The threat of Private Equity to Dermatology

[allseasons]

I constantly hear about the threat of private equity groups taking over older medical practices and decreasing wage for new doctors. I can see why this would be a threat for Ortho, Optho, Plastics, as the start up costs are very high for a private practice, but I often hear that PE groups will doom derm too, which never made sense to me.
From talking to private practice derms, start up costs are pretty low (in comparison to those others anyway) since not as much expensive equipment is needed.

PE groups mainly just put competitors at a disadvantage when there are high start up costs, so are they really that much of a threat to dermatology?

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[voxveritatisetlucis]

I think that the bigger threat lies in healthcare conglomerates (HCA, partners, ascension etc.) buying up all the private practices and or making it impractical for patients to seek out services at private practices.

Don’t worry, interest rates will go up over the next 5-7 years. High risk free rates increase the hurdle rate on potential investments (ie. Acquisitions) and will probably reduce deal flow in healthcare, as well as more broadly.

 

[allseasons]

PE invests in all these simply because there is significant money to be made. They go after practices with a higher ratio of advanced practioners (ie subspeciality), higher ratio of commercial insurance patient, and a higher volume of patients. See https://www.healthaffairs.org/doi/abs/10.1377/hlthaff.2020.02062 for a good summary. A JAMA research letter (see Private Equity Investment in Physician Practices ) found most common practices to be acquired were anesthesiology, multi-specialty, emergency medicine, family practice, and dermatology.

oh absolutely. I 100% believe PE is trying to buy out many dermatology clinics. My question is just how much of a threat is this to new dermatology clinics, as PE for example can easily undercut Plastic Surgeons on price as there's a high startup cost. I figured it was harder to monopolize derm because the barrier for entry is lower. So while PE can enter the sphere and start many clinics, they can't really prevent others from entering too.

 

[allseasons]

What I would speculate is the PE is after the practices that have associated "spas" and high-cost/high volume non-insured procedures. While on one hand they cant prevent others from entering but they you get into the ability to actually build a practice. For example 3 corporate behemoths (2 huge hospital systems and the huge private practice) basically keep more and more referrals within themselves thus starving any newly opening practices from getting a toehold on patients. The last large independent hospital was consumed by one of them a few years ago and all the private practices are falling into line as at least affiliates if not just under the corporate umbrella. Simply because you can open a practice doesnt mean you will make it the success you want.

true, their advertising budget will still exceed most individuals.

 

[KnightDoc]

true, their advertising budget will still exceed most individuals.

Whether it's PE or large practice groups, over time, ALL small private practices in all specialties will be gobbled up, so just get used to it.

The biggest threat to your income is going to come from pressure on insurance reimbursements, whether from MFA or private insurance. And you, as a solo or small group, will never have the scale to compete with PE or larger groups, and will have your pipeline of patients cut-off as a result of not being able to live with the reimbursement rates they agree to in order to be in-network providers.

This is definitely the trend. It's not going to stop, PE or no PE. The odds are extremely high we are all going to be employees or independent contractors in the future, and none of us are going to be small business owners like those who came before us. JMHO.