Private Equity Now Buying Up Primary Care Practices

Yves here. The original title to this post, Little Good can Come from Private Equity in the Healthcare Industry, did the piece a disservice by making it sound as if it were behind state of play. Private equity has been making acquisitions in health care for a long time, including hospital chains (which they found on the whole not so attractive because state regulations), ambulances, hospital staffing, and specialist practices. Eileen Appelbaum has written extensively on this topic and was even called in to testify to Congress about how private equity has been the big driver in the increase in “surprise billing”.

The new and sobering news in this post is that private equity is now hoovering up primary care practices, planning to wring more profit from them via pricing games with Medicare Advantage plans. Don’t get me started on Medicare Advantage….

The continuing deterioration of health care in the US, due to it becoming ever less about health or care, is the big reason I keep telling myself I have to become an expat.

By run75441. Originally published at Angry Bear

As if we did not have enough issues with the commercial healthcare insurance industry attempting to supplant single payer Medicare (minus setting hospital budgets, doctor fees, and pharmaceutical costs to the consumer) and the VA with commercial healthcare insurance and/or Medicare Advantage and ACOs? Commercial Healthcare Insurance and Medicare Advantage are “not” the equivalent of Medicare or the VA healthcare models.

Some advocates are actively promoting the replacement of Medicare with commercial Medicare Advantage which does not bode well for the healthy, the elderly, and also those with pre-existing conditions. In the end, it will be more costly healthcare to the nation and individuals. Fix the healthcare issues and move onward with single payer to cut costs.

But . . . the latest threat to healthcare are private equity companies entering the market and buying up medical practices.

What Does This Mean?

When the PPACA was passed, within the new healthcare law was a concept called the Accountable Care Organization or ACO as they are mostly know as. The organizational concept were created with good intentions and meant to provide better care patients more efficiently and less costly. Even before the PPACA came into being many hospitals were increasing their prices as I wrote here, here, and here.

With the consolidation of healthcare under the ACO concept has come a greater concentration of care as ACOs have bought up other hospitals (and closed some), clinics, specialist groups, and well as testing facilities. The HHI (measures competition) has increased to an ~5000 in areas of the countries and the cost of healthcare has increased as a result.

What Is Happening Today

Both MedPage Today and Modern Healthcare are sounding the alarm on a new threat to healthcare due to multiple acquisitions taking place in 2021.

ModernHealthcare: “Physician practice acquisitions see ‘staggering’ spending uptick in Q2”

Compared to 2nd quarter 2020, investors spent 10 times as much time buying-up physician practices  . . .

From Modern Healthcare, Solic Capital Management tallied a total transaction value of $126.1 billion in the three months ended June 30, 2021. It characterized the 2021 venture investments as a “staggering” increase over the $12.9 billion during the same period in 2020. Huge deals in the long-term care, hospital, and e-health sectors drove up spending in the recently ended quarter.

Solic Capital Management; ‘It seems investors are trying to make up for lost time,

Today’s healthcare investors are mostly private equity firms and especially those doing roll-ups of their existing portfolio companies -and special purpose acquisition companies. That’s a shift from five years ago, when buyers were mostly health systems.

The hottest area for investment as of late is primary care. This is a surprising find given private equity tends to favor specialties with higher reimbursement. Specialties such as dermatology, ophthalmology and orthopedics. Primary-care tends to have higher proportions of Medicare and Medicaid patients while specialties draw more commercially insured clientele.

Involvement in Primary-Care opens the door to supplying medical services through Medicare Advantage plans which are more open to pricing than traditional Medicare.

What makes Primary-Care so attractive right now is the “aging Baby Boomer” generation and the continued expansion of Medicare Advantage.’”

Senior Managing Solic Director Greg Hagood: Insurance companies are particularly aggressive about building out primary care acquisitions to increase their patient influence on the front end and control costs in their own Medicare Advantage plans. For private equity investors, it’s more about having more leverage in negotiations with insurers if they control some doctors in the area.

MedPage Today has a similar article giving some history on healthcare insurance and also a findings as detailed in a white paper.

MedPage Today: “Private Equity Is Ruining American Healthcare”

For-profit insurance companies have long been regarded as the ultimate offenders in medical -profiteering. However they distract from the goal of providing healthcare, it is the unscrupulous involvement of private equity (PE) in medicine, a similarly culpable and even more insidious economic titan.

In May 2021, an American Antitrust Institute white paper found private equity investment accelerates consolidation and “is fundamentally incompatible with a stable, competitive healthcare system serving patients and promoting the well-being of the population.”

The rise of private equity in medicine has resulted in a proxy war against insurance companies exclusively for the benefit of clandestine shareholders and investment fund managers rather than patients or clinicians.

More recently, and as I have also written about, was the surprise billing by out of network ER doctors. The advent of the ACA increased the numbers of insured people. Even with acquiring healthcare insurance, approximately 20% of people still have problems paying medical bills largely because healthcare pricing is rising faster than their income.

Rising costs have been increasing by out of network billing by some medical practices contracting to hospitals and utilizing in-network facilities such as hospital Emergency Departments. In some cases, the practice has been encouraged by hospitals to lower their budgets.

When Congress was considering bills to eliminate or minimize surprise or out of network billing, two private equity back firms backed opposition to these bills by lobbying Congress indirectly.

MedPage Today: “In 2019 the New York Times exposed the financial backers of Doctor Patient Unity, a secretive organization that created a $28 million ad campaign demonizing insurance companies for “surprise bills” and opposing legislation to eliminate out-of-network bills. Those backers were revealed to be two of the largest Private Equity backed emergency medicine staffing firms — contract management groups (CMGs) Envision and TeamHealth, which are owned by PE firms KKR and Blackstone, respectively.”

And we still find people willing to back commercial healthcare insurance companies in the take over of Medicare with Medicare Advantage and the VA with commercial healthcare even though they may lack the capabilities to treat veterans. Both entities have proving good care and sound records of controlling costs and slowing the increase of the same. Medicare Advantage overbilling Medicare to the tune of $30 billion to date by listing more disorders for patients.

For private insurance companies, the ACA allows them to markup the costs of providing healthcare 15% for group healthcare and 20% for individuals. Insurance did not keep the old markup cost when hospitals increased prices 42% from 2007 – 2014. Insurance took the 15 and 20% markup on the new prices regardless of any cost increase incurred by them. To be blunt if there was not a cost increase on their providing insurance, there should be no increase. They made the situation worse for the people they were insuring by increasing costs.

The business model for Private Equity and the history of it is not pretty. It is stilted towards the investors and is pointedly aggressive with the people of the acquired firm. As MedPage Today points out, PE is a unique and unregulated investment platform with the objective of aggressively generating short-term revenue for the firm and its investors without regard for long-term value to society, including public health much less the people of the organization.

PE firms typically operate on a 3 to 7-year cycle for the acquired company by an investment manager with funds from “limited partners” who can be institutional investors also. The company can be acquired in a leveraged buyout from which the resulting transaction saddles the company with high-interest debt needing to be paid back. The company bears the full risk of failure to become more profitable. A typical and ruthless tactic to insure profits is cost-cutting and personnel layoffs which cuts into the capabilities of the company.

In any case and regardless of outcome, the PE firm and manager become significantly wealthier due to exorbitant fees on such as assets under management.

IA recent American Antitrust Institute white paper details PE investment activities accelerating consolidation. The concept “is fundamentally incompatible with a stable, competitive healthcare system that serves patients and promotes the well-being of the population.” This adds to the consolidation of major ACOs buying up other hospitals, clinics and other services throughout the nation

The rise of PE in medicine has resulted in a war between insurance companies and PE investors for the benefit of clandestine shareholders and investment fund managers rather than the benefit of patients or clinicians. This is a radical change.


It was commercial insurance being the villain in providing limited healthcare through denied coverage, minimal coverage, high insurance costs competing with Medicare and Medicaid in the past. The PPACA provided a government plan forcing insurance companies to cover more people.

The PPACA also gave power to regional hospitals in an effort to make it capable of being more efficient in providing healthcare and controlling costs through size. Instead the country has experienced a decrease in competition in those regions and higher costs due to monopolistic control of providing all types of healthcare bought up by hospitals.

Medicare Advantage is another form of commercial healthcare insurance with all the similar costs and inefficiencies. It has been overcharging Medicare for its services and the model promotes the over diagnosis of the patients using it to allow for more costs. By itself, MA plans could not compete with Medicare providing the same service.

Private Equity entering the healthcare market is there for only one reason to maximize profit from buying up services provided to those on Medicare Advantage and Commercial Healthcare.

Go back to “Goal” of providing healthcare efficiently and less costly as talked about by such Single Payer advocates as Kip Sullivan.

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  1. Chris Herbert

    So we still cling to that ‘competitive’ thingy? The real problem is that this industry should be nationalized. Socialism has its issues, but sucking every dollar from the customers is not one of them.

    1. Timothy Dutra MD PhD

      Thank you, Chris. Healthcare should be a right, not a privilege. Medicare for all! I am so disillusioned with my fellow countrymen and countrywomen, that they acquiesce to our abominable system of privatized healthcare economics. It isn’t entirely their fault because our corrupt Congressmen and Congresswomen are in the pocket of the American oligarchs. Unfortunately, I can’t see things changing, because Emma Goldman was right: “If voting changed anything, they’d make it illegal.” That said, keep up the good fight!

  2. WhoaMolly

    Yves wrote:
    “The continuing deterioration of health care in the US, due to it becoming ever less about health or care, is the big reason I keep telling myself I have to become an expat.”

    If becoming an expat is realistic, then you are absolutely right. The health care system in the US has become a criminal venture. One of the defining characteristics of aging is sudden changes in health. The US has become a very bad place to get old or sick.

  3. Jeremy Grimm

    I wonder how young doctors feel about their choice of career. I doubt they entered medicine and assumed the large debts to pay for med-school so they could work as employees of firms run by private equity or Corporate managers. I expect it might take some of the profession out of being a medical doctor.

    1. IM Doc

      I expect it might take some of the profession out of being a medical doctor.

      It has taken it right out.

      I was in the big city for decades – in a large academic center. About 7 years ago or so – the faculty practices were consolidated into a large “non-profit” run by MBAs. Within a year – I realized I was in a company that may as well be run by vultures. That is literally what they are. The stated goals of the MBA profession are a direct 180 from the MD profession. The fact that these vultures are in charge of everything in a system where the “consumers” or patients are at their most vulnerable is a crime of the ages. My immediate elders when I was a young doctor that are all gone now would have scarcely recognized the current raping mantra employed by these companies. What has allowed this to happen? The pencil necked assholes in the Ivory Towers in Boston and NYC and DC who are MDs who never see a patient but tell everyone how to do it – and then it was hugely made worse by Obamacare.

      I cannot stress upon everyone enough – if you have a choice – do not go to any physician that is affiliated with any kind of non-profit. They are often worse than the profit corporations, at least they have some accountability. And I know there are huge swaths of America that have no choice.

      My wife was putting constant pressure on me – she was the first to realize that my job was literally killing me. We left the big city – and are now in a very small town in a very remote part of the country. The hospital is run by a board elected by the taxpayers – COMPLETE accountability to the community – and I feel like I have taken a step back in the past when I was young. It has been an incredible change in so many ways. Is it perfect? – NOPE – what in life is? But I can certainly live and thrive here – and not feel I am going to burn in Hell one day.

      The elite have completely destroyed the profession of medicine – and have completely dismantled our public health system. Both were once the envy of the world. I hope and pray that we can all see in the past 18 months how vulnerable these losses have made the whole population to the predation of the elites.

      I see no solution until we hit the brick wall.

      1. Michael

        Morning Doc,
        Thanks for all of your thoughtful and caring posts.
        Do you include Kaiser in the non profit world? 12M members.
        Family and friends, my 65+ wife and I included, have used for decades.
        Complaints sure but avoid?

      2. Glen

        Well, you are not alone. I work for an aerospace company, and it’s happened here too.

        American CEOs and management have been trained in how to maximize their income, not the company’s income, not the product, not the future of their industry or it’s core profession or it’s core competency. It is all about what you can do for them for the next quarter to maximize their personal income, period.

        They have morphed this company into a place where engineers get ahead by figuring out what upper management wants to hear and saying it. Engineers that tell them the truth get kicked out of the meetings. So we’ve created a system that rewards sociopathic engineers. It sucks.

      3. Alex Cox

        Doc I very much appreciate your posts, but must take issue with the idea that US medicine was ever the ‘envy of the world.’ All the places I’ve lived – including Nicaragua – had better health care systems than the US, and everybody knew it. Attempts by New Labour and the Tories to introduce ‘competition’ and ‘patient choice’ are unpopular because the British used to enjoy a not for profit medical system and are watching it being Americanized.

      4. Geo

        “The stated goals of the MBA profession are a direct 180 from the MD profession.”

        Doctors: “Do no harm.”

        MBA: “Pillage and burn!!!”

      5. Felix_47

        Similar history here. Except I decided to just leave the country and practice elsewhere under a national health care system. Yes, it is way underfunded in comparison to the US but the care is substantially better. The PR flacks of the Health Industrail Complex tell us that if we have a system like England’s that people will have to wait a few years for a total knee or total hip. Well…thta is a non issue. Why? Because in the US up to 1/3 of patients are not satisfied with their total knees. In England, because they have suffered with real pain for a year or so, the success rate is much higher. Same with total hips. And the complication rates both short and long term are lower because surgeons can select the best candidates. In the US if you don’t operate the next guy will even if surgery really should not be done. The US, because of its surplus of doctors attracted from all over the world by the pay, the only way to make it work is to copy England and if one wants to improve it provide better funding. All doctors should be on salary with no bonus for production or patient satisfaction (some of hte most popular surgeons I know are criminals and operate on everything which pleases the patients but misses the point on medical care.) The placebo effect is huge. I think in the US we spend 10,000 per capital on health care and in England it is something like 2 or 3000. But we are told to vote blue no matter who and the people who hold the blue power are lawyers, doctors, finance and insurance. It says something when a nation cannot bring about national health care in the midst of a pandemic.

      6. Objective Ace

        >do not go to any physician that is affiliated with any kind of non-profit.

        Any way to know ahead of time? Is it as simple as calling and asking before scheduling an appointment?

  4. Mikel

    If you think there was lack of preparedness for this pandemic, heaven help us with the next one.

    1. Expat2Uruguay

      This pandemic isn’t over. It IS next pandemic.

      People considering the expat life may want to consider Uruguay as it is safe, easy to immigrate to, and has a stable well-functioning democracy with a good climate and few natural disasters.

    1. Jeff N

      Even if we can find somewhere good, it would then get overrun with other expats with the same idea.

    2. Yves Smith Post author

      There are actually a lot of places that take Americans on retirement visas and most Social Security payouts will do. But they aren’t Canada or France.

      That isn’t the hard part. The hard part is:

      1. If you want to keep working, even if what you do does not compete with the locals. Most countries are hostile to that.

      2. Taxes! Two country returns are a nightmare and costly

      3. Financial compliance. Even if you are not well off, your bank in foreign country has to report to the Treasury. A lot of banks won’t take expat accounts.

      4. Picking a country and a place within the country . You have to be really sure. Moving and coming back if you got it wrong are also costly. 50% of the expats to Ecuador, a popular destination, come back to the US in <5 years.

  5. gloehr

    Please elaborate on Medicare Advantage. Next year I qualify for Medicare and need to know which one to buy.

    1. Shonde

      Put Medicare advantage into the search box above and you will find lots of material to help you.

    2. Yves Smith Post author

      Medicare Advantage just cost my mother $30,000 because the only good rehab facility in her area didn’t take her plan. This was for services that Original Medicare covers 100%, going to a skilled nursing facility after a >3 day hospital stay.

      Most skilled nursing facilities are warehouses. If she had gone to one of them, her next stop would have been either a nursing home or being at home in bed all the time, in diapers, with the aides struggling to keep her from getting bedsores.

      Instead she got a new lease on life. She’s doing transfers out of the wheelchair better than before she was sick, can stand in a walker for 5 minutes, and is even taking a few steps.

      Thank goodness she had the money…it would have been catastrophic if she didn’t.

      Medicare Advantage sticks you in a network. But they are marketed like crazy on TV (gee, at patient expense) and make for easier shopping than original Medicare, where you wind up picking multiple plans.

  6. Bart Hansen

    Thanks, I wasn’t aware of PE’s health care mischief. Here in rural Virginia we have what I call a HHC, a hospital holding company by the name of Sentara. Sentara has gone about the state plus parts of North Carolina buying up hospitals, local clinics and urgent care offices. What benefit this extra layer of management adds is beyond me, other than out and out rent seeking.

  7. tiebie66

    I do not understand this: buy up primary care practices and run them into the ground over 3 to 7 years? Then what? Or do they see things coming that we don’t? Large numbers of chronically ill people with long Covid-19? Other Covid-19 related pressures coming that would mainly impact primary care facilities and so offer profit opportunities?

    1. JBird4049

      They are doing a Mafia style Bust-out or an “investor” pillage and burn, where the object is to extract as much wealth in selling or stealing everything of value, including the pensions, with no concern or care beyond that, and the next few months, quarters, or just maybe, years. Just look at Sears, Toys R Us and many other chains.

      “IBGYBG” or “I’ll Be Gone, You’ll Be Gone.”

    2. run75441


      It is already here.

      “Medicare Advantage is another form of commercial healthcare insurance with all the similar costs and inefficiencies. It has been ‘overcharging Medicare for its services and the model promotes the over diagnosis of the patients using it to allow for more costs.” By itself, MA plans could not compete with Medicare providing the same service.”

      If you need a monthly infusion of Rituxan, the list cost is ~$30,000. Medicare pays ~$7,000 for the infusion of the drug and the Rituxan. Commercial healthcare pays ~twice that cost. Medicare and Medicare Advantage pay by diagnosis. Medicare has set prices and Advantage has higher prices.

      There is still money in Medicare and many of the people on MA and traditional Medicare have more serious ailments than younger insured people

  8. nothing but the truth

    hey, the post modern economics wants the fed to keep rates at zero (or lower) forever and buy up all the treasuries.

    be careful what you wish for.

    when interest costs are driven to zero, financiers will buy out everyone.

    my mom and pop businesses (a pain in the butt), have been getting offers from PE firms. This is how bad it has gotten.

    1. Yves Smith Post author

      Private equity was already aggressively consolidating before super low interest rates.

      The big driver is desperate underfunded public pension plans, who are the biggest investors in PE. There is also reason to believe that corruption is a big factor, as in PE firms can do stuff like require execs in their portfolio companies to donate to preferred pols, in addition their top brass being huge contributors in their own right.

      If this was just about cheap money, you’d see a similar explosion in other “alternative” strategies. While desperate investors are throwing more money at them, PE is running way way ahead.

    2. Charlie

      The natural Fed Funds rate is 0%. It’s only higher because a) the Treasury chooses to issue bonds (completely voluntary) b) the Fed pays interest on excess reserves and c) the Fed conducts open market operations (selling Treasurys).

      1. saywhat?

        The natural Fed Funds rate is 0%. Charlie

        Only if you think it’s natural that ONLY private depository institutions, aka “the banks”, may use fiat in account form and their other government privileges (eg. government-provided deposit guarantees) that suppress the DEMAND for the Nation’s fiat in favor of private bank deposits.

        Not that low interest rates would not otherwise be a blessing but currently they are a curse along with all other privileges for the private-credit-for-usury cartel, aka “the banks.”

        What a world where government privileges for usurers is considered “natural”! Dante assigned bankers to the lower regions of Hell but currently their privileges are considered indispensable!

  9. Susan the other

    One obvious solution to this corrupt medical monopoly for profiteers is to open up the US to Cuba and India and other foreign doctors. Please come here and form a consortium that counters the rampant medical profiteering we are suffering. We are suffering it and the government refuses to do anything to interfere in the “free” market – so clearly we need more “free” market…. we need an infusion of foreign doctors and pharmaceutical companies as soon as we can process them. Yesterday. The only catch will be if they become as corrupt and colluded and intermingled as the current “American” system they will be forthwith deported. Too bad we can’t deport the current batch.

    1. Noone from Nowheresville

      Why should Americans, who can’t contain their government or their government created / maintained elites, get to take ever more resources,especially medical resources, from the rest of the world? I suspect America could be mostly self-sufficient if she choose to be without the need for the global elites to trade with one another.

    2. Ezra Kaufman

      If the long term interest rate expresses the covenant between the generations, between the present and the future, then its long-term depression is today selling out tomorrow. Risk-free return on money is non-existent. Savers have become chumps.

      Infrastructure was purchased with taxes, user fees, and risk-free borrowed money. Hopefully the money was borrowed at an interest rate reflecting the useful life of the infrastructure it purchased

      1. saywhat?

        Risk-free return on money is non-existent. Ezra Kaufman

        The alternative is welfare proportional to account balance, not according to need.

        If you want a return then take a risk and invest the money. Otherwise, be content with savings that receive nothing for doing nothing.

        And if your investments fail, that’s where a generous retirement safety net should come in.

    3. Lupana

      Maybe there’s something I’m missing but I don’t see how where a doctor was born or immigrates from is the issue. I believe it’s the medical system which any doctor would be working under no matter where they’re from. We need to make it easier and more affordable for doctors to set up their own practices much like it used to be.

  10. Sound of the Suburbs

    Capitalism isn’t looking too clever at the moment.
    Anyone know what’s gone wrong?

    Capitalism isn’t the problem.
    The fact we don’t know how it works is.

    The classical economists identified the constructive “earned” income and the parasitic “unearned” income.
    Most of the people at the top lived off the parasitic “unearned” income and they now had a big problem.
    This problem was solved with neoclassical economics.

    Hiding rentier activity in the economy does have some surprising consequences.

    We got Ricardo’s Law of Comparative Advantage.
    What went missing?
    Ricardo was part of the new capitalist class, and the old landowning class were a huge problem with their rents that had to be paid both directly and through wages.
    “The interest of the landlords is always opposed to the interest of every other class in the community” Ricardo 1815 / Classical Economist
    What does our man on free trade, Ricardo, mean?

    Disposable income = wages – (taxes + the cost of living)
    Employees get their money from wages and the employers pay the cost of living through wages, reducing profit.
    Employees get less disposable income after the landlords rent has gone.
    Employers have to cover the landlord’s rents in wages reducing profit.
    Ricardo is just talking about housing costs, employees all rented in those days.
    Low housing costs work best for employers and employees.

    Who pays?
    It’s the right question, but we keep getting the wrong answer with neoclassical economics.
    Employees get their money from wages and it is employers that are paying, via wages, reducing profit.

    Everyone pays their own way.
    Employees get their money from wages.
    The employer pays the way for all their employees, via wages, reducing profit.
    No wonder all our firms are off-shoring.

    Capitalism actually works best with a low cost of living, but no one can see that with neoclassical economics.
    You really want low housing and healthcare costs.

    1. Sound of the Suburbs

      What was Keynes really doing?
      Creating a low cost, internationally competitive economy.
      Keynes’s ideas were a solution to the problems of neoclassical economics, but we forgot why he did, what he did.

      They tried running an economy on debt in the 1920s.
      The 1920s roared with debt based consumption and speculation until it all tipped over into the debt deflation of the Great Depression. No one realised the problems that were building up in the economy as they used an economics that doesn’t look at private debt, neoclassical economics.

      Keynes looked at the problems of the debt based economy and came up with redistribution through taxation to keep the system running in a sustainable way and he dealt with the inherent inequality capitalism produced.

      The cost of living = housing costs + healthcare costs + student loan costs + food + other costs of living
      Disposable income = wages – (taxes + the cost of living)

      Strong progressive taxation funded a low cost economy with subsidised housing, healthcare, education and other services to give more disposable income on lower wages.
      Employers and employees both win with a low cost of living.

      Keynesian ideas went wrong in the 1970s and everyone had forgotten the problems of neoclassical economics that he originally solved.

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