Why is private equity bad for doctors?

[john7991]

I read about private equity and how bad it is for patients, but is it also bad for doctors? What are some reasons why private equity is bad for doctors/aspiring doctors?

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[Moko]

I read about private equity and how bad it is for patients, but is it also bad for doctors? What are some reasons why private equity is bad for doctors/aspiring doctors?

It's probably easier to ask why private equity in medicine is good for anyone involved (other than the investors looking to make money). A physician partner selling their practice will likely get a higher upfront payoff, but this may diminish their long-term gains. The profits given to the investors are coming from somewhere. By selling your practice, you are also relinquishing the extra autonomy that you may have in how you want your practice to be run, especially when it conflicts with their bottom line. At the end of the day, private equity's main goal is profit above all else. Patient care, patient outcomes, and community health are all secondary. And for many physicians who are already decently compensated to begin with, preserving that "mission" may be worth more than whatever extra payout obtained by getting private equity involved. Just my thoughts.

 

[Mr.Smile12]

Check out our interdisciplinary forums: Med Business [ MD/MBA, DO/MBA, DDS/MBA ] .

 

[i-doctor]

It’s good for the doctors who are near or within a few years of retirement. Great upfront cash payout makes it a net plus. Negative for most others.

 

[john7991]

It's probably easier to ask why private equity in medicine is good for anyone involved (other than the investors looking to make money). A physician partner selling their practice will likely get a higher upfront payoff, but this may diminish their long-term gains. The profits given to the investors are coming from somewhere. By selling your practice, you are also relinquishing the extra autonomy that you may have in how you want your practice to be run, especially when it conflicts with their bottom line. At the end of the day, private equity's main goal is profit above all else. Patient care, patient outcomes, and community health are all secondary. And for many physicians who are already decently compensated to begin with, preserving that "mission" may be worth more than whatever extra payout obtained by getting private equity involved. Just my thoughts.

Don’t doctors have the option to just not sell? From what I’m getting, it really isn’t all that bad for physicians until they sell their practice and keep practicing in that practice because then they won’t have as much control. It’s bad for the patients because it becomes more expensive. I just want to understand what about PE is scaring people.

Do you think PE will discourage patients from seeking medical care/cosmetic procedures at smaller practices regardless of whether or not they’re owned by PE?

 

[john7991]

It’s good for the doctors who are near or within a few years of retirement. Great upfront cash payout makes it a net plus. Negative for most others.

Why is it negative for other doctors? Why not just refuse to sell your practice?

 

[i-doctor]

The other doctors are often still non-owner employees (before becoming partner) who don’t get the upfront money.

 

[Angus Avagadro]

Don’t doctors have the option to just not sell? From what I’m getting, it really isn’t all that bad for physicians until they sell their practice and keep practicing in that practice because then they won’t have as much control. It’s bad for the patients because it becomes more expensive. I just want to understand what about PE is scaring people.

Do you think PE will discourage patients from seeking medical care/cosmetic procedures at smaller practices regardless of whether or not they’re owned by PE?

Most doctors now are employed either by PE or Health Systems, kinda the same thing. There aren't many practices to buy any more.

 

[Med Ed]

I read about private equity and how bad it is for patients, but is it also bad for doctors? What are some reasons why private equity is bad for doctors/aspiring doctors?

Anything bad for patients is (ultimately) bad for doctors.

 

[peltier]

I read about private equity and how bad it is for patients, but is it also bad for doctors? What are some reasons why private equity is bad for doctors/aspiring doctors?

I was a partner in private practice for most of my career up to this point. I left my group because we were having staffing issues a few years ago and became an employee of one of the large national multi-specialty groups that had just recently been acquired by a very large PE firm out of New York. PE firms and groups, prior to COVID, were busy gobbling up a lot of anesthesia groups around the country. PE cares about only one thing--$$$$ for investors. Period. This means the physician works more hours for less pay or no pay under a salary arrangement. There is no autonomy, no self-direction, and if you have issues, the 'office' is hundreds if not thousands of miles away and no one cares. In summary, you become just another cog on the corporate wheel of medicine, and it will grind you to a pulp. Consider staying in academics or join a health network that has a long standing reputation as being physician led and friendly (Kaiser, for example).

 

[showkayaker]

I was a partner in private practice for most of my career up to this point. I left my group because we were having staffing issues a few years ago and became an employee of one of the large national multi-specialty groups that had just recently been acquired by a very large PE firm out of New York. PE firms and groups, prior to COVID, were busy gobbling up a lot of anesthesia groups around the country. PE cares about only one thing--$$$$ for investors. Period. This means the physician works more hours for less pay or no pay under a salary arrangement. There is no autonomy, no self-direction, and if you have issues, the 'office' is hundreds if not thousands of miles away and no one cares. In summary, you become just another cog on the corporate wheel of medicine, and it will grind you to a pulp. Consider staying in academics or join a health network that has a long standing reputation as being physician led and friendly (Kaiser, for example).

Hi, how is academics different from PE? I am a current applicant so not really familiar with the difference. For example, how in academics are you not just a cog in the wheel/making money for someone else?

 

[Angus Avagadro]

Hi, how is academics different from PE? I am a current applicant so not really familiar with the difference. For example, how in academics are you not just a cog in the wheel/making money for someone else?

You are, but you are compensated for non clinical time, research, teaching, journal club, etc.. It is included in your compensation package. PE doesn't compensate for that. Hours in academics are better. Usually lower salary than PE.

 

[peltier]

Hi, how is academics different from PE? I am a current applicant so not really familiar with the difference. For example, how in academics are you not just a cog in the wheel/making money for someone else?

In academics you typically have better overall compensation and retirement packages PLUS stability. A recent PE owned large national group has been losing contracts left and right. This alone is gut wrenching enough. I went through it. Never again.

 

[john7991]

I was a partner in private practice for most of my career up to this point. I left my group because we were having staffing issues a few years ago and became an employee of one of the large national multi-specialty groups that had just recently been acquired by a very large PE firm out of New York. PE firms and groups, prior to COVID, were busy gobbling up a lot of anesthesia groups around the country. PE cares about only one thing--$$$$ for investors. Period. This means the physician works more hours for less pay or no pay under a salary arrangement. There is no autonomy, no self-direction, and if you have issues, the 'office' is hundreds if not thousands of miles away and no one cares. In summary, you become just another cog on the corporate wheel of medicine, and it will grind you to a pulp. Consider staying in academics or join a health network that has a long standing reputation as being physician led and friendly (Kaiser, for example).

Thank you and Happy Thanksgiving, but what I don’t understand is why don’t private doctors just tell the PE people no when they knock on the door with money? I don’t see how PE is actually making things worse for doctors. Just open up a practice and never sell to PE, you get to keep your autonomy etc, simple, or is it not that simple? It seems as if it’s truly and only bad for doctors who sell their practices to PE and doctors who work for a practice owned by a PE firm.

 

[john7991]

Anything bad for patients is (ultimately) bad for doctors.

Thank you for your reply and Happy Thanksgiving, do you mind expanding on this?

 

[voxveritatisetlucis]

Physicians who sell to PE are kind of like Judas/Brutus. Most practice owners could probably ride off into retirement with plenty of money but greed makes them sell to people who are ultimately bad for the next generation of physicians and patients.

 

[Med Ed]

Thank you for your reply and Happy Thanksgiving, do you mind expanding on this?

Brevity is the soul of wit.

 

[Med Ed]

Thank you and Happy Thanksgiving, but what I don’t understand is why don’t private doctors just tell the PE people no when they knock on the door with money? I don’t see how PE is actually making things worse for doctors. Just open up a practice and never sell to PE, you get to keep your autonomy etc, simple, or is it not that simple?

PE firms like to buy multiple practices and then consolidate their operations, which in theory improves efficiency and saves money. Their usual pitch to each practice therefore boils down to "join us now or we'll team up with your competitors and run you out of business."

And yes, sometimes it's driven by the older partners who get paid out and head to the sunset, leaving the younger docs stranded.

Physicians warned of the pitfalls behind private equity promises

 

[john7991]

Thank you and Happy Thanksgiving, but what I don’t understand is why don’t private doctors just tell the PE people no when they knock on the door with money? I don’t see how PE is actually making things worse for doctors. Just open up a practice and never sell to PE, you get to keep your autonomy etc, simple, or is it not that simple?

PE firms like to buy multiple practices and then consolidate their operations, which in theory improves efficiency and saves money. Their usual pitch to each practice therefore boils down to "join us now or we'll team up with your competitors and run you out of business."

And yes, sometimes it's driven by the older partners who get paid out and head to the sunset, leaving the younger docs stranded.

Physicians warned of the pitfalls behind private equity promises

Thank you, now I’m concerned. Are they actually running private practices out of business? That seems kinda exaggerated.

 

[Med Ed]

Thank you, now I’m concerned. Are they actually running private practices out of business? That seems kinda exaggerated.

Check back with us in 20 years.

 

[Mr.Smile12]

That also happened 40 years ago with the explosion of managed care organizations (maybe a bit longer) to get us to where we are now. It's currently happening to dentistry.

Selling up for millions: How US dentists are getting rich

As an industry begins to be consolidated, dental practices that are joined together by a DSO become substantially more valuable.

www.dental-tribune.com

 

[john7991]

Check back with us in 20 years.

I’ll just become a PA

 

[zanzizic]

I'm not an anesthesiologist but I work with them in my ASC and have heard the stories. There are two large private anesthesia groups in my city. One had like 60 partners and was started in the late 1950s or so. The other was started in the early 1990s and had even more partners. They dominated the scene working at large hospitals and ASCs around the metro area. There were smaller groups of a few anesthesiologists here and there. Both of the large groups sold to PE firms in the 2018 to 2019 timeframe. At first the partners of both groups were excited. Big cash lump sump up front and then they were supposed to have competitive pay. Selling point was national group would have better leverage in insurance negotiations (better contracts means better reimbursements) and economies of scale and better overall management.

It didn't turn out that way. Everybody liked the money up front but that money was soon spent. Then COVID hit. Anesthesiologists were pulled to larger hospitals to care for COVID patients. Many of the older docs said "Hey I sold out and I don't want to take care of COVID patients so I'm out". Both groups saw a fairly large exit of the older cohort leaving them somewhat shorthanded. When business as usual started up again the larger PE group management got pressure from big hospitals to continue to cover them (had to make up time for months of ortho, spine, CT, and other lucrative surgeries that the hospitals missed out on during shutdowns). ASCs were second fiddle and lost coverage.

This was a problem for the rank and file anesthesiologists. The preferred ASC cases because the patients were healthy. ASCs may have a 7a to 5p lineup of 8-14 cases with quick room turnover. Lucrative with few complications. Hospitals are typically more chaotic. Room turnover is slow and the gas passers may sit and wait for an hour to get the next patient in. Clock ticking with no reimbursements. Long hospital cases pay less too than quick and easy 30 minute cases. So now they have lost cushy ASC jobs and sit around the hospital. ASCs in turn started hiring the small groups who picked up the plum assignments because they didn't have the "duty" to bow down to hospital wishes.

Also, PE firms didn't actually get better contracts. And aren't collecting any better than they had before. So now the anesthesia guys who sold are employees who make less and work in an environment they don't like as much. Lots of unintended consequences to private equity sale.

 

[zanzizic]

Thank you and Happy Thanksgiving, but what I don’t understand is why don’t private doctors just tell the PE people no when they knock on the door with money? I don’t see how PE is actually making things worse for doctors. Just open up a practice and never sell to PE, you get to keep your autonomy etc, simple, or is it not that simple? It seems as if it’s truly and only bad for doctors who sell their practices to PE and doctors who work for a practice owned by a PE firm.

Nobody has to sell. But when you own a private practice and you're 55-60 years old you think "Do I sell to these guys and use that money to fund my retirement and practice three more years and walk away? Or do I just shut this practice down and walk away with nothing?" It's not that hard of a choice. Many late career docs can stand three more years with a decent salary when they get a large lump sum. Also, that lump sum will likely be taxed as long-term capital gains and you may have to pay 20% tax instead of your normal 40% tax rate on earned income.

 

[john7991]

The other doctors are often still non-owner employees (before becoming partner) who don’t get the upfront money.

I mean, I don’t see how this is a bad thing since they aren’t owners

 

[john7991]

Nobody has to sell. But when you own a private practice and you're 55-60 years old you think "Do I sell to these guys and use that money to fund my retirement and practice three more years and walk away? Or do I just shut this practice down and walk away with nothing?" It's not that hard of a choice. Many late career docs can stand three more years with a decent salary when they get a large lump sum. Also, that lump sum will likely be taxed as long-term capital gains and you may have to pay 20% tax instead of your normal 40% tax rate on earned income.

Thank you for replying and for writing all of that, have you heard any stories of PE companies forcing private practices to sell? There are a lot of private practice doctors/influencers who advertise their work on Instagram (I follow a lot of them) and they seem to be doing fine. I’ve never seen any of them complain about PE companies forcing them to sell

 

[Med Ed]

There are a lot of private practice doctors/influencers who advertise their work on Instagram (I follow a lot of them) and they seem to be doing fine. I’ve never seen any of them complain about PE companies forcing them to sell

Doctor/influencers on Instagram, you say? That's certainly who I turn to for high quality, unbiased information.

 

[Rachapkis]

Here is a link to an AMA article on the subject. Physicians warned of the pitfalls behind private equity promises

 

[john7991]

Doctor/influencers on Instagram, you say? That's certainly who I turn to for high quality, unbiased information.

I follow them for inspiration. I was just saying that I don’t recall hearing any doctor I follow complain about PE