Private equity brings opportunities – and concerns

MSSC held an engaging membership meeting on March 4 that grappled with the impact of private equity in healthcare.

MSSC President Jany Moussa, MD, said MSSC had considered for some time hold­ing a meeting on private equity but had been hesitant to do so because its members are divided on the topic. But MSSC decided to have the meeting, Moussa said, because “this topic is important, and we should be able to discuss it.”

MSSC Executive Director Phillip Brownlee provided an overview of the topic. He noted that private-equity firms started aggressively buy­ing medical practices and hospitals about 15 years ago.

“The increased acquisitions have led to greater mar­ket consolidation and control,” Brownlee said. “In 28% of the metropolitan statistical areas across the U.S., a single private-equity firm employs more than 30% of physicians in a given specialty.”

Private equity can bring opportunities, such as ac­cess to capital, enhanced administrative expertise, and economies of scale in purchasing and negotiations. For many physicians, selling a stake in their practice provides financial security, especially amid rising op­erational challenges.

But PE involvement can also create concerns, including increased patient costs and decreased job satisfaction by physicians and staff. Several large PE-backed health systems have declared bankruptcy, which has led to hospital closures.

Brownlee then led a panel discussion of the topic. MSSC member David Norris, MD, spoke about co-founding the Association for Independent Medicine, a national organization that helps physicians remain inde­pendent. He also shared some of his concerns about private equity’s ownership of physician practices.

“The financial issues – once you’re in, how do you get out, how much say do you have – can be real frus­trating,” Norris said. “Private equities are trying to solve a problem that’s there; I just wish we could develop a better solution to the problem, but it takes us banding together.”

MSSC member Hossein Amirani, MD, talked about the strategic thinking behind Cardiovascular Care’s deci­sion to partner with U.S. Heart and Vascular, a PE-backed physician practice management platform. He shared some of the benefits – and challenges – his group has seen from the partnership.

“Running a practice is not easy,” Amirani said. “We are physi­cians and we know how to practice medicine, but when it comes to running a business, it’s a little unfamiliar for most of us. So we chose to move foward and deal with private equity to help us be able to overcome the challenges and headaches. It’s still early, but I can say the practice of medicine has become a little easier for me, although I’ve lost some autonomy.”

The third panelist was Matthew Agnew, a local attorney who specializes in healthcare law and has advised on private-equity transactions. Agnew spoke about how the legal landscape has evolved over re­cent years, how acquisitions are typically structured, and the critical dos and don’ts when negotiating a PE agreement.

“Do your due diligence,” Agnew said. “Private equity doesn’t always increase the quality of life for physicians and patients. Thoughtfulness to your own exit, your existence after the agreement is signed and thoughtfulness to patients – service delivery or restrictions to your pracice – need to be on the table before you sign the document.”