The Impact of Private Equity-Backed Management Services on Physician Practices and Healthcare Delivery

Private equity-backed management services organizations (MSOs) are revolutionizing the healthcare industry. These MSOs provide independent physician practices with access to expert business talent and capital, enabling them to stay afloat in a rapidly evolving healthcare landscape. As the trend of physicians working in private practices continues to decline, the support provided by private equity-backed MSOs has become increasingly critical.

The Role of Private Equity in Healthcare

Private equity firms are playing a growing role in the healthcare industry, particularly in home care and hospice care. These sectors are attractive to investors due to their profitability and light regulation, as well as demographic trends such as an aging population and a preference for home-based care. However, this trend has sparked concerns about the potential impact on the quality of care and patient access, particularly as private equity-owned companies strive to generate robust profits for investors.

Despite these concerns, the private equity model has its advantages. For example, private equity-backed MSOs have been instrumental in helping independent physician practices remain independent. Paul Berggreen, MD, founder and president of Arizona Digestive Health, highlights that partnering with a private equity-backed MSO, the GI Alliance, has provided the practice with valuable business talent and capital.

Legislation and Scrutiny

Moving forward, the role of private equity in healthcare is likely to draw increasing legislative scrutiny and public attention. The American Medical Association (AMA) has been instrumental in introducing legislation like the No Fees for EFTs Act, aiming to end fees for healthcare providers' electronic funds transfer transactions from insurers. This Act reflects the growing need for regulatory oversight in the industry.

Shamika Mazyck, a Health & Life Sciences attorney at Quarles & Brady, has pointed out that the future of private equity in healthcare will likely involve supporting innovative healthcare delivery models, such as expanding telehealth services, performing infusion services in the home, and decentralizing clinical trials.

Investments and Innovations

As part of their investment strategy, many private equity firms are focusing on healthcare technology. A prime example of this is Peloton Equity, LLC's recent investment in OnPoint Healthcare Partners, Inc., an AI-enabled technology services provider. This investment will be used to accelerate product development, boost sales and marketing, and enhance customer service, ultimately reducing physician burnout and improving administrative efficiency.

The Flip Side of the Coin

However, not all private equity investments in healthcare have been viewed positively. A recent report from the Private Equity Stakeholder Project criticizes Apollo Global Management's ownership of two major American hospital systems, arguing that it has led to a decrease in less profitable services, layoffs, and a lack of competitive wages. The report highlights the need for increased scrutiny and regulation of private equity's involvement in healthcare.

In conclusion, while private equity-backed MSOs have the potential to provide significant support to independent physician practices, it is crucial to balance this with the need for regulatory oversight and the prioritization of patient care. As private equity continues to shape the healthcare landscape, its impact will be closely watched by industry stakeholders, policymakers, and the public.