May 14, 2023

The New York Times reports on a growing trend among healthcare organizations in the US, the impact of which may be of concern for patients and taxpayers. The Times reported on May 8, 2023 (“Corporate Giants Buy Up Primary Care Practices at Rapid Pace”) that:

“CVS Health, with its sprawling pharmacy business and ownership of the major insurer Aetna, paid roughly $11 billion to buy Oak Street Health, a fast-growing chain of primary care centers that employs doctors in 21 states. And Amazon’s bold purchase of One Medical, another large doctors’ group, for nearly $4 billion, is another such move.

“The appeal is simple: Despite their lowly status, primary care doctors oversee vast numbers of patients, who bring business and profits to a hospital system, a health insurer or a pharmacy outfit eyeing expansion.

“And there’s an added lure: The growing privatization of Medicare, the federal health insurance program for older Americans, means that more than half its 60 million beneficiaries have signed up for policies with private insurers under the Medicare Advantage program. The federal government is now paying those insurers $400 billion a year.”

This consolidation isn’t a new phenomenon. Again from the Times:

“The absorption of doctor practices is part of a vast, accelerating consolidation of medical care, leaving patients in the hands of a shrinking number of giant companies or hospital groups. Many already were the patients’ insurers and controlled the distribution of medicines through ownership of drugstore chains or pharmacy benefit managers. But now, nearly seven in 10 of all doctors are either employed by a hospital or a corporation, according to a recent analysis from the Physicians Advocacy Institute.”

This could be of great concern for patients. As the Times noted:

“This consolidation of medical care may also run afoul of state laws that prohibit what is called corporate medicine. Such statutes prevent a company that employs doctors from interfering with patient treatment.

“And experts warn of the potential harm to patients, when corporate management seeks to control costs through byzantine systems requiring prior authorization to receive care.”

The COVID-19 pandemic accelerated this trend. KFF, the healthcare foundation formerly known as the Kaiser Family Foundation, noted in September 2020 (“What We Know About Provider “Consolidation”) that:

“Depending on the severity and duration of revenue loss, some hospitals and physician practices may find it difficult to operate independently, which could increase the rate of consolidation among health care providers. Lower margins among some providers may create new opportunities for large chains to acquire smaller providers. The Coronavirus Aid, Relief, and Economic Security (CARES) Act and the Paycheck Protection Program and Health Care Enhancement Act allocated $175 billion for grants to providers that were partly intended to help make up for revenue lost due to coronavirus, but analysis shows that the first $50 billion in grants were not targeted to providers most vulnerable to revenue losses.² Another $13 billion was subsequently targeted to safety net hospitals and $11 billion has been targeted to rural providers.³ However, it is not clear whether this infusion of funds plus other government loans—including those from the Paycheck Protection Program—will be sufficient to stabilize providers who are least equipped to weather this revenue decline. Even if sufficient government assistance is provided, the disruption of the COVID-19 pandemic may make operating independently seem less attractive and riskier to some smaller providers. Therefore, financial assistance to providers may not be sufficient to prevent an increase in the pace of consolidation.”

There are concerns that these private equity buyouts will have a negative impact on competition, health, and quality of care. The American Antitrust Institute and experts from the UC Berkeley School of Public Health released a report on this in 2021 entitled “Soaring Private Equity Investment in the Healthcare Sector: Consolidation Accelerated, Competition Undermined, and Patients at Risk.” Among their findings, they noted that:

“Private equity funds, by design, are focused on short-term revenue generation and consolidation and not on the care and long-term wellbeing of patients. This in turn leads to pressure to prioritize revenue over quality of care, to overburden health care companies with debt, strip their assets, and put them at risk of long-term failure, and to engage in anticompetitive and unethical billing practices. Adding to the mounting evidence of the negative impact of private equity on healthcare, two recent National Bureau of Economic Research studies of the nursing home and dialysis markets found that private equity ownership is correlated with worse health outcomes and higher prices.”

Health Systems Facts is a project of the Real Reporting Foundation. We provide reliable statistics and other data from authoritative sources regarding health systems in the US and sixteen other nations.

Page last updated May 14, 2023 by Doug McVay, Editor.