Dive Brief:
- Private equity acquisitions of physician practices were associated with increased healthcare spending and patient utilization in a new study of commercial insurance enrollees published in JAMA Health Forum.
- PE-owned practices showed a consistent rise in spending through eight quarters after an acquisition, with the average charge per claim increasing 20% and the average allowed amount per claim up 11%.
- The study's authors, from Johns Hopkins University, Harvard Medical School and Oregon Health and Science University, said their research adds to evidence of potential overutilization and higher spending on care that will be important for policy makers to monitor. “These billing patterns could mean more efficient documentation of services provided, or it could mean upcoding or up-charging insurance companies to make more money,” senior author Jane Zhu, assistant professor of medicine at OHSU, said in a press release.
Dive Insight:
A surge in physician group buyouts over the past few years has been attributed to increasingly difficult economic challenges, including labor and supply shortages, facing doctor practices since the start of the COVID-19 pandemic.
A study from Avalere this year found nearly three-quarters of U.S. doctors now work for corporate entities such as private equity firms, health insurers and hospitals, up from 69% the year before.
The researchers in the JAMA Health Forum study said their data did not identify specific reasons for higher spending associated with private equity ownership or the impact on clinical outcomes for patients. However, the financial incentives of private equity firms, which aim for annual returns exceeding 20%, mean these new owners must generate higher revenue or reduce costs, Zhu said.
The study compared 578 U.S. dermatology, gastroenterology and ophthalmology practices acquired by private equity firms from 2016 to 2020 to 2,874 similar independent physician groups. In addition to higher spending, the study found an increase in the number of patients seen in the PE-owned practices and a greater share of outpatient visits lasting longer than 30 minutes.
The PE-acquired practices saw visits by new patients increase 38% and total visit volume rise by 16%, compared to the control group, with a 9.4% increase in the share of office visits for established patients that were billed as longer than 30 minutes.
The study found no statistically significant changes in patient risk scores between PE-acquired practices and the control group.
“These findings may reflect changes in management and practice operations, such as expanding practice hours, branding and advertising, or broadening referral networks. Alternately, increased patient volume may also reflect overutilization of profitable services and/or unnecessary or low-value care, which could raise health care spending without commensurate patient benefits,” the study authors wrote.