Private equity firms in Congress' crosshairs with legislation calling for transparency

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Lawmakers are scrutinizing private equity firms they believe are major culprits of surprise medical bills. (Getty Images/Bill Chize)

Private equity firms that have been gobbling up physician practices should watch out for congressional efforts to rein them in.

The House Ways and Means Committee advanced a bill Wednesday to force private equity firms that own physician practices to provide the federal government with information on payments and real estate investments. The legislation is the latest bid by lawmakers to scrutinize such firms that critics have said are a driving force behind surprise medical bills.

The bill would require private equity owners that have a controlling stake in a medical provider to file information with the Internal Revenue Service on Medicare payments and the mortgage and rent payments the firms get from providers.

“Transparency is imperative to better understand how this part of the market affects our healthcare system,” said Rep. Richard Neal, D-Massachusetts, chairman of the House Ways and Means Committee, during a markup of the legislation Wednesday.

Private equity firms have been acquiring physician practices at a blistering rate. Democrats are also concerned about reports that private equity-owned provider groups have been major culprits of foisting surprise medical bills on patients and driving up costs.

"Some equity practices have employed network strategies that inflate costs for patients," Neal said. 

RELATED: Private equity firms are buying up dermatology practices, study shows

Rep. Lloyd Doggett, D-Texas, said he hopes the bill will be included in any final package the House creates on surprise medical bills, which has major bipartisan support. This will ensure that the bill isn’t considered by itself nor meets a likely demise in the Senate, he said.

But major Republican opposition could stymie that plan. Republicans on the committee slammed the bill as unfairly targeting one sector of the industry.

“This piece of legislation is an unprecedented abuse of our tax code,” said Rep. Kevin Brady, R-Texas, the committee’s top Republican. “What is the point of forcing just some private companies to make this information public? It opens the door for Congress to target any industry purely for political gain.”

Rep. Adrian Smith, R-Nebraska, lamented that he hates to see “the demonization of private investment.” Brady proposed an amendment, which was voted down, that would take out the transparency initiative and instead require the Government Accountability Office to study the issue.

While Republicans on the committee were opposed to the transparency bill, oversight of private equity firms’ role in healthcare has gotten bipartisan support.

RELATED: Healthcare private equity deals reach record levels in 2018

The House Energy and Commerce Committee launched a bipartisan investigation last year into private equity firms’ role in surprise billing.

Committee leaders wrote to the leaders of major private equity firms Blackstone Group, KKR and Welsh, Carson, Anderson & Stowe back in September to get information and documents surrounding their ownership of physician staffing and emergency transportation companies.

The leaders said that Blackstone had sought to acquire the emergency department staffing firm EmCare and KKR was seeking to get the staffing firm TeamHealth.

“Evidence indicates that these physician staffing firms charge significantly higher in-network rates than their counterparts, thereby driving reimbursement upwards as they enter into staffing arrangements with hospitals,” the letters said.

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