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December 12, 2019

Implications of Private Equity Acquisition of Otolaryngology Physician Practices

Author Affiliations
  • 1Department of Otolaryngology–Head and Neck Surgery, Massachusetts Eye and Ear Infirmary, Boston
  • 2Department of Otolaryngology, Harvard Medical School, Boston, Massachusetts
  • 3Harvard Business School, Boston, Massachusetts
JAMA Otolaryngol Head Neck Surg. Published online December 12, 2019. doi:10.1001/jamaoto.2019.3738

In the past several decades, consolidation of physician practices has increased substantially. Physician practices are motivated to consolidate into larger practices for many reasons, for example, to achieve increased bargaining power over payment rates, greater economies of scale to support the high fixed costs of practice (eg, investments in medical equipment), and larger patient referral bases. Consolidation generally takes place through 3 mechanisms: (1) practices merge with each other, (2) private practices are acquired by another organization (either a multispecialty physician group or a hospital-based health system), or (3) private practices are acquired by a private equity firm. In recent years, private equity firms have played a growing role in physician practice consolidation. To date, the first wave of private equity consolidations has focused on the specialties of orthopedics, ophthalmology, and dermatology.1 However, in the second wave of consolidation, firms are now turning their focus to other financially attractive specialties, such as otolaryngology. Therefore, otolaryngologists should understand the fundamentals, risks, and benefits of practice acquisition by private equity firms.

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