Category Archives: Physician Practice Acquisition

3 huge healthcare battles being fought in 2024

Posted on by • Posted in Abortion, Abortion Rights, Affordability, Artificial Intelligence Generative, Big Pharma, Food and Drug Administration (FDA), High Drug Prices, High Premiums, High Prices, Market Outlook, Market Trends, Mifepristone, Modern Medicine, Pharmaceutical Industry, Physician Patient Relationship, Physician Practice Acquisition, Price Transparency, Private Equity, Roe v. Wade, Supreme Court • Leave a comment

https://www.linkedin.com/pulse/3-huge-healthcare-battles-being-fought-2024-robert-pearl-m-d–aguvc/?trackingId=z4TxTDG7TKq%2BJqfF6Tieug%3D%3D

Three critical healthcare struggles will define the year to come with cutthroat competition and intense disputes being played out in public:

1. A Nation Divided Over Abortion Rights

2. The Generative AI Revolution In Medicine

3. The Tug-Of-War Over Healthcare Pricing American healthcare, much like any battlefield, is fraught with conflict and turmoil. As we navigate 2024, the wars ahead seem destined to intensify before any semblance of peace can be attained. Let me know your thoughts once you read mine.

Modern medicine, for most of its history, has operated within a collegial environment—an industry of civility where physicians, hospitals, pharmaceutical companies and others stayed in their lanes and out of each other’s business.

It used to be that clinicians made patient-centric decisions, drugmakers and hospitals calculated care/treatment costs and added a modest profit, while insurers set rates based on those figures. Businesses and the government, hoping to save a little money, negotiated coverage rates but not at the expense of a favored doctor or hospital. Disputes, if any, were resolved quietly and behind the scenes.

Times have changed as healthcare has taken a 180-degree turn. This year will be characterized by cutthroat competition and intense disputes played out in public. And as the once harmonious world of healthcare braces for battle, three critical struggles take centerstage. Each one promises controversy and profound implications for the future of medicine:

1. A Nation Divided Over Abortion Rights

For nearly 50 years, from the landmark Roe v. Wade decision in 1973 to its overruling by the 2022 Dobbs case, abortion decisions were the province of women and their doctors. This dynamic has changed in nearly half the states.

This spring, the Supreme Court is set to hear another pivotal case, this one on mifepristone, an important drug for medical abortions. The ruling, expected in June, will significantly impact women’s rights and federal regulatory bodies like the FDA.

Traditionally, abortions were surgical procedures. Today, over half of all terminations are medically induced, primarily using a two-drug combination, including mifepristone. Since its approval in 2000, mifepristone has been prescribed to over 5 million women, and it boasts an excellent safety record. But anti-abortion groups, now challenging this method, have proposed stringent legal restrictions: reducing the administration window from 10 to seven weeks post-conception, banning distribution of the drug by mail, and mandating three in-person doctor visits, a burdensome requirement for many. While physicians could still prescribe misoprostol, the second drug in the regimen, its effectiveness alone pales in comparison to the two-drug combo.

Should the Supreme Court overrule and overturn the FDA’s clinical expertise on these matters, abortion activists fear the floodgates will open, inviting new challenges against other established medications like birth control.

In response, several states have fortified abortion rights through ballot initiatives, a trend expected to gain momentum in the November elections. This legislative action underscores a significant public-opinion divide from the Supreme Court’s stance. In fact, a survey published in Nature Human Behavior reveals that 60% of Americans support legal abortion.

Path to resolution: Uncertain. Traditionally, SCOTUS rulings have mirrored public opinion on key social issues, but its deviation on abortion rights has failed to shift public sentiment, setting the stage for an even fiercer clash in years to come. A Supreme Court ruling that renders abortion unconstitutional would contradict the principles outlined in the Dobbs decision, but not all states will enact protective measures. As a result, America’s divide on abortion rights is poised to deepen.

2. The Generative AI Revolution In Medicine

A year after ChatGPT’s release, an arms race in generative AI is reshaping industries from finance to healthcare. Organizations are investing billions to get a technological leg up on the competition, but this budding revolution has sparked widespread concern.

In Hollywood, screenwriters recently emerged victorious from a 150-day strike, partially focused on the threat of AI as a replacement for human workers. In the media realm, prominent organizations like The New York Times, along with a bevy of celebs and influencers, have initiated copyright infringement lawsuits against OpenAI, the developer of ChatGPT.

The healthcare sector faces its own unique battles. Insurers are leveraging AI to speed up and intensify claim denials, prompting providers to counter with AI-assisted appeals.

But beyond corporate skirmishes, the most profound conflict involves the doctor-patient relationship. Physicians, already vexed by patients who self-diagnose with “Dr. Google,” find themselves unsure whether generative AI will be friend or foe. Unlike traditional search engines, GenAI doesn’t just spit out information. It provides nuanced medical insights based on extensive, up-to-date research. Studies suggest that AI can already diagnose and recommend treatments with remarkable accuracy and empathy, surpassing human doctors in ever-more ways.

Path to resolution: Unfolding. While doctors are already taking advantage of AI’s administrative benefits (billing, notetaking and data entry), they’re apprehensive that ChatGPT will lead to errors if used for patient care. In this case, time will heal most concerns and eliminate most fears. Five years from now, with ChatGPT predicted to be 30 times more powerful, generative AI systems will become integral to medical care. Advanced tools, interfacing with wearables and electronic health records, will aid in disease management, diagnosis and chronic-condition monitoring, enhancing clinical outcomes and overall health.

3. The Tug-Of-War Over Healthcare Pricing

From routine doctor visits to complex hospital stays and drug prescriptions, every aspect of U.S. healthcare is getting more expensive. That’s not news to most Americans, half of whom say it is very or somewhat difficult to afford healthcare costs.

But people may be surprised to learn how the pricing wars will play out this year—and how the winners will affect the overall cost of healthcare.

Throughout U.S. healthcare, nurses are striking as doctors are unionizing. After a year of soaring inflation, healthcare supply-chain costs and wage expectations are through the roof. A notable example emerged in California, where a proposed $25 hourly minimum wage for healthcare workers was later retracted by Governor Newsom amid budget constraints.

Financial pressures are increasing. In response, thousands of doctors have sold their medical practices to private equity firms. This trend will continue in 2024 and likely drive up prices, as much as 30% higher for many specialties.

Meanwhile, drug spending will soar in 2024 as weight-loss drugs (costing roughly $12,000 a year) become increasingly available. A groundbreaking sickle cell disease treatment, which uses the controversial CRISPR technology, is projected to cost nearly $3 million upon release.

To help tame runaway prices, the Centers for Medicare & Medicaid Services will reduce out-of-pocket costs for dozens of Part B medications “by $1 to as much as $2,786 per average dose,” according to White House officials. However, the move, one of many price-busting measures under the Inflation Reduction Act, has ignited a series of legal challenges from the pharmaceutical industry.

Big Pharma seeks to delay or overturn legislation that would allow CMS to negotiate prices for 10 of the most expensive outpatient drugs starting in 2026.

Path to resolution: Up to voters. With national healthcare spending expected to leap from $4 trillion to $7 trillion by 2031, the pricing debate will only intensify. The upcoming election will be pivotal in steering the financial strategy for healthcare. A Republican surge could mean tighter controls on Medicare and Medicaid and relaxed insurance regulations, whereas a Democratic sweep could lead to increased taxes, especially on the wealthy. A divided government, however, would stall significant reforms, exacerbating the crisis of unaffordability into 2025.

Is Peace Possible?

American healthcare, much like any battlefield, is fraught with conflict and turmoil. As we navigate 2024, the wars ahead seem destined to intensify before any semblance of peace can be attained.

Yet, amidst the strife, hope glimmers: The rise of ChatGPT and other generative AI technologies holds promise for revolutionizing patient empowerment and systemic efficiency, making healthcare more accessible while mitigating the burden of chronic diseases. The debate over abortion rights, while deeply polarizing, might eventually find resolution in a legislative middle ground that echoes Roe’s protections with some restrictions on how late in pregnancy procedures can be performed.

Unfortunately, some problems need to get worse before they can get better. I predict the affordability of healthcare will be one of them this year. My New Year’s request is not to shoot the messenger.

Private equity could worsen cardiology’s overutilization problem

Posted on by • Posted in Cardiac Care, Cardiology, Health System, Hospital, Hospital Industry, Mergers & Acquisitions, Overutilization, Physician Practice Acquisition, Private Equity, Profit Motive • Leave a comment

https://mailchi.mp/e1b9f9c249d0/the-weekly-gist-september-15-2023?e=d1e747d2d8

 An article published this week in Stat documents private equity’s move into the cardiovascular space. There’s reason to suspect private equity ownership could exacerbate cardiology’s overuse problem, according to several cardiologists and researchers. Studies has found private equity acquisition results in more patients, more visits per patient, and higher charges.

Outpatient atherectomies have become a poster child for overutilization, with the volume billed to Medicare more than doubling from 2011-2021.

The Gist: Fueled by the growing number of states allowing outpatient cardiac catheterization, all signs point to cardiovascular practices being the next specialty courted for PE rollups.

However, the service line brings more complexities to deal structure and future returns than recent targets like dermatology and orthopedics. Heart and vascular groups are more heterogeneous, and less profitable medical management of conditions like congestive heart failure accounts for a greater portion of patient volume. Much more of the medical group business is intertwined with inpatient care, and, unlike other proceduralists, around 80 percent of cardiologists are already employed by health systems. While that doesn’t mean health systems are safe from cardiologists seceding for the promise of PE windfalls, 

the closer PE firms get to the “heart” of medicine, the more they’ll find their standard playbook at odds with the broad spectrum of care that cardiovascular specialists provide—and the more they’ll find that partnering with local hospitals will be non-negotiable to maintain the book of business.

Private equity-backed practices flexing market share muscle 

Posted on by • Posted in Antitrust, Federal Trade Commission, Federal Trade Commission (FTC), High Prices, Market Consolidation, Market Power, Market Trends, Mergers & Acquisitions, Physician, Physician Acquisition, Physician Aggregator, Physician Employment, Physician Practice Acquisition, Physician Specialist, Physician Staffing - Private Equity Backed, Private Equity • Leave a comment

https://mailchi.mp/d0e838f6648b/the-weekly-gist-september-8-2023?e=d1e747d2d8

This week we showcase data from a recent American Antitrust Institute study on the growth of private equity (PE)-backed physician practices, and the impact of this growth on market competition and healthcare prices. 

From 2012 to 2021, the annual number of practice acquisitions by private equity groups increased six-fold, especially in high-margin specialties. During this same time period, the number of metropolitan areas in which a single PE-backed practice held over 30 percent market share rose to cover over one quarter of the country. 

These “hyper-concentrated” markets are especially prevalent in less-regulated states with fast-growing senior populations, like Arizona, Texas, and Florida. 

The study also found an association between PE practice acquisitions and higher healthcare prices. In highly concentrated markets, certain specialties, like gastroenterology, were able to raise prices rise by as much as 18 percent. 

While new Federal Trade Commission proposals demonstrate the government’s renewed interest in antitrust enforcement, it may be too little, too late to mitigate the impact of specialist concentration in many states.  

Quantifying private equity’s takeover of physician practices

Posted on by • Posted in Antitrust, Federal Trade Commission (FTC), Health Policy, Health System, High Prices, Hospital, Hospital Industry, Market Consolidation, Market Power, Mergers & Acquisitions, Physician Acquisition, Physician Employment, Physician Practice Acquisition, Private Equity • Leave a comment

https://mailchi.mp/cc1fe752f93c/the-weekly-gist-july-14-2023?e=d1e747d2d8

A detailed report, published by a group of organizations including the American Antitrust Institute, provides one of the highest-quality examinations of the growth of private equity (PE)-backed physician practices, and the impact of this growth on market competition and healthcare prices.

From 2012 to 2021, the annual number of practice acquisitions by private equity groups increased six-fold, and the number of metropolitan areas in which a single PE-backed practice held over 30 percent market share rose to cover over one quarter of the country. (Check out figure 3B at the bottom of page 20 in the report to see if you live in one of those markets.)

The study also found an association between PE practice acquisitions and higher healthcare prices and per-patient expenditures. In highly concentrated markets, certain specialties, like gastroenterology, saw prices rise by as much as 18 percent.

The Gist: As the report highlights, one of the greatest barriers to assessing PE’s impact on physician practices is the lack of transparency around acquisitions and ownership structures. This analysis brings us closer to understanding the scope of the issue, and makes a strong case for regulatory and legislative intervention. 

Recent proposed changes to federal premerger disclosure requirements offer a good start, but many practice acquisitions are still too small to flag review, and slowing future acquisitions will do little to unwind the market concentration already emerging. 

PE is also not the sole actor contributing to healthcare consolidation, and proposed remedies may target the activities of payers and health systems considered anti-competitive as well.

What’s driving the bidding war for primary care practices?

Posted on by • Posted in Center for Medicare and Medicaid Services (CMS), Health Policy, Market Consolidation, Market Power, Medicare Advantage, Mergers & Acquisitions, Outcomes, Physician Practice Acquisition, Physician Practice Valuation, Primary Care, Quality of Care, Value-Based Contracting, Value-Based Healthcare • Leave a comment

https://mailchi.mp/5e9ec8ef967c/the-weekly-gist-april-14-2023?e=d1e747d2d8

Published in the April edition of Health Affairs Forefront, this piece unpacks why payers and other corporations have replaced health systems as the top bidders for primary care practices, driving up practice purchase prices from hundreds of dollars to tens of thousands of dollars per patient. While corporate players like UnitedHealth Group, Amazon, and Walgreens have spent an estimated $50B on primary care, it pales in comparison to the potential “$1T opportunity” in value-based care projected by McKinsey and Company.

The authors argue that this tantalizing opportunity exists because the Centers for Medicare and Medicaid Services (CMS) invited corporations to “re-insure” Medicare through capitated arrangements in Medicare Advantage (MA) and its Direct Contracting program.

While CMS intended to promote risk and value-based incentives to improve care quality and costs, the incentive structures baked into these programs have afforded payers record profits, despite neither improving patient outcomes nor reducing government healthcare spending.

The Gist: While the critiques of MA reimbursement structures in this piece are familiar, they are woven together into a convincing rebuke of the “unintended consequences” of CMS’s value-based care policy. 

Through poorly designing incentives, CMS paved a runway for corporate America to capture the lion’s share of the financial returns of value-based care, paying prices for primary care that health systems can’t match.

Meanwhile, despite skyrocketing valuations for primary care practices, primary care services remain underfunded and inadequately reimbursed, pushing primary care groups closer to payers with excess profits to invest.

Be Ready for the Reorganized Healthcare Landscape

Posted on by • Posted in Board, Business Model, CEO, Change, Change Management, Change Mindset, Leadership, Medicare Advantage, Mindset, Physician Compensation, Physician Employment, Physician Leadership, Physician Network, Physician Practice Acquisition, Physician Practice Management, Private Equity, Strategic Issue, Strategic Leadership, Strategy, Value Based Care Model, Value-Based Care Functions, Value-Based Contracting, Value-Based Healthcare • Leave a comment

Click to access Industry_Insights_1.25.23.pdf

Running a health system recently has proven to be a very hard job. Mounting losses in the face of higher operating expenses, softer than expected volumes, deferred capex, and strained C-suite succession planning are just a few of the immediate issues with which CEOs and boards must deal.


But frankly, none of those are the biggest strategic issue facing health systems. The biggest
strategic issue is the reorganization of the American healthcare landscape into an ambulatory care
business that emphasizes competing for covered lives at scale in lower cost and convenient settings
of care. This shift in business model has significant ramifications, if you own and operate acute care
hospitals.


Village MD and Optum are two of the organizations driving the business model shift. They are
owned by large publicly traded companies (Walgreens and UnitedHealth Group, respectively). Both
Optum and Village MD have had a string of announced major patient care acquisitions over the past
few years, none of which is in the acute care space.


The future of American healthcare will likely be dominated by large well-organized and well-run
multi-specialty physician groups with a very strong primary care component. These physician
service companies will be payer agnostic and focused on value-based care, though will still be
prepared to operate in markets where fee-for-service dominates. They will deliver highly
coordinated care in lower cost settings than hospital outpatient departments. And these companies
will be armed with tools and analytics that permit them to manage the care for populations of
patients, in order to deliver both better health outcomes and lower costs.


At the same time this is happening, we are experiencing steady growth in Medicare Advantage.
And along with it, a stream of primary care groups who operate purpose-built clinics to take full risk
on Medicare Advantage populations. These companies include ChenMed, Cano Health and Oak
Street, among others. These organizations use strong culture, training, and analytics to better
manage care, significantly reduce utilization, and produce better health outcomes and lower costs.


Public and private equity capital are pouring into the non-acute care sectors, fueling this growth. As
of the start of 2022, nearly three quarters of all physicians in the US were employed by either
corporate entities (such as private equity, insurance companies, and pharmacy companies), or
employed by health systems. And this employment trend has accelerated since the start of the
pandemic. The corporate entities, rather than health systems, are driving this increasing trend.
Corporate purchases of physician practices increased by 86% from 2019 to 2021.


What can health systems do? To succeed in the future, you must be the nexus of care for the
covered lives in your community. But that does not mean the health system must own all the
healthcare assets or employ all of the physicians. The health system can be the platform to convene these assets and services in the community. In some respects, it is similar to an Apple iPhone. They are the platform that convenes the apps. Some of those apps are developed and owned by Apple. But many more apps are developed by people outside of Apple, and the iPhone is simply the platform to provide access.


Creating this platform requires a change in mindset. And it requires capital. There are many opportunities for health systems to partner with outside capital providers, such as private equity, to position for the future – from both a capital and a mindset point of view.


The change in mindset, and the access to flexible capital, is necessary as the future becomes more and more about reorganizing into an ambulatory care business that emphasizes competing for covered lives at scale in lower cost and convenient settings of care.

Physician burnout reaches record levels 

Posted on by • Posted in Pandemic, Physician, Physician Acquisition, Physician Burnout, Physician Employment, Physician Practice Acquisition, Physician Workforce, Retention, Team-Based Care Models, Work-Life Balance • Leave a comment

https://mailchi.mp/3a7244145206/the-weekly-gist-december-9-2022?e=d1e747d2d8

The long hours, stressful conditions, and labor shortages brought on by the pandemic have done serious harm to the physician workforce. The graphic above tracks physician burnout, a combination of emotional exhaustion, loss of agency, and depersonalization that has become the primary measure of the pandemic’s toll on workers, to reveal that physicians are demoralized like never before. 

Physician burnout levels had been decreasing since 2014, in part due to practice consolidation and the expansion of team-based care models. Burnout reached its lowest levels in 2020—perhaps explained by a pandemic-induced sense of purpose—but 2021 then saw a dramatic spike in every measure of physician dissatisfaction, as the heroic glow of the early pandemic faded, and an overtaxed and understaffed delivery system became the new norm.

In explaining how the pandemic has impacted their career decisions, surveyed physicians list unsustainable burnout and stress as their top concern, and 11 percent say they have exited the profession, either for retirement or a non-clinical job, in the past two years. Four in ten surveyed physicians report changing jobs since 2020, mainly within similar or different practice settings, citing a desire for better work-life balance as their primary motivation. (It should be caveated that these data are from a smaller survey of 534 physicians, 40 percent of whom identified as “early career”.) 

While the solutions here aren’t new, they are challenging: we must continue to implement team-based care models that provide physicians top-of-license practice and improved work-life balance, remove administrative tasks wherever possible, and ensure that we are communicating and engaging physicians—employed and independent alike—in organizational strategy and decision-making. 

Private equity-backed buyouts have physicians concerned

Posted on by • Posted in Competition, Dept of Justice (DOJ), Federal Trade Commission (FTC), For-Profit, Market Consolidation, Market Power, Market Share, Market Trends, Mergers & Acquisitions, Physician, Physician Acquisition, Physician Practice Acquisition, Private Equity • Leave a comment
https://www.beckershospitalreview.com/hospital-physician-relationships/private-equity-backed-buyouts-have-physicians-concerned.html?utm_medium=email&utm_content=newsletter

The Federal Trade Commission and the Justice Department are seeking comments on ways merger guidelines should be updated, and physicians are raising concerns about private equity-backed buyouts of provider practices. 

The FTC and the Justice Department announced in January that they’re seeking to revamp merger guidelines for businesses. Comments on how to “modernize the merger guidelines to better detect and prevent anticompetitive deals,” can be submitted to the agencies through April 21. 

Comments are pouring in from physicians. Many of the comments are anonymous, but the commenters self-identify as physicians. 

The physicians’ top concern are private equity-backed buyouts, according to an analysis by Law360. They’re also concerned by the profit-first attitude of healthcare and consolidation in the industry, according to the report. 

The commenters raised many concerns with private equity groups, saying they “put profits over patients” and “stifle the voices of physicians.”

The comments are coming in as private equity firms continue to buy up physician practices. 

Private equity firms acquired 59 physician practices in 2013, and that number increased to 136 practices by 2016, according to a research letter published in JAMA. 

UnitedHealth’s profits

Posted on by • Posted in Health Insurance Industry, Net Income, Operating Expenses, Operating Income, Operating Margin, Operating Metrics, Operating Performance, Operating Revenue, Pharmacy Benefits Management, Physician Practice Acquisition, Physician Practice Management • Leave a comment
https://www.axios.com/newsletters/axios-vitals-39805e09-f735-452d-8822-d60983748ac9.html?utm_source=newsletter&utm_medium=email&utm_campaign=newsletter_axiosvitals&stream=top

The second year of the pandemic did not dampen UnitedHealth Group’s finances, and the company actually surpassed its initial 2021 revenue and profit projections, Bob writes.

The big picture: UnitedHealth’s revenue has tripled from 2010 to 2021, and profit has almost quadrupled. The company continues to make more of its money from owning doctor groups and controlling pharmacy benefits instead of relying on health insurance.

Private equity as an enabler of Boomer doctor retirements

Posted on by • Posted in Health System, Hospital, Hospital Industry, Physician, Physician Compensation, Physician Employment, Physician Exit Strategy, Physician Independence, Physician Practice Acquisition, Physician Practice Management, Physician Practice Valuation, Physician Retirement, Physician Staffing, Private Equity, Strategy, Talent Identification, Talent Imperative, Talent Management • Leave a comment

https://mailchi.mp/13ef4dd36d77/the-weekly-gist-august-27-2021?e=d1e747d2d8

How Much Money Does a Doctor Need to Retire? — Finity Group, LLC

There’s been a lot of hand wringing over the ongoing feeding frenzy among private equity (PE) firms for physician practice acquisition, which has caused health system executives everywhere to worry about the displacement effect on physician engagement strategies (not to mention the inflationary impact on practice valuations).

While we’ve long believed that PE firms are not long-term owners of practices, instead playing a roll-up function that will ultimately end in broader aggregation by vertically-integrated insurance companies, a recent conversation with one system CEO reframed the phenomenon in a way we hadn’t thought of before. It’s all about a demographic shift, she argued.

There’s a generation of Boomer-aged doctors who followed their entrepreneurial calling and started their own practices, and are now nearing retirement age without an obvious path to exit the business. Many didn’t plan for retirement—rather than a 401(k), what they have is equity in the practice they built.

What the PE industry is doing now is basically helping those docs transition out of practice by monetizing their next ten years of income in the form of a lump-sum cash payout. You could have predicted this phenomenon decades ago.

The real question is what happens to the younger generations of doctors left behind, who have another 20 or 30 years of practice ahead of them? Will they want to work in a PE-owned (or insurer-owned) setting, or would they prefer health system employment—or something else entirely?

The answer to that question will determine the shape of physician practice for decades to come…at least until the Millennials start pondering their own retirement.