Theodosia Stavroulaki reviews how the involvement of private equity in American healthcare leads to, among other negative outcomes, burnout and stress among healthcare workers, particularly physicians. She writes that the consequences could cripple America’s healthcare system.
This article is part of a series that explores how private equity reduces competition in the United States healthcare sector and the ways in which enforcers can respond. You can read the rest of the series as it is published here.
Private equity has taken over American healthcare, with devastating outcomes for workers in the healthcare industry. The COVID-19 pandemic spurred private equity’s involvement in the U.S. healthcare industry due to the sudden decline in clinical revenue as patients were told to cancel elective care and put off checkups and treatment, which undermined the ability of medical practices to stay afloat and generate profits. By 2022, 4.5% of physicians were employed by a private equity-owned medical practice. And by 2023, private equity firms controlled more than half of the market supply for certain specialty physician services, most prominently anesthesiology, dermatology, and emergency medicine.
The overwhelming involvement of private equity in healthcare has sparked heated debate. Proponents allege that private equity’s penetration into the U.S. healthcare system helps medical practices cut their costs and improve the efficiency of their services. By incentivizing medical practices to eliminate waste, reduce variability and attain standardization of medical care, private equity allows medical practices to expand, innovate and adopt new models of healthcare delivery. Improving efficiency, the argument goes, can help the U.S. healthcare system limit unnecessary care. Given that the U.S. spends two and half times more per person on healthcare than any other wealthy nation, improved efficiency could not be timelier.
On the other hand, critics of private equity’s takeover of medical practices tell a different story. Specifically, they illustrate that acquisitions by private equity firms are associated with nurses and physicians experiencing higher levels of burnout and job dissatisfaction as their primary responsibility shifts from healing patients to boosting shareholders’ financial returns on investment. Not surprisingly, providers are leaving their profession at escalating rates, exacerbating the severe shortage of nurses and physicians that plagues the U.S., especially in underserved areas. The consequence for patients is thatquality suffers, as the poorer treatment of workers and patients and cost-cutting measures lead to higher infection rates and increased death rates for patients in hospitals and nursing homes.
A survey assessing physicians’ views toward private equity’s continuous investment in the healthcare sector sheds some light on those concerns. Over 60% of participants expressed negative views of private equity’s involvement in healthcare. Compared to physicians working for practices uninvolved with private equity, physicians employed by private equity were less likely to report high levels of autonomy and job satisfaction and less likely to remain with their employer. In their view, private equity’s appetite for profits in healthcare compromises health equity, increases healthcare spending and harms physicians’ well-being. Another survey assessing the views of early career radiologists about the private-equity takeover of their specialty pointed to similar conclusions. The participants expressed concern that the trend toward corporatization of radiology practices through private equity leads to lower wages and a heavier workload, especially for early career radiologists. The physicians also expressed worry that private equity’s focus on short-term profits rather than patient care disregards community needs and undermines patient care.
The risks are real. Indeed, following acquisition by private equity, providers feel pressure to offer more elective surgeries, increase the volume of ancillary services, and engage in upcharging. What’s more, when physician practices are acquired by private equity, they are incentivized to offer care to commercially insured patients and to exclude government-insured patients, thus harming health equity and reducing access to care. Following acquisition by private equity, medical practices are also encouraged to prioritize patients who are easier to treat over high-risk patients with complex healthcare needs. Some go even further and encourage practices to open new offices in high-income neighborhoods where healthier, wealthier patients live, rather than in socially disadvantaged neighborhoods where vulnerable populations and less healthy people live. Ultimately, private equity dumps poorer and sicker patients onto the remaining, non-private equity-controlled practices and selectively serves healthier and wealthier populations. This can put further financial pressure on non-private equity practices and make them ripe for eventual takeover on terms favorable to the acquiring private equity firms. In this way, private equity can cause a vicious cycle toward a higher-cost, lower-quality, less equitable U.S. healthcare system, albeit with record-breaking profits for private equity’s investors.
If physicians were outspoken about the strategies private equity firms implement in the name of profits but at the expense of population health, the detrimental effects of such strategies might be mitigated. In light of the reputational costs private equity-owned physician practices would incur if their antisocial business strategies were publicized, they might be incentivized to abstain from them. Nonetheless, private equity firms successfully deter their employed physicians from making public how private equity degrades healthcare services. First, they often require physicians to sign non-disclosure agreements that prevent them from speaking to the media without prior approval. Second, they often threaten to fire physicians if they reveal to the public how private equity firms harm healthcare quality and contribute to the rising health disparities nationwide.
As a result of private equity’s involvement, physicians are increasingly suffering from moral injury, a term used by military psychiatrists to describe the psychological wounds soldiers carry when they have to commit acts such as killing civilians. Physicians experience a similar moral injury, often contributing to higher rates of burnout, when they are forced to balance the pressure of making profits on the backs of vulnerable patients with the sacred obligations and duties of their Hippocratic Oath: first, do no harm.
Due to the higher levels of burnout physicians experience following acquisition by private equity, more and more physicians may be tempted to seek early retirement or leave the medical profession entirely. For others, working for private equity-owned practices that prioritize profits over patients may be a barrier to entering the medical profession in the first place. This is concerning given that the U.S. is anticipated to face a physician shortage of 86,000 by 2036. The problem is particularly acute in rural communities, which are often poorer than their urban counterparts, exacerbating private equity’s extant contributions to healthcare financial disparities. If rural hospitals struggle to recruit an adequate number of physicians, especially specialists, they may have to cut services such as surgeries. This undermines rural hospitals’ financial stability and, ultimately, expedites their closure.
Despite these negative effects, the antitrust enforcers have failed to prevent the harms private equity acquisitions cause to millions of Americans. Since many acquisitions are too small to trigger the M&A thresholds for regulatory review outlined in the Hart-Scott-Rodino Antitrust Improvements Act, they often escape the attention of antitrust enforcers. In addition, over the past decade, the antitrust enforcers have not thoroughly assessed how acquisitions in the healthcare sector affect the working conditions of healthcare professionals. In this way, they have contributed to the wounds these deals cause to the American healthcare workforce and the harm they pose to the most vulnerable people’s health.
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Articles represent the opinions of their writers, not necessarily those of the University of Chicago, the Booth School of Business, or its faculty.
