Episode 39
Who Employs Your Doctor?
What happens when private equity firms buy hospitals and doctor’s offices? In this episode of Humans in Public Health, host Megan Hall sits down with health care economist Yashaswini Singh to unpack how private equity is reshaping the American health care system—often behind the scenes. From rising costs to shifting priorities in patient care, Singh explains why the recent collapse of Steward Health Care is just the tip of the iceberg. Whether you’ve heard the term “private equity” or not, this conversation will change the way you think about your next doctor’s visit.
Transcript
In the past few years, the field of public health has become more visible than ever before, but it's always played a crucial role in our daily lives. Each month, we talk to someone who makes this work possible. Today, Yashaswini Singh.
For this episode, we're taking a look at an industry you've probably been hearing about a lot these days…
*waterfall of news anchors saying “private equity” in various news clips*
[:So to help us understand what's going on, and how private equity might be affecting your health care, we invited Yashaswini Singh into the studio. Yashaswini is a health care economist and professor at the Brown University School of Public Health. Her research looks at what happens when private equity firms buy all sorts of healthcare practices.
[:[00:01:16] Yashaswini Singh: Thank you so much for having me. I'm so excited to be here.
[:[00:01:28] Yashaswini Singh: So private equity firms in general are investors who invest in private companies with profitability as their main emphasis.
Now, the key thing to remember with private equity is they typically are looking to exit their investments in a three to seven time year time period.
A short time horizon. So that's what makes them different from other types of financial investors.
[:[00:02:02] Yashaswini Singh: And recently they've been very attracted to the American health care system, investing in nursing homes, hospitals, physician practices—really every segment where care is delivered.
[:[00:02:20] Yashaswini Singh:So in the early 2000s we saw a lot of private equity investments materialize in long-term care settings like nursing homes and assisted living facilities, and hospitals as well.More recently, since 2015 or so, we've seen the investment focus shift towards physician practices. And since the COVID-19 pandemic, the focus of investments has shifted to specialties where the care is focused more on value-based care and less on doing procedures. So settings like primary care or oncology.
[:[00:03:07] Megan Hall: So are private equity firms basically just really advanced house flippers?
[:[00:03:44] Megan Hall: So extend the analogy for me. When a private equity firm buys a hospital, how is that like a house flipper? Are they adding a new roof to the hospital or what are they doing?
[:[00:03:57] Megan Hall: Yashaswini says she's seen private equity firms use a few different approaches, depending on the situation. Let's say a PE firm buys a physician practice…
[:One, it enables the PE firm to capitalize on something economists call economies of scale, which essentially means, you know, a way of delivering maybe backend functions more efficiently. The billing, the administrative burden and so on.
The second thing it does is because you're consolidating smaller physician practices into one large entity, it can have a significant impact on the local level of market competition, which has direct and significant implications for the cost of care and access to care.
[:[00:05:05] Yashaswini Singh: Hospitals across different cities in the U.S. sit on really valuable real estate. Blocks and blocks of properties in downtown Philadelphia. The most valuable real estate in downtown Boston. That's more often where the hospital is sitting.
[:[00:05:30] Yashaswini Singh: So these are also called real estate leasebacks because the property is then leased back to the hospital or the nursing home that once owned their own real estate, but now have the privilege of paying rent on it, because they're now owned by a private equity firm.
[:[00:05:48] Yashaswini Singh: You know, we're realizing now with the Steward episode that this is really not a great deal for hospitals because when you have hospitals losing their most valuable asset, the real estate that they're sitting on it creates a lot of financial pressures for the hospital to pay off the debt and service interest payments.
[:[00:06:11] Yashaswini Singh: Research has shown that after PE buyouts of hospitals staffing changes, there are reductions in how much hospitals spend on hiring and retaining talented staff. There's also research that shows that the services that hospitals offer, those also tend to change, kind of aligned with the expected profitability of those services. So things that are really lucrative, like imaging services, those go up. And at the same time, things that aren't traditionally considered to be money making, like inpatient psychiatry services, for example, those are paired down again in service of profitability for investors.
[:[00:06:53] Yashaswini Singh: Yeah, so I've done a ton of work that shows when PE firms invest in health care practices, the way that physicians practice medicine changes. So we've seen physicians increase how many patients they see. They're made to see more patients per day. They're also made to do more tests and procedures that oftentimes have unclear benefits for patients, right? It's unclear if they're driving any clinical value to the patients. But they're certainly serving the bottom line of the practice. And then at the same time because of all of these changes to the way the practice may be in operation or the way medicine is practiced, you see a lot of dissatisfaction with the profession of medicine entirely.
[:[00:07:44] Yashaswini Singh: That's right.
A lot of these trends can have very real, very human implications on job satisfaction, work-life balance, whether you see career progression, long-term in medicine and so on. And those are questions that are harder to study systematically.
Some recent work I've done has shown that PE investments of physician practices in particular are followed by physicians quitting the practice and oftentimes moving entire regions in search of alternate employment. So a recent study, I did show that physician turnover increases by about 200% when PE firms buy up a practice.
[:[00:08:28] Yashaswini Singh: That's exactly right. I talk to a lot of physicians for my work, just, you know, to understand what their experience is like and one doctor described it to me as being a professional athlete. They said, you're just being traded from one team to the other and you're being told how to, you know, practice and how to be a professional by people who have no idea.
And you have no say in who you get sold to. You have no say in who you get traded to. And that's just what the practice of medicine has become.
[:[00:08:57] Yashaswini Singh: Absolutely not.
[:[00:09:02] Yashaswini Singh: So there's some early research that shows when PE firms invest in nursing homes and hospitals, patient care really deteriorates in the nursing home setting.
Mortality goes up by about 10% in the hospital setting. There's an increase in infections and falls and worse patient care experiences, based on how patients themselves self-report their care experience. It's a little harder to study in the setting of physician practices because as you can imagine, you know, a lot of the settings where PE firms are investing like ophthalmology practices, for example. Care is pretty standard. It's really difficult to see a complexity after a cataract surgery, for example. And so those settings are not as well studied as hospitals and nursing homes. But overall, the prognosis isn't great.
[:[00:09:54] Yashaswini Singh: The research literature is pretty consistent that when PE firms invest in health care, the cost of care goes up. We often don't see any clear benefits materialized to patients or health care workers.
You know, we might not always see harms, but the fact that the cost of care goes up and quality doesn't change at best, means that the value of care goes down. And so to me, you know, that signals a broader problem in the sustainability of this approach.
[:But who is buying them? Like, who wants that investment when they know that that's the game plan, that you inflate how much something is worth and then it's kind of a disaster. Like who, who wants to make that kind of investment?
[:If we can only understand what the exit game plan is, maybe we can begin to understand PEs incentives. My research has shown that in the physician practice space, PE firms exit investments by selling to other PE firms. So it's restarting the cycle of buying to sell and who the ultimate buyer is of the asset.
Unfortunately, we don't know the answer to that question just yet.
[:[00:11:22] Yashaswini Singh: it certainly doesn't bode well for the overall sort of sustainability of this model because by definition, PE firms need to exit their investments to deliver on their profitability expectations.
So an exit will happen. I think the question is, you know, at what point in time and what form does it take?
[:[00:11:44] Yashaswini Singh: Unfortunately so.
[:[00:12:07] Yashaswini Singh: Yeah, that's a great question and I spend a lot of my time thinking about that question. So there are a handful of policy levers that we have at our disposal here.
[:But, for cases when private equity firms buys up a lot of smaller practices so they have more market power, Yashaswini says government officials should look at enforcing antitrust laws.
[:But increasingly in the last few years, we've seen many, many states take the charge here as well. So we've seen in Massachusetts, for example, the Office of the Attorney General is doing more. Oregon has its own health care markets oversight authority. So I think there's an increasing awareness around states that this is a problem that deserves attention now and waiting around for federal action just isn't gonna cut it.
And then the last thing where I think there's a lot of momentum and a lot of potential is a call for greater transparency. PE firms, and really any type of private investment in health care, there are no systematic reporting or disclosure requirements that enable us to understand who is the ultimate owner or financial investor in a hospital or a doctor's practice, who is employing your doctor.Many times, even doctors don't know who that is.
And so just having better data on ownership structures in healthcare will enable researchers certainly, but also policy makers and regulators to understand how much of this is a problem that needs to be addressed within their sort of local market.
[:[00:14:06] Yashaswini Singh: You know, the United States health care system is one that is based on health care markets.
For better or worse, we have a market-based health care system, and so for health care to really work, which means for us to have certain levels of prices and quality that we desire for us to have access to those outcomes. We need markets to work. And markets in general don't work in health care—we don't have the type or the level of competition we need to support those types of, you know, fair, affordable prices, high quality, high access.
So the average person should care because consolidated markets directly lead to higher prices for health care. They directly lead to poor quality for health care and poor access for health care and health care expenditures increasing directly eats up into our budget for other types of expenditure.
Right? When you spend more on health care, you spend less on housing, you spend less on food, you spend less on education, and so it's a real problem.
[:[00:15:04] Yashaswini Singh: I don't think so. I think we covered a whole range of topics, but I feel good.
Well, not good in terms of the current state of affairs, but
[:[00:15:14] Yashaswini Singh: We covered it.
[:[00:15:17] Yashaswini Singh: It was a great pleasure. Thanks for having me.
[:Humans in Public Health is a monthly podcast brought to you by Brown University School of Public Health. This episode was produced by Nat Hardy and recorded at the podcast studio at CIC Providence.
I'm Megan Hall. Talk to you next month!
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