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Zhu JM, Hua LM, Polsky D. Private Equity Acquisitions of Physician Medical Groups Across Specialties, 2013-2016. JAMA. 2020;323(7):663–665. doi:10.1001/jama.2019.21844
Acquisition of physician practices by private equity firms has accelerated,1,2 with unknown implications for care delivery and patient outcomes. However, available data are limited to single specialties or come from industry reports or opinion articles. A dearth of evidence and the use of nondisclosure agreements at early stages of negotiation have constrained the ability to evaluate this phenomenon empirically.3 In this study, we describe physician group practices acquired in 2013-2016 across specialties.
We identified US physician group practice acquisitions by private equity firms using the Irving Levin Associates Health Care M&A data set,4 which includes manually collected and verified transactional information on a broad set of health care mergers and acquisitions. We excluded practices bought by entities not classified as private equity firms at the time of acquisition. We verified practice names, locations, specialties, and group practice status via Google searches.
We linked acquisitions to the SK&A data set, a commercial data set of verified physician- and practice-level characteristics (eg, specialty, credentials, practice ownership, size, and locations) for US office-based practices. Transactions that spanned multiple sites and distinct practice names were considered separate acquisitions. Otherwise, we aggregated all practice sites observed in the SK&A data set and matched these to 1 observation from the M&A data set.
Linkages involved (1) fuzzy matching for nonexact records of a practice name in the SK&A data set with reported acquisitions in the M&A data set and (2) manual searches for nonmatches to identify name changes using publicly available records and practice websites. Within practices, we excluded physicians with primary administrative roles.
Match rates between practices in the SK&A data set and the M&A data set were 87% in 2013, 82% in 2014, 90% in 2015, and 87% in 2016. We benchmarked estimates against industry reports to ascertain data quality and integrity, and described numbers of practices, sites, and physicians in acquired practices across specialties.
Of approximately 18 000 unique group medical practices, there were 355 physician practice acquisitions (1426 sites and 5714 physicians) by private equity firms from 2013 to 2016, increasing from 59 practices in 2013 to 136 practices in 2016 (Table 1). Acquired practices had a mean of 4.0 sites, 16.3 physicians in each practice, and 6.2 physicians affiliated with each site. Overall, 81.4% of these medical practices reported accepting new patients, 83.4% accepted Medicare, and 60.3% accepted Medicaid. The majority of acquired practices were in the South (43.9%).
The most commonly represented medical groups included anesthesiology (19.4%), multispecialty (19.4%), emergency medicine (12.1%), family practice (11.0%), and dermatology (9.9%) (Table 2). From 2015 to 2016, there was also an increase in the number of acquired cardiology, ophthalmology, radiology, and obstetrics/gynecology practices.
Within acquired practices, anesthesiologists represented 33.1% of all physicians; emergency medicine specialists, 15.8%; family practitioners, 9.0%; and dermatologists, 5.8%.
Private equity acquisitions of physician practices increased across specialties from 2013 to 2016 but still constituted a small proportion of group physician practices in the United States. Industry reports suggest further growth in 2017-2018 private equity acquisitions, particularly in ophthalmology, dermatology, urology, orthopedics, and gastroenterology.5 These data, which show acquired practices to have several sites and many physicians, match 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.
Research is needed to understand the effect of these acquisitions and to mitigate unintended consequences. Private equity firms expect greater than 20% annual returns,3 and these financial incentives may conflict with the need for longer-term investments in practice stability, physician recruitment, quality, and safety. There may be additional pressures to increase revenue streams (eg, elective procedures and ancillary services), direct more referrals internally, and rely on lower-cost clinicians.6
Key limitations include that the data are based on publicly announced transactions and therefore underestimate total acquisitions, particularly of smaller practices, and that available data lag behind the rapid pace of private equity acquisitions.
Accepted for Publication: December 16, 2019.
Corresponding Author: Jane M. Zhu, MD, MPP, MSHP, Division of General Internal Medicine and Geriatrics, Oregon Health & Science University, 3181 SW Sam Jackson Park Rd, Portland, OR 97239 (email@example.com).
Author Contributions: Drs Zhu and Polsky had full access to the data in the study and take responsibility for the integrity of the data and the accuracy of the data analysis.
Concept and design: Zhu, Polsky.
Acquisition, analysis, or interpretation of data: All authors.
Drafting of the manuscript: Zhu, Hua.
Critical revision of the manuscript for important intellectual content: All authors.
Statistical analysis: Zhu, Hua.
Administrative, technical, or material support: Zhu, Hua.
Supervision: Zhu, Polsky.
Conflict of Interest Disclosures: None reported.