Wall Street Is Making Your Doctor Visits More Expensive
In the US, more and more doctors are now affiliated with the hospital conglomerates or Wall Street firms taking over the health care system — and these doctors tend to charge significantly more for office visits than independent practitioners do.
According to a new study, prices for office visits are 11 percent higher for hospital-affiliated family doctors and 8 percent higher for private-equity-affiliated doctors as of 2022. (Jeffrey Greenberg/Universal Images Group via Getty Images)
It’s increasingly likely that your family doctor is now affiliated with the hospital conglomerates or Wall Street firms taking over the American health care system — and if so, new research suggests you’re likely being charged significantly more for your office visits than you would be at an independent practice. In total, health insurers are shelling out billions more annually for corporate-owned primary care providers, and they’re passing those costs onto you.
A groundbreaking new study published in the medical journal JAMA Health Forum found that, of the nearly 200,000 primary care physicians analyzed, the percentage of doctors affiliated with hospital systems has almost doubled since 2009, with about half of general practitioners affiliated with a hospital in 2022. Another small but growing number of family doctors have been selling their practices to private equity firms encroaching on the health care industry.
As of 2023, nearly four in five physicians were employees of hospital systems, private equity firms, insurance giants, or other corporations.
These affiliations come with heftier price tags: according to the study, prices for office visits are 11 percent higher for hospital-affiliated family doctors and 8 percent higher for private-equity-affiliated doctors as of 2022.
Those costs add up. The study’s authors found that in 2022, commercial health insurers spent up to $1.8 billion more on hospital-affiliated doctors than independent providers and possibly millions more for private-equity-affiliated providers. Consequently, health insurers are raising their premiums year over year, citing rising medical costs among their top reasons.
“The growing acquisition of physician practices by hospitals and health systems and [private equity] firms is one of the most important recent trends in the organization of physician practices in the [United States],” the JAMA study’s authors wrote, who noted this is the first known analysis comparing commercial insurance prices at hospital-affiliated, private-equity-affiliated, and independent primary care practices.
While corporations say their market consolidations can help meet the growing needs of the health care system and reduce inefficiencies, studies have found that both hospital and private equity buy-ups come with poorer patient experiences and dips in physician income.
Now it’s clear those consolidations — and the resulting lack of market competition — are also jacking up costs for doctor visits.
That “prices are higher at hospital-affiliated settings relative to independent settings is consistent with prior research, which has found differences in commercial insurer payment rates for identical outpatient services delivered in physicians’ offices and hospital-affiliated settings,” wrote the new study’s authors.
Profits Over Patients
Family doctors are increasingly susceptible to selling their practices or entering a hospital system thanks to low reimbursement rates from insurance companies, making it increasingly difficult for them to remain financially viable while operating independently. Many providers are also attracted to the fact that practices owned by larger corporations have more power to negotiate higher fees from insurers.
The acquisition of family practices helps hospitals increase their market share and revenue, with hospital prices increasing significantly post-acquisition.
Wall Street is also eager to buy up physician practices: Private equity firms are seeing major returns on their health care investments, exceeding 20 percent in just three to five years. In the past decade, private equity firms have spent nearly $1 trillion on roughly eight thousand health care deals, including primary care practices.
“Over the past decade, the median internal rate of return for private equity healthcare deals has outperformed the all-industry median by about 6 percentage points,” according to the global management consulting firm Bain & Company. “Strong returns will likely continue to attract new sources of capital.”
Patients, however, aren’t necessarily benefiting from these investment deals. In fact, the larger, more complex health care systems formed by consolidating hospitals and physician practices do not generally deliver better quality care, according to a 2020 study.
Private equity buy-ups are also impacting patients. In a study published this January, researchers examined seventy-three hospitals that were recently acquired by private equity firms and found that patients’ self-reported care experience worsened following the acquisitions compared to independent hospitals. Another study found that patients were more likely to fall and contract new infections during a stay at a private-equity-owned hospital facility.
A yearlong congressional investigation into two private-equity-owned hospitals uncovered similar findings: private equity firms reap massive payouts through these investments, while patient care deteriorates.
“As our investigation revealed, these financial entities are putting their own profits over patients, leading to health and safety violations, chronic understaffing, and hospital closures,” Sen. Sheldon Whitehouse (D-RI) said in a statement. “Private equity investors have pocketed millions while driving hospitals into the ground and then selling them off, leaving towns and communities to pick up the pieces.”
This pattern extends beyond hospitals. Between 2004 and 2016, nearly 23,000 elderly Americans died as a result of living in nursing homes run by private equity firms, according to a 2021 analysis by the National Bureau of Economic Research. The data showed that going to a nursing home owned by private equity significantly “increases the probability of death during the stay and the following 90 days” as compared to different nursing homes.
Currently, at least thirty-five states require hospitals and private equity firms to notify state officials of certain proposed mergers. Yet as of last October, only five states — California, Indiana, Minnesota, New Mexico, and Oregon — have programs that regulate private equity in health care by requiring increased state oversight of these business deals.
Why You Pay Private Equity’s Bills
Other research shows that increased insurance costs for hospital and private-equity-affiliated doctors eventually get passed onto patients.
A study found that in 2022, private and employer-sponsored health insurance plans paid on average 254 percent more to hospitals than what Medicare, the federal health care program for senior citizens, would have paid for the same services at the same facilities.
These higher costs ultimately result in higher premiums for beneficiaries. This year will be the third consecutive year in which employee health care costs increase by more than 5 percent.
Premiums for individual insurance plans offered through the Affordable Care Act’s Health Insurance Marketplace are also rising, with rates potentially increasing by an average of 7 percent this year. According to an analysis by the health policy and research institute KFF, alongside inflation and the rising costs of prescription drugs, spikes in health care prices at hospitals and doctors’ offices are a key factor in driving up premium rates.
“The cost of health care has been outpacing wage growth for patients for decades, putting strain on both public and private budgets and limiting access,” noted a new report by the federal Department of Health and Human Services on consolidation and private equity in health care markets. “One of the main factors contributing to unsustainable health care inflation has been growing consolidation in the health care sector and the lack of meaningful competition.”