The risks of private equity in health care
Add Axios as your preferred source to
see more of our stories on Google.
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
