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August 11, 2021

Private Equity and Health Care Delivery: Value-Based Payment as a Guardrail?

Author Affiliations
  • 1Humana Inc, Louisville, Kentucky
  • 2Mass General Brigham, Boston, Massachusetts
  • 3Department of Medical Ethics and Health Policy, Perelman School of Medicine, University of Pennsylvania, Philadelphia
  • 4Corporal Michael J. Crescenz VA Medical Center, Philadelphia, Pennsylvania
JAMA. 2021;326(10):907-908. doi:10.1001/jama.2021.13197

Private equity investments in health care delivery have increased substantially during the past decade, a trend that has raised concern among some researchers and policy makers.1-3 Critics are concerned that the financial incentives inherent in private equity ownership (ie, to substantially increase financial performance during a relatively short period) may lead to decisions and practices that are at odds with the best interests of patients and physicians. These concerns often emanate from high-profile examples of facility acquisition that results in higher negotiated prices and of high rates of surprise billing by private equity–owned physician groups.

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4 Comments for this article
James Marzolf, MD MPH MSc | Whole Health Institute
A very timely and outstanding contribution which dispels a core misperception about capital markets. The inclusion of case studies made it more compelling.
Value-Based Payment Aggravates Disparities in Access to Care
Stephen Kemble, M.D. | U. Of Hawaii John A. Burns School of Medicine
The big problem with shifting insurance risk onto providers of care via capitation and bundled payments is that way too much of the financial risk in health care is predictable due to pre-existing conditions, demographics, and social determinants. There has never been evidence of much unnecessary care in primary care when paid with fee-for-service, so there is not much primary care providers can do to reduce utilization other than to limit primary care visits, which saves nothing under capitated payment arrangements, and may incentivize more referrals to specialists, urgent care, and specialists, and may lead to more hospitalizations. This is the result that the authors of this paper found when HMSA, the dominant insurer in Hawaii, imposed capitation on most primary care practices in Hawaii. On the other hand, it is much easier to achieve high scores on quality metrics and lower cost of care by cherry-picking a patient population and excluding higher risk patients who have complex problems, more social problems, and are poor, aggravating disparities in care. This has been demonstrated in studies on the effects of “value-based payment” on disparities: these payment strategies definitely aggravate disparities in access to care. Participating primary care practices demonstrate improved quality metrics while the total population experiences worsening access to care and increased total cost. And this does not even include accounting the high cost of detailed documentation and data reporting required for risk adjustment (which is pathetically crude and ineffectual) and “quality” metrics that measure less than 5% of actual quality of care.
Private Equity Impact on Nursing Homes
Sara Buscher, JD, MS | Advocate

Few studies focus on outcomes meaningful to patients.

One such study involving nursing homes reports an increase in mortality following private equity investments (1).


1. Atul Gupta, Sabrina T. Howell, Constantine Yannelis & Abhinav Gupta. Does Private Equity Investment in Healthcare Benefit Patients? Evidence from Nursing Homes

Private Equity and Healthcare Delivery
Mark Couch, MD | Private Practice (PriMed Physicians)
Today, independently owned primary care medical groups are left to their own devices to find resources to continue innovation. CMS Innovations (CPC-plus) has assisted many primary care groups to understand how to change through its measures and milestones while engaging the private insurance industry to align with the effort since 2013. However, for those who have done well in growing through that journey, transformation into a new model care delivery has been challenging.

We have noted in primary care an overwhelming trend that independent physicians are rapidly being absorbed by hospital and insurer-affiliated groups because they
cannot find the capital to change and innovate.

It has been our good fortune to find "partners" (insurance companies, hospitals and venture capital) who provide varying levels of funding for infrastructure-supporting informatics, contracting aggregation, as well as access to intellectual and financial capital.

As stated in the comments, change is hard but is critical to success of becoming more effective and efficient. We are learning that dramatic improvement in quality metrics may be the easy part of the challenge using standardization and process improvement . The greater challenge is understanding and cultivating trust from patients (ie, "the consumer") which will have to be earned based upon experience in the dimensions they desire.

Ultimately, we look forward to a 3rd party with enough gravitas to cause everyone to align with a common set of standards that we all can follow and perform.

CONFLICT OF INTEREST: Currently, our independent medical group does participate in value-based contracts .