Private-Equity Raises Colonoscopy Costs but Not Quality

Private-equity (PE) acquisition of gastroenterology (GI) practices led to higher colonoscopy prices, utilization, and spending with no commensurate effect on quality, an economic analysis found. Price increases ranged from about 5% to about 7%.

In view of the growing trend to such acquisitions, policy makers should monitor the impact of PE investment in medical practices, according to researchers led by health Economist Daniel R. Arnold, PhD, of the Department of Health Services, Policy & Practice in the School of Public Health at Brown University in Providence, Rhode Island. “In a previous study of ours, gastroenterology stood out as a particularly attractive specialty to private equity,” Arnold told Medscape Medical News.

Published in JAMA Health Forum, the economic evaluation of more than 1.1 million patients and 1.3 million colonoscopies concluded that PE acquisitions of GI sites are difficult to justify.

The Study

This difference-in-differences event study and economic evaluation analyzed data from US GI practices acquired by PE firms from 2015 to 2021. Commercial insurance claims covering more than 50 million enrollees were used to calculate price, spending, utilization, and quality measures from 2012 to 2021, with all data analyzed from April to September 2024.

The main outcomes were price, spending per physician, number of colonoscopies per physician, number of unique patients per physician, and quality, as defined by polyp detection, incomplete colonoscopies, and four adverse event measures: cardiovascular, serious and nonserious GI events, and any other adverse events.

The mean age of patients was 47.1 years, and 47.8% were men. The sample included 718, 851 colonoscopies conducted by 1494 physicians in 590, 900 patients across 1240 PE-acquired practice sites and 637, 990 control colonoscopies conducted by 2550 physicians in 527,380 patients across 2657 independent practice sites.

Among the findings:

• Colonoscopy prices at PE-acquired sites increased by 4.5% (95% CI, 2.5-6.6; P < .001) vs independent practices. That increase was much lower than that reported by Singh and colleagues for noncolonoscopy GI services.

• The estimated price increase was 6.7% (95% CI, 4.2-9.3; P < .001) when only colonoscopies at PE practices with market shares above the 75th percentile (24.4%) in 2021 were considered. Both increases were in line with other research, Arnold said.

• Colonoscopy spending per physician increased by 16.0% (95% CI, 8.4%-24.0%; P < .001), while the number of colonoscopies and the number of unique patients per physician increased by 12.1% (95% CI, 5.3-19.4; P < .001) and 11.3% (95% CI, 4.4%-18.5%; P < .001), respectively. These measures, however, were already increasing before PE acquisition.

• No statistically significant associations were detected for the six quality measures analyzed.

Could such cost-raising acquisitions potentially be blocked by concerned regulators? 

“No. Generally the purchases are at prices below what would require notification to federal authorities,” Arnold said. “The Department of justice/Federal Trade Commission hinted at being willing to look at serial acquisitions in their 2023 Merger Guidelines, but until that happens, these will likely continue to fly under the radar.”

Still, as evidence of PE-associated poorer quality outcomes as well as clinician burnout continues to emerge, Arnold added, “I would advise physicians who get buyout offers from PE to educate themselves on what could happen to patients and staff if they choose to sell.”

Offering an outsider’s perspective on the study, Health Economist Atul Gupta, PhD, an assistant professor of healthcare management in the Wharton School at the University of Pennsylvania in Philadelphia, called it an “excellent addition to the developing literature examining the effects of private-equity ownership of healthcare providers.” Very few studies have examined the effects on prices and quality for the same set of deals and providers. “This is important because we want to be able to do an apples-to-apples comparison of the effects on both outcomes before judging PE ownership,” he told Medscape Medical News.

In an accompanying editorial , Primary Care Physician Jane M. Zhu, MD, an associate professor of medicine at Oregon Health & Science University in Portland, Oregon, and not involved in the commercial-insurance-based study, said o ne interpretation of the findings may be that PE acquisition focuses on reducing inefficiencies, improving access by expanding practice capacity, and increasing throughput. “Another interpretation may be that PE acquisition is focused on the strategic exploitation of market and pricing power. The latter may have less of an impact on clinical measures like quality of care, but potentially, both strategies could be at play.” 

Since this analysis focused on the commercial population, understanding how patient demographics may change after PE acquisition is a future avenue for exploration. “For instance, a potential explanation for both the price and utilization shifts might be if payer mix shifted toward more commercially insured patients at the expense of Medicaid or Medicare patients,” she wrote.

Zhu added that the impact of PE on prices and spending, by now replicated across different settings and specialties, is far clearer than the effect of PE on access and quality. “The analysis by Arnold et al is a welcome addition to the literature, generating important questions for future study and transparent monitoring as investor-owners become increasingly influential in healthcare.”

Going forward, said Gupta, an open question is whether the harmful effects of PE ownership of practices are differentially worse than those of other corporate entities such as insurers and hospital systems.

“There are reasons to believe that PE could be worse in theory. For example, their short-term investment horizon may force them to take measures that others will not as well as avoid investing into capital improvements that have a long-run payoff,” he said. “Their uniquely high dependence on debt and unbundling of real estate can severely hurt financial solvency of providers.” But high-quality evidence is lacking to compare the effects from these two distinct forms of corporatization.

The trend away from individual private practice is a reality, Arnold said. “The administrative burden on solo docs is becoming too much and physicians just seem to want to treat patients and not deal with it. So the options at this point really become selling to a hospital system or private-equity.”

This study was funded by a grant from the philanthropic foundation Arnold Ventures (no family relation to Daniel Arnold). 

Authors Arnold, Brent D. Fulton, and Richard M. Scheffler reported receiving grants from Arnold Ventures during the conduct of the study. Fulton reported an honorarium from the Minnesota Medical Association outside the submitted work. 

Gupta had no competing interests to declare.

Zhu reported receiving grants from the Agency for Healthcare Research and Quality during the submitted work and from the National Institutes of Health, National Institute for Health Care Management Foundation, and American Psychological Association, as well as personal fees from Cambia outside the submitted work.