Private equity firms generate higher professional fees for clinicians, study finds

Research , Health Care
Private equity firms generate higher professional fees for clinicians study finds
Private equity firms generate higher professional fees for clinicians study finds
Photo is of Jane Zhu, M.D., in a medical office at OHSU. New research finds that private equity firms increase professional fees paid to physicians compared with a control group of practices affiliated with health systems. Co-author Jane Zhu, M.D., says, “Private equity owners appear to be acutely focused on raising these professional fees to the benefit of the practices they acquire. Whether that benefits patients is a yet unanswered question.” (OHSU/Christine Torres Hicks)
New research finds that private equity firms increase professional fees paid to physicians compared with a control group of practices affiliated with health systems. Co-author Jane Zhu, M.D., says, “Private equity owners appear to be acutely focused on raising these professional fees to the benefit of the practices they acquire. Whether that benefits patients is a yet unanswered question.” (OHSU/Christine Torres Hicks)

Gastroenterology practices acquired by private equity firms appear to increase professional fees to physicians, according to a new study by researchers from Oregon Health & Science University and other institutions across the country.

“Higher negotiated professional fees may be a primary reason these physician practices are attracted to private equity ownership,” said co-author Jane Zhu, M.D., associate professor of medicine in the OHSU School of Medicine.

The study published today in the February edition of the journal Health Affairs.

Jane Zhu, M.D., has shoulder-length black hair, a blue blazer and white top, smiling in a garden at OHSU.
Jane Zhu, M.D. (OHSU)

Private equity firms tend to leverage debt to acquire businesses before turning around and selling them on a relatively short time frame, typically three to seven years. Critics worry the ongoing expansion of private equity into health care aims to drive up profits in the short term by imposing cost-cutting measures on frontline employees and higher prices on patients.

So, why would physicians sell their practices to private equity firms? The new study suggests one reason may come down to money.

Gastroenterology, focusing on the digestive system, is a common medical specialty, so researchers set out to examine key differences in insurance claims between gastroenterology practices acquired by private equity compared with a control group of those affiliated with health systems. Using claims data from commercial insurance from 2015 to 2020, researchers found that prices increased by $92 per claim after a practice was acquired by private equity — an increase of 28%.

The biggest driver came from a 78% increase in professional fees paid to health care providers.

“Private equity owners appear to be acutely focused on raising these professional fees to the benefit of the practices they acquire,” Zhu said. “Whether that benefits patients is a yet unanswered question.”

The researchers also examined facility fees, which are typically charged by practices affiliated with larger entities, like hospitals and large health systems. However, the researchers found no differential change in facility fees between gastroenterology practices acquired by private equity compared with practices affiliated with hospitals and health systems.

Zhu noted that the drive for consolidation is likely to continue in light of inflation of wages and other costs, along with stagnant reimbursement rates from government payers like Medicaid and Medicare.

“Reimbursement rates have not kept up with costs of practice management,” she said. “Negotiating higher professional fees in the commercial insurance markets is one way in which these practices might sustain their bottom dollar.”

In addition to Zhu, co-authors include Yashaswini Singh, Ph.D., of Brown University; Zirui Song, M.D., Ph.D., of Harvard University and Massachusetts General Hospital; and Daniel Polsky, Ph.D., of Johns Hopkins University.

Zhu’s research was supported by grant number R01HS029467 from the Agency for Healthcare Research and Quality (AHRQ), U.S. Department of Health and Human Services (HHS).


Erik Robinson
Senior Media Relations Specialist
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