Corporations and private equity are taking an interest in healthcare — for better or worse.
Three physicians joined Becker's to discuss the potential ramifications of corporate ownership in the healthcare industry.
Note: Responses have been lightly edited for length and clarity.
Question: Are you worried about corporate ownership and/or private equity interest in the healthcare industry? Why or why not?
Anthony Aquilina, DO. Executive Vice President and Chief Physician Executive at WellSpan Health (York, Pa.): As a clinical leader and physician, I do have concerns about the effect of private equity on the commitment of healthcare providers to underserved and underinsured populations. Private equity ownership of delivery systems, especially physician practices, risk being driven by corporate financial returns as opposed to the community health mission that should be the core of all healthcare delivery. Shunning unprofitable business with the intent that community owned not-for-profits will pick up the slack is bad national health policy and will lead to a greater disparity between patients who are the haves and the have-nots of profitable insurance coverage. While about half of all American hospitals are non-government, not-for-profit systems, the much smaller number of for-profit hospitals are regulated tightly for quality, safety and access to care. That level of oversight does not exist in the physician practice segment, especially in the ambulatory setting. The result will be forcing "undesirable" patients to the emergency room for care. That is bad for quality and horrible for affordability.
Jay Grider, DO, PhD. Chief Quality Officer at UKHealthCare and CEO at Kentucky Medical Services Foundation (Lexington, Ky.): Yes, I am very concerned. While I certainly agree that innovation and disruption are sorely needed, in our current marketplace there are perverse incentives, which may not always work for the common good or to the advantage of the most vulnerable citizens. With regard to private equity, I see two issues that continue to emerge. First, as healthcare in the U.S. becomes more complex due to increasing age and biopsychosocial issues, the less complex issues — which can be seen efficiently and lend themselves to solution-shop processes — are siphoned off. This siphoning often leaves the less well-reimbursed services for the most complex patients without innovation or disruption. Second, I have witnessed several physician enterprises in the region that have misgivings about the balance between promise and delivery on the part of private equity. Since the main goal of most private equity is to increase EBITDA in the short or intermediate term, the only recourse is either stringent expense management, which means that practices that were running lean when in the providers ownership can experience further staffing reductions, or increased throughput — through a system that many providers feel was already running at or above 85% to 95% capacity. Occasionally, I hear of private equity that involves clinicians with a long term "win-win" view, but this is the exception rather than the rule, since intermediate term "flipping" of the assets is often the goal. Corporate ownership has multiple different issues and different meanings all of which can have pros and cons, but continued consolidation of physician assets by corporate healthcare at least typically has some degree of responsiveness to a local constituency in contrast to private equity where both the physician and patient often lose their ability to impact the operation.
Anthony Muni, MD. Chief Medical Officer, System Utilization Management and Clinical Documentation Integrity at University Hospitals (Cleveland): Undoubtedly, the U.S. healthcare system is dysfunctional, so I am somewhat intrigued by the innovation that private equity and corporate ownership can bring. Something or someone needs to shake up the industry. Concerns about consolidation, access, cost cutting and quality will need to be disproven, however.