Private equity has a role in increasing healthcare prices
The healthcare space has seen an influx of investment from private equity groups looking to innovate the market, but the role of these investors could also be pushing healthcare prices higher.
As private equity firms have poured cash into healthcare companies––from tech startups to physician practices––their actual strategies to acquiring and growing business only to sell them again “is cause for concern,” according to Lovisa Gustafsson, MBA, assistant vice president of the Commonwealth Fund, and colleagues, who penned an article in the Harvard Business Review about the economic impact of private equity in healthcare.
Last year, nearly 800 private equity deals in healthcare were sprung, totaling more than $100 billion in value. However, the majority of these deals are not solving many problems in the healthcare landscape, the authors argued.
They pointed to the issue of surprise billing, where patients receive unexpected medical bills that can be thousands of dollars for out-of-network services they received at an in-network provider. In most cases, patients don’t know they are receiving out-of-network services and have no way to know how much they will owe ahead of their care.
Private equity firms have focused their investments in facilities known for having a surprise billing problem, such as emergency room physicians, hospitalists, anesthesiologists and radiologists. Increasing these specialties as well as the proliferation of freestanding facilities allow the providers to charge more for care, pushing up overall healthcare prices while returning a profit to the private equity owners.
Another crucial area is physician practices, which have seen high interest from private equity groups. Yet, the downfall of more investment in independent practices is on the patient.
“At least in some cases, the investors’ strategy appears to be to increase revenues by price-gouging patients when they are most vulnerable,” Gustafsson et al. wrote.
These strategies are earning PE firms returns, but there is a growing resistance to patient problems like surprise billing.
“Lawmakers and regulators won’t let them get away with such practices for long,” the authors concluded.
Amy joined TriMed Media as a Senior Writer for HealthExec after covering home care for three years. When not writing about all things healthcare, she fulfills her lifelong dream of becoming a pirate by sailing in regattas and enjoying rum. Fun fact: she sailed 333 miles across Lake Michigan in the Chicago Yacht Club "Race to Mackinac."