The growing dominance of corporate control in the U.S. healthcare system is under scrutiny, raising concerns among regulators and health advocates alike. As private equity firms increasingly penetrate the healthcare landscape, recent investigations indicate that this shift could potentially compromise the quality of patient care.
Almost 70% of physicians in the United States are now employed by hospitals or corporate entities, according to recent statistics. Regulators across the country warn that this shift from independent practices to corporate employment can negatively affect patient health outcomes.
On March 5, three federal agencies jointly announced a cross-government investigation aimed at assessing the rising influence of corporate and private equity investments in healthcare. States have also begun to enhance their oversight, with nearly a dozen state legislatures introducing stricter regulations on healthcare mergers and acquisitions.
“Private equity firms and other corporate owners are increasingly involved in healthcare transactions, and sometimes these transactions prioritize profit over the quality of care,” stated a press release from the Federal Trade Commission regarding the ongoing investigation.
For many healthcare providers, this situation is exacerbating existing pressures. A recent survey published in JAMA Internal Medicine found that 60.8% of responding physicians viewed private equity involvement negatively, while only 10.5% had a positive or somewhat positive perspective.
Across the nation, physicians have voiced strong concerns about the escalating corporate takeover of healthcare, linking it to increased burnout resulting from the demands of seeing more patients in less time. Dr. Jonathan Jones, president of the American Academy of Emergency Medicine, recounted leaving his position at a community hospital after a private equity firm acquired his department, leading to a doubled patient-to-physician ratio.
A JAMA study released in December 2023 revealed that patients treated in private equity-owned hospitals experienced a higher rate of adverse events, such as bloodstream infections and medication errors, compared to those in non-private equity facilities. Notably, Medicare patients in these settings had a 25% higher incidence of such complications.
Another study published in the BMJ established a correlation between private equity investment and cost increases of up to 32% for payers and patients. Additionally, findings indicated that nursing homes owned by private equity firms were associated with an estimated 20,000 additional deaths over a 12-year period.
These health disparities have prompted lawmakers in Indiana, joining those in nine other states, to demand that healthcare entities and private equity firms provide advance notice to state officials prior to any acquisition or merger.
If enacted, this legislation would make Indiana the first Republican-led state to adopt such measures, following similar mandates in blue states like New York, Oregon, California, Massachusetts, Minnesota, Nevada, Connecticut, Illinois, and Washington.
Yet, significant questions remain regarding the long-term viability of independent medical practices. The stronger negotiating power of commercial insurers often disadvantages independent providers, potentially driving them to extinction.
As the healthcare industry continues to consolidate, there are concerns that it may mirror the banking sector, dominated by a handful of powerful entities. Research indicates that private equity acquisitions in medical practices have surged six-fold over the past decade, with one private equity firm controlling over half of the market share in certain specialties within specific metropolitan areas.
As a result, patients may find themselves in the hands of corporate-employed doctors, often with less time allocated for their appointments.
Note from the editor: This article was first published in the Healthcare Docket newsletter. Click here to subscribe and read the full newsletter.
