Private equity firms are buying up dermatology practices, study shows

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In a six-year period, private equity-backed dermatology management groups acquired 184 dermatology practices. (Getty Images/FS-Stock)

Private equity firms are buying up dermatology practices across the country at a rate that is raising concerns about the potential impact on quality of care and costs.

Private equity-backed dermatology management groups acquired 184 dermatology practices between 2012 and 2018, according to a study published in JAMA Dermatology.

Drawing on data from five financial databases, researchers found the number of acquisitions increased over time and broadened in their geographic reach. The acquired practices made up an estimated 381 dermatology clinics. Those clinics spanned at least 30 states, with 138 or 36% located in Texas and Florida.

The researchers said further study is needed to assess whether and how private equity-backed ownership influences clinical decision-making, healthcare expenditures and patient outcomes.

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Over the six-year period, the study found that 17 private equity-backed dermatology management groups bought up the dermatology practices. Practice acquisitions increased each year, from five in 2012 to 59 in 2017. In the first five months of 2018, another 34 practices were bought up.

The trend has raised concerns among some physicians. In an accompanying editorial, two physician authors argued that until the effects of private equity acquisitions on dermatology practices are studied, sales should be stopped. They worried about the potential impact, saying the industry should consider cautionary tales such as the demise of the Toys “R” Us toy retailer after its 2005 takeover by private equity firms.

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 “Until meaningful data are available on what happens to the quality of care and affordability for patients and payers, dermatologists should stop selling their practices to private equity firms, and legislators should prohibit such transactions,” wrote co-authors Joshua M. Sharfstein, M.D. and Jamar Slocum, M.D., both of Johns Hopkins Bloomberg School of Public Health in Baltimore, Maryland. They argued that exceptions be made only when a practice can make “a strong and public case to health officials that doing so is in the public interest.”