The days of the friendly neighborhood doctor could be soon coming to an end. While independent physician practices used to be the norm rather than the exception, conditions are rapidly reversing, and it’s due in large part to the voracious appetites of private equity companies. A recent study by the Annals of Internal Medicine indicates that private equity companies are buying up private practices at a faster rate than ever before, and this trend could fundamentally change the landscape of the healthcare industry. That’s because a number of people in the industry are predicting that this new trend will only accelerate in the coming years.
Whether this will be a positive or negative development will take some time to figure out. The current toll for private practices bought out in 2017 logs 102 purchases, but some warn that this number could be inaccurate. That’s because many of the smaller practices may have flown under the radar of the bean counters. And since this is such unprecedented territory, it’s hard to know what impact this will have on the general healthcare landscape.
While we don’t understand what the future may hold for these acquisitions, we do have a firm understanding of how they occur. Private equity firms are generally looking for a 20% rate of return on their investment, and that means that they tend to target larger practices with a reputation for stability and a broad reach in their community. Since private equity firms are typically interested in rapidly developing the value of their investments and then making a profit, the development of these processes tends to be quick. Offices will quickly hire other practitioners, purchase smaller offices and then fold them into the larger firm, expand the scope of services offered by the office, and employ cost-cutting measures. Offices that offer elective procedures are a particularly enticing prospect because of their higher margin of profit.
Despite the pace of this trend, no peer-reviewed studies have been released on its impact. What’s certain is that the physicians who were once in charge of these offices reduce their agency in the day to day operations. And patients are particularly worried. A majority of patients have expressed concern about consolidating healthcare operations. Regardless of the impact of the trend, it’s bound to be seismic, and it requires careful evaluation from the medical community.