Oct 30, 2019 - Health

The risks of private equity in health care

Private investment into the health care sector may bring innovation, but it's also led to revenue-seeking behaviors at the expense of patients, three employees of The Commonwealth Fund argue in Harvard Business Review.

By the numbers: There were nearly 800 private equity health care deals in 2018, with a total value of more than $100 billion.

Surprise medical bills have recently put private equity in the spotlight.

  • Many of these bills are generated by specialties commonly backed by private equity, like emergency room care, anesthesiology and radiology.
  • One of the biggest political forces lobbying against Congress' effort to stop surprise medical bills is a group called Doctor Patient Unity, which has spent more than $28 million on ads and is primarily funded by private-equity-backed companies.

The big picture: Physician practices are a common target for private equity firms.

  • These investments may give small practices an alternative to being bought by hospitals, "but, at least in some cases, the investors' strategy appears to be to increase revenues by price-gouging patients when they are most vulnerable," the authors write.
  • Freestanding emerging rooms are also commonly owned by private equity. These have come under fire for their high prices, which can be 22 times higher than what a physician's office charges for the same care.

The bottom line: Price-gouging patients may backfire. "Consumer outrage leads quickly to government intervention," the authors conclude.

Go deeper: Private equity's other stake in surprise medical bills

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