Researchers Study Patterns in Physician Practice Private Equity Deals


Researchers studying private equity investment in physician practices found that it was highest in the Northeast, Florida and Arizona, and lowest in the Midwest, and among six specialties studied, the number of physicians working in private equity-acquired practices was highest in dermatology, followed by gastroenterology.

A research team led by Jane Zhu, M.D., of Oregon Health & Science University recently published a study, funded in part by the National Institute for Health Care Management (NIHCM) Foundation, on the increasing trend of private equity investment in physician practices. The research team noted that in the second quarter of 2021 alone, 63 percent of physician practice deals had private equity buyers. They suggest that it is important to understand patterns in private equity healthcare market penetration and how they might impact patient outcomes, competition, and costs. 

 An NIHCM Research Insights brief states that “the long-term effect of these ownership changes includes reduced competition and increased prices within each local healthcare market. As private equity acquisitions vary across the country, these impacts are particularly significant in geographic areas in which private equity acquisitions are more concentrated. This study highlights the importance of monitoring consolidation, ownership, and regulatory environment of private equity activity.”

Some key findings from the study include:

  • Researchers examined 97,094 physicians practicing in six specialties, 4,738 of whom worked in private-equity acquired practices.
  • Of these specialties, the number of physicians working in private equity acquired practices was highest in dermatology (7.5%; 851 of 11,324), followed by gastroenterology (7.4%; 845 of 11, 484), urology (6.5%; 492 of 7,609), ophthalmology (5.1%; 741 of 14, 493), obstetrics/gynecology (4.7%; 1,352 of 28, 493), and orthopedics (1.9%; 460 of 23,891).
  • Physician practice penetration by private equity firms was lowest in the Midwest and highest in the Northeast (including the District of Columbia), Florida, and Arizona, where it was concentrated in hospital referral regions.
  • In recent years, physician practice penetration by private equity firms has increased from 59 deals, representing 843 physicians in 2013, to 136 private equity acquisition deals representing 1,882 physicians in 2016.
  • Among 200 hospital referral regions, a mean of 5.6% of physicians were in private equity-acquired practices.

In the paper’s discussion section, the researchers note that “because some PE acquisitions consolidate physician practices into larger organizations, geographic concentration of PE penetration may be associated with reduced physician competition, which could lead to increased prices. If PE acquisitions induce practice consolidation among remaining independent practices with financial pressures, this spillover effect may further hinder competition, underscoring the importance of monitoring practice consolidation and the ownership and regulatory environment of acquisitions.”


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