AHIP advocates for transparency for healthcare private equity firms

Photo: John Fedele/Getty Images

In letters sent to Congress and the White House this week, health insurance group AHIP called for bringing transparency to what it called private equity firms’ “monopoly power” in air ambulance, emergency and certain speciality services delivered under fee-for-service.

Citing growing evidence that these firms’ acquisitions of healthcare providers is undermining affordability and access, AHIP said these monopolies “have the predictable effect of refusing to participate in networks in order to demand higher prices from health insurance providers, which results in higher premiums for everyone.”

By 2018, AHIP said, private equity represented 45% of all healthcare mergers and acquisitions. It referenced a working paper in the Institute for New Economic Thinking which claimed private equity firms borrow heavily from banks and others, using the funds to acquire private entities with the goal of turning a profit in a relatively short time. 

A 2019 analysis in Medical Economics found that initial private equity acquisitions targeted specialties like orthopedics, dermatology, urology and gastroenterology, where potential profits were highest. But the firms, said AHIP, are now expanding their targets.

Raising prices has been a common strategy after a private equity acquisition, and patient outcomes have suffered as well, the group said.

Its recommendation to state and federal legislators is to require public reporting of all private equity or hedge fund purchases of air or ground ambulance providers or facilities, emergency room physicians, and other specialty groups – especially where there is evidence of high levels of concentration, or low levels of network participation. Public reporting, said AHIP, should include notification to existing patients and insurance providers with existing contracts.

As for federal regulators, AHIP suggested the Department of Health and Human Services should, as a condition of participation in Medicare, require hospitals in those local markets to report annually on any contracts with those private equity-backed providers, including the type of compensation structure and any incentives. 

The group also said Congress should direct the Government Accountability Office and the Federal Trade Commission to conduct studies of the anti-competitive impacts of private equity and hedge fund acquisition.

WHAT’S THE IMPACT

Addressing the role of private equity firms in healthcare was one of several recommendations AHIP made to Congress and the Biden Administration. The organization also encouraged lawmakers to support the consumer-centric expansion of home-based advanced care through value-based care and payment models. 

Additionally, AHIP implored lawmakers to advance site-neutral payments to defend consumers against having to pay more for the same services depending on the site of care. 

Historically, the organization said, Medicare paid a higher amount for comparable services that are provided in a hospital outpatient department than in a physician’s office. This higher payment structure, along with an ability to influence referrals and access 340B drug pricing, created what AHP called “a perverse incentive” for hospitals to acquire physician practices and convert them to off-campus, provider-based hospital outpatient departments. With this practice, providers raise their rates with no demonstrable difference in care, the group said.

Other recommendations from AHIP include: supporting patients’ choice of telehealth; accelerating the availability of prescription drug biosimilars; and reforming the system for provider-acquired drugs.

THE LARGER TREND

A working paper published in 2021 found private equity firm ownership to be associated with increased mortality rates and higher costs for post-acute patients, declines in five-star ratings, and slightly lower levels of direct care staffing, with the exception of an increase in registered nurse staffing.

A recent study during the COVID-19 pandemic found that private equity firm–owned facilities performed similarly to those with other types of ownership in the number of COVID-19 cases and deaths, but private equity firm–owned nursing homes had lower supplies of personal protective equipment.

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