Infectious Disease

Investment deluge in medicine may be saving grace, or its doom


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Cohen, Feldman, Gewanter and Schweitz report no relevant financial disclosures. Gibofsky reports consulting and speaking for AbbVie and Pfizer; consulting for Acquist, Biosplice Therapeutics, Boehringer Ingelheim and Janssen; and being a stockholder of AbbVie, Amgen, J&J, and Pfizer.


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Since 2010, nearly $1 trillion has flooded the U.S. health care system, across multiple specialties, from private equity firms through thousands of deals to acquire hospitals and practices.

Whether this represents a welcome investment, or a hostile takeover, depends on who you ask.

Private equity is making its mark in health care, investing hundreds of billions of dollars into practices and systems, promising greater efficiency and capital for those with an ownership stake. We all know the goal of private equity investing in medical practices is to make money, Madelaine A. Feldman, MD, FACR, told Healio Rheumatology.

Private equity is making its mark in health care, investing hundreds of billions of dollars into practices and systems, promising greater efficiency and capital for those with an ownership stake. We all know the goal of private equity investing in medical practices is to make money, Madelaine A. Feldman, MD, FACR, told Healio Rheumatology. That is their purpose. However, many physicians remain skeptical that such an infusion of cash and the conditions that come with it will in fact translate into improved working conditions or patient care. How does the medical practice benefit? she added. And do those benefits outweigh the potential disadvantages for patients and practitioners?
Source: Madelaine A. Feldman, MD, FACR

From 2010 to 2021, the number of private equity deals in health care increased from 325 to more than 1,000, while the value of the portfolio companies owned by private equity leveraged buyout funds grew to more than $2.6 trillion. More than half of these investments have been in the United States. In 2021 alone, private equity investments in U.S. health care topped $150 billion.

Historically, much of this activity has been in specialties like anesthesiology, dermatology and ophthalmology. However, more recently, rheumatology has also been attracting its own attention from investors.

“Private equity is here,” Stanley B. Cohen, MD, clinical professor in the department of internal medicine at the University of Texas Southwestern Medical School, in private practice with Rheumatology Associates, and co-medical director of the Metroplex Clinical Research Center, in Dallas, told Healio Rheumatology. “The corporatization is changing medicine and, in many cases, not for the better.”

There have been several high-profile instances of private equity acquisitions in the rheumatology space.

In the spring of 2022, Specialty Networks LLC, acquired United Rheumatology, which offers group purchasing services, sponsored educational events, data and analytic support, and value-based payer programs. Specialty Networks aims to expand the group’s capabilities with services ranging from pharmacy and dispensation, to clinical trials and patient identification.

In the third quarter of 2022, VSS Capital Partners invested in the Los Angeles-based Center for Rheumatology, which offers infusion treatments, phlebotomy and laboratory services, bone density tests, musculoskeletal ultrasounds, digital X-ray exams, and other ancillary services.

Years prior, in 2019, Corrona was acquired by Audax Private Equity. Corrona, now CorEvitas, has gathered a significant amount of evidence on the safety and efficacy of medications in the autoimmune space.

In all three instances, specific purchase or investment figures were not to be found in the official announcements. That said, the Chicago-based Linden Capital Partners, of which Specialty Networks is a portfolio company, stated it has raised more than $6 billion in limited partner commitments since its inception. VSS, which boasts investments in 95 portfolio companies with more than 400 add-on acquisitions, manages $4 billion in aggregate committed capital across eight funds. Meanwhile, Audax has since its founding in 1999 raised more than $26 billion in capital across its private equity and private debt businesses, with more than $5 billion invested in more than 130 platforms and 800 add-on companies.

“We all know the goal of private equity investing in medical practices is to make money,” Madelaine A. Feldman, MD, FACR, president of the Coalition of State Rheumatology Organizations (CSRO), founder and past president of the Rheumatology Alliance of Louisiana, and a chair of the Alliance for Safe Biologic Medicines, said in an interview. “That is their purpose.”

The key question, according to Feldman, is whether the business of making money can coexist with providing optimal patient care.

“How does the medical practice benefit?” she said. “And do those benefits outweigh the potential disadvantages for patients and practitioners?”

Pros and Cons

According to Allan Gibofsky, MD, JD, professor of medicine and public health at the Weill Medical College of Cornell University, and an attending rheumatologist at the Hospital for Special Surgery, the benefits of private equity’s interest in rheumatology mainly revolve around the delineation of capital and management.

“Private equity allows for the return of capital to people who put the entity together,” he said in an interview.

“Private equity definitely allows for — indeed, requires — more efficient management of the practice, so as to maximize the profit of the practice,” Gibofsky added. “Businesspeople have a skill set that is not taught in medical training and that many physicians do not have.”

The flip side, however, is that employees — including junior physicians, advanced practice practitioners, nursing and support staff — often do not see any part of the financial profit, and business management experience does not always translate 1-to-1 into running a successful medical practice.

Michael C. Schweitz, MD
Michael C. Schweitz

Meanwhile, the main disadvantage of private equity investment, according to Michael C. Schweitz, MD, past president and founder of the CSRO, is a loss of independence.

“Instead of being an employer, you are an employee,” he said. “For my generation of doctors, that is a big negative.”

This brings the discussion to patient care. For many experts, “more efficient management” of a medical practice means leaner staffing and less time with individual patients.

“Ultimately, it is probably not good for patient care,” Schweitz said. “If it is doctor-owned and doctor-run, the goal is to take good care of patients. If it is run by an organization whose primary function is revenue, patient care may suffer.”

Although there is some concern among rheumatologists that private equity may soon gobble up the specialty, other experts are not necessarily convinced.

Harry L. Gewanter, MD
Harry L. Gewanter

“Unlike anesthesiology, dermatology or some other specialties, rheumatology does not appear to be a prime acquisition target for the simple reason that we do not make that much money,” Harry L. Gewanter, MD, director for CSRO, medical director of Medical Home Plus and clinical associate professor of pediatrics at the Children’s Hospital of Richmond at Virginia Commonwealth University, told Healio Rheumatology. “We do not do a lot of procedures, and that is how significant revenue is generated.”

However, according to Schweitz, that may not matter. Rather, he suggested that the “corporatization of medicine” may bring private equity to rheumatology in other forms beyond a single firm taking over a single practice.

“We are seeing a real shift in doctors working for hospitals or health systems rather than hanging a shingle,” Schweitz said.

Stanley B. Cohen, MD
Stanley B. Cohen

According to Cohen, studies show that only approximately 15% of rheumatologists are left in private practice.

“Everyone else is working for a health system of some kind,” he said.

Understanding the nature of this shift could hold clues to the future relationship between business and rheumatology.

‘There Exists Broad Skepticism’

Ophthalmology is in a similar position, in terms of potential interest from private equity, as rheumatology at the moment. There, too, experts are looking to other specialties to determine the potential impact.

In a paper published in Current Opinions in Ophthalmology, Brill and colleagues reviewed data for private equity in a host of other specialties, including anesthesiology, dermatology, emergency medicine, radiology and urology.

“Medical practices are being consolidated into a few larger platform groups,” they wrote. “Although there has been a short-term financial success for both private equity firms and senior medical practice partners, there exists broad skepticism from peer-reviewed publications and the national media.”

The researchers concluded that although the role of private equity in ophthalmology is “speculative” at the moment, a number of trends from other specialties may be likely to cross over.

“These trends include increased volume of services, increased profits, improved payer mix, increased payment per patient visit, increased use of mid-level practitioners, decreased physician autonomy, and decreased physician salaries,” they wrote.

Schweitz argued that, in high-revenue specialties like dermatology and anesthesiology, private equity is “coming in to make larger practices and create an economy of scale.”

This economy of scale has a direct impact on the practice of medicine, according to Feldman.

“When you are an employed physician, someone else is determining your schedule, your assistants and essentially how your practice runs in order to make profits,” she said.

However, for Feldman, there is a larger message to be taken from the conclusions found in the Brill paper.

“The decreasing reimbursements and the incursion of payers taking charge of how we treat our patients is adding to burnout,” she said.

Although burnout is obviously a significant concern in the rheumatology world, evidence suggests that investment from private equity can have some financial benefit.

In a paper published in the JAMA Internal Medicine, La Forgia and colleagues investigated the impact of physician management companies (PMCs) — which they noted are often backed by private equity — on prices paid to anesthesiologists. Results demonstrated that the prices paid to anesthesiologists increased after hospital outpatient departments and ambulatory surgery centers signed under contract with PMCs. If the PMC received a private equity investment, the prices were “substantially higher,” according to the findings.

Whether the possibility of increased revenue is a significant enough reward to offset leaner staffing and potential burnout would be a consideration for any rheumatologist or rheumatology group looking for investment from private equity.

Allan Gibofsky, MD, JD
Allan Gibofsky

For Gibofsky, it is a matter of assigning roles to the appropriate person.

“A rheumatology practice is a small business that requires some degree of management,” he said. “You can cite me as a person who says that physicians should practice medicine and let someone else handle the business side. I can hire a business manager to manage my group.”

That said, hiring a business manager and a private equity company taking over a practice are two different animals, Gibofsky added.

“A physician who hires a business manager is still in control of how the business operates, and that control is lost when practice ownership is transferred to a private equity entity,” he said. “The risk, then, is that there will be pressure for private equity-employed physicians to maximize volume at the expense of time, which will cut into the ability to care for complex patients.”

Although patients with dermatologic diseases are often not as complex as those routinely seen in rheumatology, there are parallels to be drawn. Understanding how private equity has played out in dermatology could provide an indication of what may happen in rheumatology.

‘Under a Single Umbrella’

In a paper published in Health Affairs (Millwood), Braun and colleagues noted that, in 2017, one in 11 dermatologists were practicing in a group owned by private equity. According to the findings, patient volume for equity-backed practices was 4.7% to 17% higher than in those that were not backed by equity. In addition, prices paid to dermatologists working in private equity-backed practices were 3% to 5% higher than those paid to dermatologists working in practices that were not backed by equity.

“Dermatology is an example of a specialty where large practices have come under a single umbrella,” Gibofsky said, noting that some clinicians in his sphere are comfortable with the transition from employer to employee.

Feldman told a different story.

“My primary exposure to private equity is in the dermatology space,” she said.

Madelaine A. Feldman, MD, FACR
Madelaine A. Feldman

In New Orleans, where Feldman resides and practices, Sanova Holding AG, an international group of companies headquartered in Switzerland, has purchased a number of practices. In general, her impression from those dermatology colleagues tracks with many of the established pros and cons of private equity investment: The investors have relieved some of the burdens of running the business, but have taken away some autonomy the practitioners had previously enjoyed.

However, there are other drawbacks as well, according to Feldman.

“My colleague is now having to see many more patients than she did before private equity bought out the practice,” she said.

This raises a point about physicians, their personality and their work rate, in general.

“People in the private equity system know they can get away with asking doctors to do more because they know doctors always want to do their best,” Cohen said. “They are type A personalities. They will see patients all day and do records all night if they have to, because that is how they are programmed. Private equity companies, as well as health care systems, have used this to their advantage.”

If there was more money involved, then the sting of so much extra work might be assuaged. However, the experience of Feldman’s colleague is representative for many whose practices are taken over by private equity.

“She did not own the practice, so she did not get any of the upfront money or percentage of the ownership,” she said.

All of this highlights a stark reality facing physicians of the future, according to Cohen. “Moving forward, doctors will no longer have the option to remain independent and, as employees, will not receive the monetary benefits of their work effort,” he said. “Private equity, as with any venture, will be seeking a return on their investment and that will have to come from reduced provider income. It is as simple as that, and it is already happening.”

As rheumatologists consider weighing increased revenue for the larger practice against decreased autonomy and a lower personal salary, they may look closer to home to see where private equity may be making inroads into their specialty — the infusion suite.

Revenue for Infusions ‘Dramatically Reduced’

The conventional wisdom is that if private equity is to become a significant player in rheumatology, it will be in infusions.

To give just one example, Feldman noted the investment of private equity in the Center for Rheumatology in Los Angeles, an office with four physicians.

“I would think that private equity would start with the most profitable centers,” she said.

According to Gibofsky, infusion centers are particularly “attractive” to private equity due to their overall business model.

“Infusion centers are procedurally based,” he said. “Meaning, they make money per piece, which would clearly make them more attractive for private equity investment.”

That said, the revenue stream for infusion centers has been dramatically reduced in recent years, Schweitz said.

“Policy from Washington and Medicare has radically decreased reimbursement,” he added. “The cost of infusible medications has been dropping consistently and dramatically.”

Meanwhile, insurance carriers and PBMs have also been making efforts to limit the profitability of infusions, according to Gewanter.

“They want to keep money in-house, rather than a ‘buy and bill’ structure, where you can make money on your purchases,” he said.

Part of the scheme is that specialty pharmacies are sending the medication to infusion centers, according to Gewanter. This is called “white bagging.”

“They are saying, ‘We are not going to pay you for the medication, we will pay ourselves for the medication,’” he said. “That results in the practice losing a significant chunk of money to cover the infusion and administrative costs. It also may result in higher overall costs to the patient since a physician practice usually charges less for the medication than the specialty pharmacy.”

It is likely that private equity investors are paying attention to these trends. Whether that will diminish the likelihood of investment in rheumatology remains to be seen. Either way, the rheumatology community could be well served to consider the possibility of investment in their specialty from as many angles as possible.

A Type of ‘Super Group’

“When private equity buys up practices, it can essentially form a type of super group, which potentially gives the practice more leverage in negotiating reimbursements,” Feldman said. “Those practices who do not join in may continue to lose out in terms of leverage with private equity, creating competition with payers.”

For Gewanter, this highlights a natural conflict between the aims of private equity and the aims of a rheumatologist.

“The difficulty for rheumatologists with institutional buyout is being in charge of treatment plans,” he said. “We will argue forever about which TNF inhibitor is the best for an individual patient in a given situation. We think in exceptions. We are the department of odds and ends. We love dealing with the oddities.”

These oddities and complexities could potentially lie in direct contrast to the high-throughput goals that private equity has established in other specialties.

“Given the complexity and need to individualize treatment plans for each patient, rheumatology as a specialty may be unattractive for private equity investors because all of our patients are complex,” Gibofsky said.

However, there are other reasons why rheumatologists may be resistant to the promises of private equity, according to Gewanter.

“We are a time-sensitive, staff-heavy specialty,” he said. “We do not use many machines, we do not do a lot of procedures — we use people. And if private equity is going to limit our time with patients and/or cut people, it is going to have a significant impact on our working lives.”

That said, Gewanter acknowledged that health care in the United States, as a whole, has been moving toward — or rather merging into — into larger groups.

“Look at OptumRx,” he said, noting that the company has approximately 70,000 physician employees. “United Health Group, their parent corporation, is effectively a private single payer health care system. They have their own insurance, pharmacy benefit managers, specialty pharmacies, multi-specialty groups, imaging and surgical centers, et cetera, thereby providing them with significant power.”

For Gewanter, it is ironic that there is significant political antipathy toward a government-run single-payer system, but not so much against conglomerates like OptumRx.

“The important difference is that with a government single-payer system, the money made goes back into the system,” he said. “What is happening now is that the money goes to the shareholders. Then you get a situation where you have to raise prices to keep the shareholders happy, which creates an upward spiral of costs. In contrast to these private systems, government systems are transparent, whereas all the data in a private system is considered ‘proprietary and non-disclosable.’”

Although these vertically integrated monopolies may be difficult to stop, Gewanter offered some opinions for rheumatologists to consider.

“The first thing individual rheumatologists and organizations like the ACR can do is point out what is going on,” he said. “The second thing we need to do is push back.”

‘The Future Doctors of America will be Employees’

However, not all rheumatologists may want to push back. The trend among younger physicians seems to be away from desiring control over a practice and toward a less rigorous work-life balance. Meanwhile, as a generation of rheumatologists is set to retire, private equity may be an attractive option for those who want to treat patients and leave the grind of business operations to someone else.

“My generation did not know any better than to work for hours and hours for the betterment of our patients,” Gewanter said. “For the last decade or two, doctors have grown accustomed to being shift workers.”

Schweitz added that he believes this trend will only continue in the coming years and decades.

“The future doctors of America are going to employees rather than employers,” he said. “The vast majority of trainees and young physicians want a 40-hour work week.”

In addition, a different career path for new rheumatologists, compared to their predecessors, has already emerged, according to Cohen.

“Instead of working at the same place for 30 or 40 years, people are frequently relocating to other opportunities, whether it be industry, such as the pharmaceutical industry, or to a different clinic with a different health care delivery system, for a modest increase in salary and benefits,” he said. “Patients find this highly disruptive and that it impacts continuity of care.”

Cohen added that this is where the emergence of private equity in medicine and rheumatology hits against another, longer-standing issue — the present and worsening workforce shortage in rheumatology.

“The irony is that there are plenty of excellent applicants for medical school,” he said. “There will always be good and caring providers. However, what I think will happen is they will go into clinical care for a while, but then do other things. The demands on providers to see more patients and the extra work with electronic medical records has resulted in frustration and burnout in not only older providers but younger providers as well. Frequently, opportunities are pursued that are peripheral to clinical care, whether it be administration, pharma or in the investment field.

“It is happening now, and this is exacerbating the shortage of rheumatologists willing to do clinical care,” he added.

Cohen expressed concern regarding future care delivery in rheumatology, as well as in other internal medicine specialties.

“The forces at play now in health care are not conducive to a healthy workplace,” he said. “I think all the rheumatologists I know enjoy being in a room with a patient and trying to figure out the problem, and how to manage it, but once we leave that exam room we are forced to deal with multiple influences which outweigh that positive experience. The system can grind people down.”

The main consideration, then, comes back to the impact on patient care.

“It is difficult to be a doctor and maintain a good work-life balance,” Gewanter said. “However, I wonder if being an employee and a shift worker of a large corporation is conducive to doing the job of a rheumatologist and doing it well.”

Although investment in rheumatology remains small, the die may have already been cast with regard to the corporatization of medicine. The main question, for Feldman, is how rheumatologists of the future will deal with this reality.

“I understand that productivity leads to more income,” she said. “Perhaps some of the efficiencies created by the private equity conglomerate may help with this. But I would hope that the physicians would not have to change their way of seeing patients, as then it becomes more of a job and less like doing what we love.”


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