The Government Accountability Office recently released a sweeping report on physician practice ownership. The report contains some intriguing findings that cut against assumptions many have about the role and effect of private investment in healthcare.
The headline is clear: Private equity is not the driver of consolidation and cost escalation. Despite a recent spate of alarming stories, private equity does not own that many practices nationwide. Specifically, in the United States, the GAO found that only 6.5 percent of physicians worked in private equity-backed healthcare practices. Of that small percentage, the focus was on high levels of care for a handful of specialties such as dermatology, radiology and gastroenterology. In addition, the GAO found no evidence of higher spending after a private equity acquisition and little evidence of reduced quality or access.
On the contrary, the GAO’s report shows that private investment can provide physician practices with the resources they need to improve patient care. For example, thanks to a partnership with private equity, an independent ophthalmology practice gained access to an innovation center that helped track health records and monitor patient outcomes electronically. For another specialty, physicians reported that private capital helped their urology practice obtain expensive equipment that helps deliver less invasive treatments.
Access to care is another area where private investment can make a difference for patients. Private capital investment has helped physicians expand their practices by hiring more providers, bringing specialized services such as fertility care to rural areas, and implementing better scheduling tools that make it easier for patients to get timely appointments.
Private capital also supports physicians by reducing administrative burdens, enabling independent providers to serve their communities more efficiently. With less red tape and more time to focus directly on patients, providers backed by private equity can deliver the patient-centered care that our healthcare system badly needs.
Yet, many state and federal lawmakers are calling for broad restrictions on private investment in the healthcare system. Painting all private capital with the same brush risks doing more harm than good, and the truth is, when done responsibly, private investment plays an essential role in modernizing practices, financing innovation and expanding access.
During the COVID-19 pandemic, for example, the rapid nationwide expansion of telehealth services would not have been made possible without private capital, showing its ability to expand access to care when needed most. Indeed, given the need at that time to access services when providers and patients could not meet in person in many areas, telehealth (funded substantially by private capital) supported access to care during the initial months of the pandemic and, in some ways, enabled the survival of our healthcare system.
This doesn’t mean bad actors should get a free pass. However, we must not confuse isolated cases of mismanagement with the broader reality that private investment is helping strengthen our healthcare system. The GAO’s report shows why a more balanced conversation on private investment in healthcare is needed — one that goes beyond the headlines to consider the real pressures driving increased costs in the healthcare system, including how the government’s regulatory systems often inadvertently drive up costs for the government.
Patients depend on a healthcare system that delivers access, choice and innovation. Blanket restrictions on private capital risk are stifling innovation and depriving physicians of the resources they need to care for patients. Instead, policymakers should engage in balanced conversations that focus on the data, which shows that private equity plays no role in higher spending.
Private equity is not the problem, and should not be villainized. Providing more different kinds of healthcare investors fosters more choice and more competition, which gives the system the ability to bring down costs in a market-driven way, rather than relying on government-driven, top-down regulatory fiat.