Private Equity in Primary Care: Costs, Care, and Impact

Regular readers of health affairs know that one of the most significant and complex trends in health care practice ownership and financing is the increasing role of private equity. These are firms that buy companies with the short term aim of increasing their value quickly than selling them for a profit. The relatively early research about private equity's impact in healthcare is that it can have significant negative consequences on the quality of patients' experience and the care they receive.

But there's still a lot we don't know. And so each new paper on this topic published by Health Affairs and others represents an opportunity to fill out our picture of the space to add nuance and understanding of how these firms may be changing the practices they acquire and how those changes may affect the health of patients served by those practices. One case in point is the latest paper we're discussing on the podcast today. I'm here with Doctor.

Yashaswini Singh, a health care economist and assistant professor at Brown University. Together with co authors, she has a new article in the June issue of Health Affairs describing, quote, private equity acquisitions and primary care, colon, Changes in Utilization, Spending, and Workforce. I think this may be one of the earliest papers to look with this level of granularity, specifically at the implications for primary care and its impact on practice patterns. So we really are moving the field forward here and I'm thrilled that we can talk about it today.

Doctor. Yashaswini Singh, welcome to our Humble podcast. It's a great pleasure to be here. Thank you so much for having me back.

Well, so before we dig into your paper, maybe we can start by having you describe the current scope of private equity's presence in healthcare today. How significant is private equity's involvement in primary care specifically? Absolutely. That's a great place to start.

You know, the last time we talked about private equity, mentioned investors have poured about $1,000,000,000,000 in the American health care system over the last decade or two. Now when you look at where these funds have flown to, there is variation across sectors. So in the early 2000s, for example, we saw investors take a particular interest in hospitals and nursing homes. Starting in about 2015, we saw investors shift their focus towards physician practices, outpatient surgical centers, ambulatory surgery centers and so on.

And then starting in and around the COVID-nineteen pandemic, even within physician practices, investors have discovered areas of untapped potential if you will and primary care is one of them. We've seen primary care in particular emerge as particularly attractive to investors starting in about that twenty nineteen, twenty twenty time horizon. You know, there's very little we know about how PE plays out in the primary care setting. Primary care, you know, if we take a step back is also just fascinating given the wide range disruptions in care delivery and innovative payment models that we've seen play out in recent time with concierge medicine, payers taking an interest in acquiring primary care groups, retail investors like Amazon and Walmart.

So PE is not the only corporate entity to have taken an interest in primary care but it's the one that we study in quite detail as you mentioned in this paper. I think our best estimate before this study was nationally PE firms have acquired about 2% of primary care practices, which is quite modest given the scale and magnitude of hospital consolidation of primary care practices, for example. But if you look regionally, there are certain states like Florida, parts, other parts of the southern part of the country where PE penetration exceeds, you know, twenty, thirty, 40%.

And so we know a little bit about the scale. We don't know quite enough about its effects either in terms of how practice patterns evolve or what this means for patient care until now. Got it. Well, I'm glad you're doing the work to dig in there a little bit.

And, let's talk a little bit about your new paper. You looked at two twenty five private equity acquisitions of primary care practices during the period from 2016 to 2022. And you studied the effect of those acquisitions on utilization, spending, and workforce. What were some of your top line findings?

Sure. So we have a couple of findings I'd like to share with you today. So first, we wanted to understand what do acquisitions mean for the primary care physicians practicing at acquired locations. Do they end up practicing differently?

And for that we looked at both the number of services built by patients as well as the number of patients seen by physicians. And we found that physicians both bill additional services as well as see additional number of patients and so this might be reflective of productivity pressures or just higher productivity in general. And we also look to see what these trends mean for the care that patients receive across a range of primary care services, immunizations, routine office visits, preventive screenings, and so on.

And we found that not only do physicians bill for additional services and see additional patients, but patients themselves also end up receiving additional services, in particular preventive screenings, Medicare annual wellness visit, as well as routine lab tests for specific services that we see a higher use of on a per patient basis. Wow. A lot to take away, from those findings. And I I think sort of the kind of one of the big picture takeaways here is that you saw this increase in practice intensity after acquisition.

And I'm curious if you have a sense of sort of the potential mechanisms that may be leading to the surge. Absolutely. And that's such an important question because I think in order to make sense of these findings, we really need to pin down what mechanisms might be driving them. And so in this study, for listeners, we do quantify two specific mechanisms, and then we propose a third that we're not able to look at directly with the data we have but might also be at play.

And so I'll walk us through what we look at in the study and then I'll share with you the third one that's in the discussion but again not formally quantified in the paper. And so, you know, when you look at finding that suggests, you know, physicians are billing for more services and maybe more screenings and ordering more tests for their patients, one concern might be that maybe they're just seeing sicker patients on average. And so the higher use is just reflective of a higher need if your patient panel is more complex.

And so we looked at observable measures of patient risk as defined by the ACC score and on average we didn't find any changes in patient composition after acquisition. So we see this as indicating, a mechanism that perhaps is not at play, which is that, you know, patients are not getting sicker at practices. And so the higher use doesn't indicate, necessarily a sicker patient panel. And just to jump in there, the the universe in which the patient population gets sicker sort of would imply that the practice is seeking out sicker patients.

Is that right? That would be one. Okay. That's correct.

Yes. And so the other mechanism that we wanted to look at and we're very interested in seeing what the data show is whether practices change the composition of the clinicians practicing at acquired locations, right? So in order to build 30% additional services, are you retaining the same number of physicians and just having each of them built for additional services or are you also increasing, the overall available workforce or clinicians and kind of putting it on the team to bill additional services.

And so we look specifically at both the number of primary care physicians as well as the number of advanced practice providers. And so this latter group comprises nurse practitioners and physician assistants who increasingly across settings, not just limited to PE, are playing a greater role in the delivery of primary care. So we want to understand how workforce composition changes across these two distinct group of both physicians and APPs. And we found that physician staff increased by about 17% after acquisitions, but APPs also increased by a much larger magnitude by 40% overall.

And so there is this interesting thing we see happen where practices expand in size, rely perhaps more heavily on advanced practice providers and nurses and we see that perhaps as one mechanism that explains the higher use of services. And so, you know, the higher utilization workload likely is being spread across larger teams, if you will, that comprises both physician and non physician staff. Well, I want to hear about your third theory, if you will. But first, let's take a quick break.

And we're back. I'm here with doctor Yashaswini Singh, talking about her new paper in the June issue of Health Affairs covering private equity acquisitions in primary care. And just a moment ago, you described for us sort of two potential mechanisms at play here in how these acquisitions may be driving increased practice intensity. You were able to study those.

Then you alluded to a third theory that may be in the works here and I'd love to hear it. Yes, thank you. So the third theory, to talk about that first, maybe I'll level set a little bit. And so our study looks at the traditional Medicare population and one of the key findings that we talked about earlier in our conversation is the fact that preventive service use increases after acquisition.

Specifically, see a higher uptake of the Medicare annual visit which is this very interesting preventive service that Medicare wants practices to get done. It's distinct from kind of a routine office visit, right? It's more focused on just a holistic assessment of your patient. It doesn't necessarily involve any kind of service or procedure.

It's more just kind of taking stock of where the patient's at when they come see you. Now historically, practices have had a harder time completing this service because it is also associated with a lot of paperwork, high administrative burden. It's very resource intensive in nature. And so, you know, perhaps it's no surprise that PE investors with kind of all their muscle and manpower health practices complete the paperwork needed to do the service and essentially do what Medicare wants primary care practices to do.

So the surprise mechanism is that this is also considered by experts, this being the Medicare annual wellness visit and related preventive screenings, is also considered by experts as sort of a gateway to increase billing and coding on risk adjusted payments in the Medicare Advantage setting. You know, we do look at traditional Medicare and so that's not something we can directly examine in this paper, but we have other work that shows PE investors have also targeted primary care practices that cater specifically to the Medicare Advantage population and that's where some of these risk adjusted payments and coding incentives play a larger role.

So what we're unable to rule out is whether the physicians in our sample also see Medicare Advantage patients and whether the increase in billing of preventive services and the Medicare annual wellness visit just reflects sort of a spillover in practice patterns from the MA population to the traditional Medicare population. So stay tuned for more work on that. You know, it is certainly a plausible mechanism at play, but one that we do not directly examine in this study. Fair enough.

Great fodder for future research and we'll look forward to that. I'm wondering if you could say a little more about how some of these findings interact with sort of other trends we're seeing in this space. You alluded to Medicare Advantage just a moment ago, and we know that the sort of population of Medicare beneficiaries is over time shifting more toward Medicare Advantage and away from traditional Medicare. There's certainly the current administration's emphasis on prevention writ large and some of the addition of new codes for practices to bill in that space.

And so I'm curious how you see the increase of PE acquisition sort of interacting with some of those other factors. Yeah, absolutely. It's such a great question because I think to understand PE in primary care, we must see it as an intersection of these forces, right? PE exists partly, in large part, in response to these forces and so if we look at the shift towards value based care incentives and, you know, this large administrative workload that has emerged from that push towards value based care, a lot of the inflow of PE in primary care has been in response to independent practices saying they simply cannot keep up with the crushing demands of paperwork or logistics or capital intensive investments that participation in these programs require.

I think when we look at MA particularly, it's a fascinating landscape to understand how corporate actors are positioning themselves to strategically benefit from the financial incentives that are distinct to the MA program and that's where some of the incentives to increase your billing or coding intensity are more relevant than the traditional Medicare universe. But I think big picture it's essential to CPE as sort of a dynamic force that responds to the market, the regulatory and the financial incentives built into the American healthcare system and one that will not only shape the system going forward, but then also kind of responds directly to it.

So it's kind of a push and pull. I also want to ask about sort of the workforce pathway that you identified you mentioned earlier. Certainly providers in the sort of these advanced practice nursing roles and physician assistants are often framed as expanding access, right? That there's a limit on access and if we could just, you know, enlist more of these kinds of providers, we might be able to reach more people with the care that they need.

And so do you have a sense of, you know, is this just about sort of meeting the demand that there is versus, you know, a private equity entity finding an avenue to increase revenue? Are both these things happening at the same time or how do you sort of extricate the good from the bad? Yeah. Another great question.

So I my personal take is that it's a little bit of both. And I think in order to arrive at that take, have to allow for the possibility of private investors providing some good. I think, you know, it's it's difficult given the existing evidence on PE and facility closures, for example, higher costs tied to consolidation as another example to even allow for the possibility that there's some benefit that can be provided by PE investors. But I think it's important to be agnostic towards the role that private capital can play in healthcare and then just let the data tell the story that it does.

And then we see in this case in primary care, for example, it's not clear that there's outright harm. Now whether there is evidence of definitive benefit or expanded access, I'll let the readers come to their own conclusion. But all of the work that we've done looking specifically at PE in primary care shows that in contrast to other settings where there are real documented harms, the story seems to be a little different in primary care. So, you know, we must be open to that possibility and then take that into account in thinking about, whether and how to regulate or monitor the corporate practice of medicine more broadly.

So speaking of regulation and monitoring, to address the impact of private equity in health care, a lot of policymakers and researchers have in recent years floated a number of potential policy interventions. These include enhanced transaction oversight, transparency about ownership. And I'm curious how the findings of this paper might further inform those efforts. Yeah, such a great question and the right time to be asking that question too, right?

Just in this current legislative session across states, we have seen a flurry of proposals introduced, debated across red and blue states trying to understand whether and how states will regulate PE in their own local markets. We've also seen, I believe believe just last month, a federal bill introduced that proposes to ban private equity from investing in hospitals and nursing homes outright. And so there's a lot of interest which might be an understatement. And there's also a wide range of approaches that we have seen both federal and state policymakers taken in regulating PE.

I think the findings of our study, I personally think should or I hope will help us consider just allowing for the potential of investors to deliver some benefit, whether it's in the form of expanded access or increased use of preventive services. Generally, we think of patients being connected to primary care practices as a good thing. Generally, we think of higher use of preventive services as being a good thing. Now whether or not they're capitalizing on other incentives and other programs, that's kind of an open question.

But my hope is that this evidence provides additional insights that policymakers and regulators can consider as they debate questions related to whether banning PE is the right decision, whether a transparency forward approach is more prudent. The trade off with banning PE is, you know, if you believe the findings in the study, then there's a risk that you might ban the potentially beneficial in addition to the potentially harmful. And so that's sort of a, you know, a nuanced consideration folks must arrive at in deciding what's right for their state, but at least, you know, allowing for the possibility of investors to provide some benefit, is what I hope the study contributes.

Great. Well, wonderful note to, wrap up on, Doctor. Yashaswini Singh. Thanks so much for taking the time to chat with us today.

It was a really fascinating conversation about a really important and interesting paper. Thank you so much. Thank you so much for having me. To our listeners, thanks for tuning in.

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