Who Employs Your Doctor? Increasingly, a Private Equity Firm

Historically, doctors’ practices have been relatively small, and owned by doctors themselves. But that model has been rapidly declining as the business of medicine has become more complex and the insurance companies that negotiate with doctors over prices have become bigger. Nearly 70 percent of all doctors were employed by either a hospital or a corporation in 2021, according to a recent analysis from the Physicians Advocacy Institute.

“We’re seeing a fundamental change in how medicine is being practiced in the U.S.,” said Richard Scheffler, a professor of health economics and public policy at Berkeley and director of the Petris Center.

Hospitals and insurance companies have also bought out many independent physicians’ practices. Optum, an arm of the publicly traded UnitedHealth Group, which also owns one of the nation’s largest insurers, employs roughly 70,000 physicians. Studies have shown that these types of concentrated ownership of doctors in a given market are also associated with higher prices.

Private equity is often viewed by physicians as an attractive alternative to having their practice bought by a hospital. In part, the doctors are “getting more scale and gaining efficiencies,” including help with office administration and technology, said Lisa Walkush, a national managing principal for the professional services firm Grant Thornton. “It can be a really good thing, but the private equity firms have to keep their promises and be held accountable,” she said.

Michael Kroin, the founder and chief executive of Physician Growth Partners, a Chicago firm that advises independent practices, said the private equity firms “provide scale to allow independent practice groups to survive and maintain their autonomy.” If they could, given their rising costs and how squeezed they feel by insurers, “every independent group would want to increase its fees,” he said.

The private equity industry has begun to attract particular scrutiny from researchers and policymakers. Lawmakers in the House are considering legislation to require more reporting when the firms buy health care companies. Currently, the acquisitions can be difficult to track. The authors of the new paper relied on data on deals from a company called PitchBook, which they then matched with doctors in a health care claims database to measure payments from private health insurers.

The researchers couldn’t be sure whether the payment increases they measured happened because doctors were performing more complex procedures or just negotiating higher prices, but they suspected the prices explained most of the effect.