketing and broadening referral networks. But this could also be explained by overutilization of profitable services or low-value care. 

Ultimately, the study argued, understanding the strategies of private equity that drive greater profits is “critically important” to devising policies to monitor them. Quality of care, patient satisfaction and physician practice experience remain areas to be studied. 

“Private equity ownership of physician practices has added a distinctly private and market-driven influence to the broader trends in corporate consolidation of physicians by health systems and insurers,” the study concluded.