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
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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.
Summation
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.
Private Equity Is Ruining American Healthcare | MedPage Today
Physician practice deals see ‘staggering’ spending uptick in Q2 (modernhealthcare.com)