Bacon's Rebellion

Democracy Thrives in Sunlight

Private Equity in Medicine

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by

Dick Hall-Sizemore
in ,

To add to those revealed in  James Sherlock’s excellent posts about nursing homes and the health care industry generally, here is another culprit–private equity firms.  They buy up medical practices in an area, creating great bargaining power with insurance companies, and begin raising prices.  The fight is between giant, merged insurance companies and giant, merged medical practices.  The losers are patients and the winners are the private investors.

Today’s Washington Post has a long article describing how this happened with anesthesia practices in the Denver area.  The company, U.S. Anesthesia Partners, which calls itself a physician-owned company, was, in reality, created by the private equity firm, Welsh, Carson, Anderson & Stowe, which owns 55 percent of the stock.

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24 responses to “Private Equity in Medicine”

  1. James Kiser Avatar
    James Kiser

    Interesting that the FTC, Khan and other federal agencies haven’t put a halt to this but then I am sure Democrats and Republicans are raking in the bucks. I know Hanger the Rep. Senator for the Valley raked in the most donations from the health industry.

  2. Eric the half a troll Avatar
    Eric the half a troll

    Love the recent efforts by BR to build the case against the for-profit healthcare system in the US. Well said!

    1. James A. Bacon Avatar
      James A. Bacon

      The problem isn’t that the healthcare industry is “for profit.” In Virginia, the industry is predominantly nonprofit. The problem is government failure to use antitrust laws to bust up monopolies and cartels, the lack of price discovery, and an inability to structure the industry so that providers compete on the basis of cost, innovation, and quality of outcomes.

      1. James C. Sherlock Avatar
        James C. Sherlock

        The Virginia hospital system is made up of private systems predominantly structured as not-for-profits.

        HCA is by far the biggest for-profit system in Virginia, but it has no monopolies, so is not a prominent candidate for anti-trust enforcement.

        Physicians groups are primarily structured as for-profit businesses.

        The nursing homes are 78% for-profit.

        I suspect that the home healthcare industry is also predominantly for-profit.

        It does not matter how they are structured, but rather how they are run.

        Some of the most prominent defiers of antitrust laws are, in Virginia, not-for profit hospital systems.

        The worst nursing home chains here violate other federal and state laws – Medicare, Medicaid, elder abuse, etc. with conspiracy thrown in – and regulations.

    2. Nancy Naive Avatar
      Nancy Naive

      Charity. They want the healthcare system to be a charity system.

      “Live fast, love hard, and die young with a beautiful corpse,” is the Republican healthcare plan, aka “Repeal and (snicker) Replace.”

  3. Teddy007 Avatar
    Teddy007

    Everyone should remember that the anesthesiologist see the hospitals as their customers and not the patients. Most hospitals have outsourced their anesthesiology departments, the emergency medicine physicians, their radiology departments, and even their pathology departments. Each one becomes a group that contracts with the hospital and is isolated from the patients.

    1. DJRippert Avatar
      DJRippert

      And the hospitals are buying the family doctor practices to control the entry of patients into the system. Those hospitals then steer the patients to other facilities owned by the hospital (or, more likely, hospital group).

      For example, if you are admitted to Reston Hospital suffering from an apparent stroke and you need more advanced treatment than Reston can provide … you will be sent to The Washington Hospital Center for that treatment rather than the much closer Inova Fairfax facility.

      Meanwhile, the ambulances which pick you up for emergency transport will only take you to Reston Hospital.

      1. Teddy007 Avatar
        Teddy007

        Reston Hospitcal Center is HCA and does refer patients to Inova due to insurance concerns. Washington Hospital Center is Medstar Health and gets few patients from Reston Hospital Center.

  4. James A. Bacon Avatar
    James A. Bacon

    Symptomatic of an increasingly cartelistic healthcare industry that increases profitability by gaming the political system — evading anti-trust in this case — rather than competing and innovating. Our healthcare system gets increasingly sclerotic by the year.

    1. Eric the half a troll Avatar
      Eric the half a troll

      “Symptomatic of an increasingly cartelistic healthcare industry that increases profitability by gaming the political system…”

      I thought you just told me that “in Virginia, the industry is predominantly nonprofit”…

      1. James A. Bacon Avatar
        James A. Bacon

        Non-profits generate plenty of profit. Huge profits. They’re called “surpluses.” Non-profit status refers to ownership and mission, not profitability.

        1. Lefty665 Avatar
          Lefty665

          Increases (or surpluses) are required to be retained and applied to the charitable purpose the not-for-profit is chartered to serve rather than paid out to stockholders as with for-profits.

          How are they diverting the excess money? Not much point in running up big surpluses if you can’t do something greedy with it.

          I don’t disagree with your analysis, I’m just curious.

        2. DJRippert Avatar
          DJRippert

          And the CEOs (and presumably other top executives) of non-profit organizations can be paid a whole lot of money.

          Note the number of health care operators in the following list of highest paid non-profit CEOs:

          https://www.statista.com/statistics/1373870/top-nonprofits-ceo-compensation-us/#:~:text=In%202021%2C%20the%20nonprofit%20organization,of%2013.46%20million%20U.S.%20dollars.

      2. Nancy Naive Avatar
        Nancy Naive

        The danger is that he may soon be forced to be a victim of his own devices.

  5. Nancy Naive Avatar
    Nancy Naive

    So tell me again how bad it is in Sweden… or Canada?

    Il est le genre à voler les fausses dents d’un macchabée.

    1. James C. Sherlock Avatar
      James C. Sherlock

      Interestingly, neither is a national system. Each is a collection of regional and state systems. Think the Virginia Department of Health running the hospitals. Ouch.

      1. Nancy Naive Avatar
        Nancy Naive

        But, they’re STILL better…

        1. James C. Sherlock Avatar
          James C. Sherlock

          I repeat. Think Virginia Department of Health running the hospitals.

          America’s healthcare is rated internationally as best in the world in medical technology innovation. Patients suffer relatively few delays in access to care, especially specialists, and we have relatively good outcomes for patients. We pay too much.

          Canada is cheaper net, but admits to severe problems in access to specialists.

          And the same problem as thee U.S. with nursing shortages. https://www.ctvnews.ca/health/how-canada-can-retain-nurses-amid-a-struggling-health-care-system-report-1.6160301

          Sweden has the highest income tax rate in the world. More than 57% is annually deducted from people’s incomes.

          Sweden’s healthcare system is one of the best in the world. Full stop. But it helps that only 20.6% of the Swedish population is obese and 85% of Swedes do not smoke

          Yet, like Canada, Sweden has large medical waiting lists. Sweden is facing the same provider, especially nurses, as the rest of the world. It was bad before COVID and worse now.

          The use of private health insurance has been increasing due to the low number of hospitals, long waiting times to receive healthcare, and Sweden’s priority treatment of emergency cases first.

          In Sweden, one in 10 people do not rely on Sweden’s universal healthcare but instead purchase private health insurance.

          Which of those is “best” depends on one’s personal preferences and economic situation.

          For the poor, for whom I advocate in my work, Sweden’s system may be the “best”, even after Medicaid expansion here. Sweden, like Canada, has more GPs per capita. As you know I have made proposals to increase access to GPs here. So better unless they have to see a specialist with some urgency but do not constitute an emergency.

          But it remains to be seen how the major influx of immigrants from the Middle East in the past four years will affect that system.

          It is also not a given that an attempt to transition from America’s current healthcare system and anything like Sweden’s would not have unanticipated change costs, and not just financial costs, that we cannot anticipate. It would be very, very hard.

          1. Nancy Naive Avatar
            Nancy Naive

            But, they’re still better.

            You’ve chosen a meaningless metric to “care”, especially where cure and diagnosis is meaningless.

            Technology innovation. We build the best technologically innovation weapons systems too, with roughly the same effect.

            The system we have is screwed up, and it’s time we cheat off the smart kid’s paper.

          2. Nathan Avatar
            Nathan

            That’s like saying alcohol prohibition works in the Middle East, so why not here. We tried that, remember?

            Sweden’s demographics and culture are entirely different.

            Sweden’s entire GDP is roughly that of Virginia.

            Sweden benefits from having the US fund their national defense. They only spend 1.4 percent of their GDP on defense, the US is spending 3.48 percent. They aren’t even spending the 2 percent required for NATO membership.

            With essentially open borders to the south, we would be providing free healthcare for all sick in Central and South America.

  6. James C. Sherlock Avatar
    James C. Sherlock

    In these cases, the physicians were willing sellers. The private equity firm was a willing buyer.

    This is another instance of physicians getting tired of getting screwed by big medicine – the hospital groups and the big health insurers – who treat them badly unless they get big enough to have leverage in the process.

    In Virginia, physicians have the added obstacle that the state has created and protects hospital regional monopolies under COPN. I have encouraged them to unionize. Selling their practices to create bigger players is easier.

    So the anesthesiologists in this case sold their private practices at a profit and work in partnership with firms with the financial power to create dominant specialist guilds.

    ER doctors in Virginia have done the same thing.

    Going back to basics, if there is an anti-trust case, it should be presented in civil (treble damages) and/or criminal court. The government needs of course to bring criminal cases, but anyone who can show harm can bring a civil suit.

    We don’t lack laws, we lack enforcement, as with the bad actor nursing home chains about which I have been writing.

    For those who favor single payer, good luck figuring out how to do it without doctors and nurses being losers. Anything that drives yet more physicians and nurses out of medicine will make a bad situation worse.

    As for national health, government ownership of medical care, no one who advocates that is a serious person. The government to run it? Based upon what experience with the government running anything? For those who will answer the military, I will respond that only the combat portion of the Defense Department is reasonably well run. The acquisition establishment is a poster child for what to fear about government management of national healthcare.

  7. Nancy Naive Avatar
    Nancy Naive

    “And whose fault is this?”, was asked of the aging Republican when he suddenly realized he’d reached the age where he’d have to avail himself of the medical system he’d voted to establish his whole life.

    Another in the “What hath we wrought” series.

  8. Nancy Naive Avatar
    Nancy Naive

    Consequences have actions…
    https://www.dailypress.com/2002/10/16/nursing-program-to-be-cut-at-cnu-2/#:~:text=Christopher%20Newport%20University%20is%20eliminating,will%20continue%20through%20this%20year.

    And at it to the end…
    https://www.dailypress.com/2002/11/08/cnus-selection-of-cuts-in-question/

    Wonder what effect this’ll have?

  9. f/k/a_tmtfairfax Avatar
    f/k/a_tmtfairfax

    Given how badly many public school systems failed students, most especially low-income students, during the Pandemic, there is no way I’d trust the federal or state government with my health care. We have Medicare Part A because it’s mandatory but don’t have Medicare Part B. Like many retired federal employees, my better half kept her health insurance from work when she retired. Before we made that decision, we checked with multiple financial planning sources, including those provided to federal employees planning to retire, and everyone recommended that we stick with the private insurance.

    If there are antitrust concerns, why wouldn’t the FTC get involved?

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