investment – Health Care



As Congress considers efforts to rein them in, private equity firms are buying up more physician practices, according to a new study.

Private equity firms acquired 355 physician practices from 2013 to 2016, a number that jumped each year of the study, according to a research letter published today in JAMA. The number increased from 59 practices in 2013 to 136 practices in 2016.

Case Study

Across-the-Board Impact of an OB-GYN Hospitalist Program

A Denver facility saw across-the-board improvements in patient satisfaction, maternal quality metrics, decreased subsidy and increased service volume, thanks to the rollout of the first OB-GYN hospitalist program in the state.

See how

With approximately 18,000 group medical practices in the U.S., researchers said while private equity acquisitions increased across specialties during the study period, they still constituted a small proportion of practices. Those acquisitions continued in the years beyond those in the study period.

The 355 practices bought up included 1,426 sites and 5,714 physicians.

The majority of acquired practices (43.9%) were in the southern U.S., the study found. Practices acquired by private equity firms had several sites (a mean of four) and many physicians (a mean of 16.3 in each practice) with a mean of 6.2 physicians affiliated with each site.

The study, which identified group practice acquisitions using the Irving Levin Associates Health Care M&A data set that includes information on healthcare mergers and acquisitions, also looked at which specialties private equity firms were most interested in.

The most commonly acquired medical groups from 2013 to 2016:

  • Anesthesiology practices (19.4%)
  • Multispecialty practices (19.4%)
  • Emergency medicine (12.1%)
  • Family practice (11.0%)
  • Dermatology (9.9%)

From 2015 to 2016 there was an increase in the number of acquired cardiology, ophthalmology, radiology, and obstetrics/gynecology practices, according to the research letter.

Industry reports suggest further growth in acquisitions in 2017 and 2018, particularly in ophthalmology, dermatology, urology, orthopedics, and gastroenterology.

Within the acquired practices, anesthesiologists represented 33.1% of all physicians; emergency medicine specialists, 15.8%; family practitioners, 9%; and dermatologists, 5.8%.

That profile of practices with several sites and many doctors matches “private equity firms’ typical investment strategy of acquiring ‘platform’ practices with large community footprints and then growing value by recruiting additional physicians, acquiring smaller groups and expanding market reach,” said the study authors Jane M. Zhu, M.D., of the division of general internal medicine and geriatrics at the Oregon Health & Science University in Portland; Lynn M. Hua, of the department of health care management at the Wharton School of the University of Pennsylvania, in Philadelphia; and Daniel Polsky, Ph.D., of the Carey Business School at Johns Hopkins University in Baltimore.

They noted that more research is needed to understand the effect of the acquisitions to mitigate unintended consequences.

“Private equity firms expect greater than 20% annual returns and these financial incentives may conflict with the need for longer-term investments in practice stability, physician recruitment, quality, and safety,” wrote the researchers.

Ownership by private equity firms may create additional pressures to increase revenue streams (such as elective procedures and ancillary services), direct more referrals internally, and rely on lower-cost clinicians, the authors said.

A limitation of the study is that its data is based on publicly announced transitions and therefore may underestimate the total number of acquisitions, particularly of smaller practices, they said.

Executives are bullish on the potential of artificial intelligence to improve healthcare. But they say adoption is not happening quickly enough due to a lack of workforce training, high costs, and privacy risks, according to a survey by audit, tax, and advisory services firm KPMG.

KPMG’s survey of healthcare leaders was part of a larger study of how executives across five industries view the future of AI in their sectors, and the steps they are taking to maximize its benefits and mitigate its challenges.

“The pace with which hospital systems have adopted AI and automation programs has dramatically increased since 2017. Virtually all major healthcare providers are moving ahead with pilots or programs in these areas. The medical literature is showing support of AI’s power as a tool to help clinicians,” Melissa Edwards, managing director, digital enablement, KPMG, said in the report.

Case Study

Across-the-Board Impact of an OB-GYN Hospitalist Program

A Denver facility saw across-the-board improvements in patient satisfaction, maternal quality metrics, decreased subsidy and increased service volume, thanks to the rollout of the first OB-GYN hospitalist program in the state.

See how

An overwhelming majority of healthcare respondents (89%) think AI is already creating efficiencies in their systems, and 91% believe it is increasing patient access to care.

Many of the AI-related services and solutions being advanced in healthcare today are largely in the clinical, patient-facing space.

“Basic forms of automation are proving to be the ‘gateway drug’ to advanced forms of AI—such as scanning documents to determine the urgency of a referral. Applying AI to make earlier diagnoses of critical illnesses is a key area,” Edwards said.

  • Nine out of 10 healthcare executives are confident that AI will improve the patient experience with the greatest impacts being found on diagnostics, electronic records management and incorporating robotics into tasks.
  • More than two-thirds of healthcare stakeholders (68%) are confident AI will eventually be effective in diagnosing patient illnesses and conditions, and close to half (47%) believe that diagnostics will have a significant impact soon—within the next two years.
  • Healthcare executives also anticipate gains in process automation, with 40% seeing X-rays and CT scans being handled robotically.

Recent findings indicate that function may be close to reality. Google Health reported that an AI model developed and deployed by its DeepMind subsidiary was more effective in screening patients for breast cancer than human doctors using recent X-rays only, despite having access to patients’ previous records.

But the pace of progress is too slow, according to one-third of executives, citing barriers such as a lack of workforce talent and the high cost of implementing AI tools.

To date, only 44% of healthcare insiders say their employees are prepared for AI adoption, which is substantially lower than some of the other industries surveyed. Less than half of healthcare organizations (47%) offer AI training courses to employees.

Just 67% of healthcare insiders say their employees support AI adoption, the lowest ranking of any industry, according to KPMG.

Many healthcare institutions lack a breadth of individuals who “speak” the language of AI, Edwards said.

“Comprehending the full range of AI technology, and how best to apply it in a healthcare setting, is a learned skill that grows out of pilots and tests. Building an AI-ready workforce requires a wholesale change in the approach to training and how to acquire talent. Having people who understand how AI can solve big, complex problems is critical,” she said.

Health systems have already made significant capital investments to meet electronic health records (EHR) requirements. To get AI off the ground requires even more of an investment, and, as a result, some health systems are slower to allocate full funding for AI.

More than half of executives (54%) believe that AI to date has actually increased rather than decreased the overall cost of healthcare. Decision-makers are struggling to determine where to place their AI best bets.

“The question is, ‘Where do I put my AI efforts to get the greatest gain for the business?’ Trying to assess what ROI will look like is a very relevant point as they embark on their AI journey,” Edwards said.

Healthcare executives also are concerned that AI could threaten the security and privacy of patient data. Relatedly, 86% say their organizations are taking care to protect patient privacy as it implements AI.