During the past few years, private equity firms have dramatically increased their acquisition of physician practices, according to a research and opinion brief published in the Annals of Internal Medicine.
Five things to know from the analysis, written by researchers with the Weill Cornell Medicine/NewYork-Presbyterian Hospital in New York City:
1. For the analysis, the researchers reviewed previous literature on the topics and interviewed 21 leaders of private equity firms, physician practices and health insurers, as well as consultants, attorneys and investment bankers.
2. In 2017, 102 physician practices were acquired by private equity firms, according to a database offered by Irving Levin Associates cited in the analysis. Interviewees told the Weill Cornell Medicine/NewYork-Presbyterian Hospital researchers that more private equity firms have been buying physician practices in recent years, and some deals are not represented in the database because they involved smaller practices.
3. Interviewees added that a move toward value-based purchasing has piqued physicians' interest in selling their practices. This is true of smaller practices that are struggling to adhere to value-based purchasing program requirements paired with general uncertainty within the healthcare policy landscape, the interviewees said.
4. It's also true of large, independent practices that are challenged with finding the capital needed to reach greater size and negotiating scale. In addition, independent physician practices are finding it increasingly difficult to recruit physicians as providers head to practices owned by hospitals, insurers and private equity firms, according to the analysis.
5. "Private equity interest in practice acquisitions is increasing, and EBITDA multiples are reaching levels that many interviewees described as excessive, raising the questions of whether this trend is sustainable and who the ultimate buyers will be. Most private equity sales to date are to other private equity firms, but if the ability to sell at higher multiples declines, the ultimate buyers could be hospitals and health insurers. In any case, for better or worse, acquired practices surrender control of their destiny," the researchers concluded.
For the full research and opinion brief, click here.