Private Equity’s Growing Role in Rheumatology: Benefits & Concerns
Since 2010, nearly $1 trillion has flowed into the U.S. Health care system, a surge of investment from private equity firms acquiring hospitals and practices across numerous specialties. Whether this influx of capital represents a much-needed boost or a potentially damaging takeover remains a fiercely debated question.
The scale of this investment is substantial. From 2010 to 2021, private equity deals in health care more than tripled, rising from 325 to over 1,000. The value of portfolio companies owned by these firms ballooned to over $2.6 trillion, with more than half of this investment concentrated in the United States. In 2021 alone, U.S. Health care attracted over $150 billion in private equity funding. Recent trends indicate that rheumatology, alongside traditionally targeted specialties like anesthesiology, dermatology, and ophthalmology, is now drawing significant investor attention.
A Shifting Landscape in Rheumatology
While the financial implications are clear, the impact on patient care and the practice of medicine is less so. Experts are divided on whether this corporatization of health care will ultimately benefit or harm the system. “Private equity is here,” says Stanley B. Cohen, MD, a clinical professor at the University of Texas Southwestern Medical School. “The corporatization is changing medicine and, in many cases, not for the better.”
Recent acquisitions illustrate this trend. In early 2022, Specialty Networks LLC acquired United Rheumatology, aiming to expand services like group purchasing and data analytics. Later that year, VSS Capital Partners invested in the Los Angeles-based Center for Rheumatology, which offers a range of infusion and diagnostic services. In 2019, Corrona, now CorEvitas, was acquired by Audax Private Equity, a company focused on gathering real-world evidence on autoimmune disease treatments. While specific financial details of these transactions remain undisclosed, the parent companies involved manage billions of dollars in investments. Linden Capital Partners, for example, has raised over $6 billion, while VSS Capital Partners manages $4 billion across eight funds. Access to research from these firms is limited, making independent assessment difficult.
The Core Question: Profit vs. Patient Care
Madelaine A. Feldman, MD, FACR, president of the Coalition of State Rheumatology Organizations, succinctly frames the central concern: “We all understand the goal of private equity investing in medical practices is to make money. That is their purpose.” The critical question, she argues, is whether the pursuit of profit can coexist with optimal patient care. “How does the medical practice benefit? And do those benefits outweigh the potential disadvantages for patients and practitioners?”
Allan Gibofsky, MD, JD, professor of medicine at Weill Medical College of Cornell University, suggests that the primary benefits of private equity lie in capital infusion and improved management. “Private equity allows for the return of capital to people who set the entity together,” he explains. “It also requires more efficient management of the practice, bringing business expertise that many physicians lack.” However, he acknowledges that these benefits may not extend to all staff, and business acumen doesn’t automatically translate to successful medical practice management.
Loss of Independence and Potential Impacts on Care
Michael C. Schweitz, MD, past president and founder of the CSRO, highlights a key disadvantage: the loss of independence. “Instead of being an employer, you are an employee,” he says, a shift that may be particularly unwelcome to physicians of his generation. This loss of control can translate into concerns about patient care, with some experts fearing that “more efficient management” will lead to leaner staffing and reduced time with patients. “it is probably not good for patient care,” Schweitz contends. “If it is doctor-owned and doctor-run, the goal is to take good care of patients. If it is run by an organization whose primary function is revenue, patient care may suffer.”
Harry L. Gewanter, MD, director for CSRO, suggests that rheumatology may not be a prime target for private equity due to the relatively lower revenue generated compared to procedure-heavy specialties. However, he cautions that the broader “corporatization of medicine” could still impact the field through increased consolidation and hospital employment of rheumatologists. Currently, studies show that approximately 85% of rheumatologists are employed by health systems, leaving only around 15% in private practice, according to Cohen.
The Experience in Other Specialties
Looking to other specialties where private equity has a stronger foothold, such as dermatology, offers some insights. A study published in Health Affairs found that private equity-backed dermatology practices tended to have higher patient volumes, and prices. Vertical integration, where companies control multiple aspects of healthcare delivery, is also becoming more common.
Feldman notes that in her experience, private equity acquisitions in dermatology have relieved some administrative burdens for physicians but have also reduced their autonomy. She also points to a trend of increased patient volume, potentially compromising the quality of care. “My colleague is now having to see many more patients than she did before private equity bought out the practice,” she says.
Infusion Centers and the Future of Rheumatology
Infusion centers, a significant component of rheumatology care, are particularly attractive to private equity due to their procedural revenue model. However, reimbursement rates for infusions have been declining due to policy changes and the increasing influence of pharmacy benefit managers (PBMs). PBMs are increasingly pushing for “white bagging,” where medications are sourced directly from specialty pharmacies rather than being billed through the practice, reducing revenue for rheumatologists. This complex interplay of financial pressures could shape the future of private equity investment in rheumatology.
Gibofsky suggests that the key is to separate medical practice from business management. “A rheumatology practice is a small business that requires some degree of management,” he says. “You can cite me as a person who says that physicians should practice medicine and let someone else handle the business side.” However, he emphasizes that transferring ownership to a private equity entity can lead to a loss of control and potential pressure to prioritize volume over patient care.
Navigating a Changing System
The trend toward corporatization and the increasing influence of private equity raise essential questions about the future of rheumatology. Gewanter argues that the focus should be on transparency and advocacy. “The first thing individual rheumatologists and organizations like the ACR can do is point out what is going on,” he says. “The second thing we need to do is push back.”
Cohen believes that the future may see more physicians becoming employees rather than independent practice owners, potentially accepting a less demanding work-life balance but also relinquishing financial control. Schweitz echoes this sentiment, predicting that future doctors will prioritize employment over entrepreneurship. The evolving preferences of younger physicians, coupled with the impending retirement of experienced practitioners, could accelerate this shift.
the impact of private equity on rheumatology will depend on how these forces play out. The central challenge remains balancing the pursuit of profit with the fundamental goal of providing high-quality, patient-centered care. As Feldman concludes, “Perhaps some of the efficiencies created by the private equity conglomerate may help with this. But I would hope that the physicians would not have to change their way of seeing patients, as then it becomes more of a job and less like doing what we love.”
- For more information:
- Stanley B. Cohen, MD, can be reached at 8144 Walnut Hl Ln Ste 800, Dallas, TX 75231; email: [email protected].
- Madelaine A. Feldman, MD, FACR, can be reached at 2633 Napoleon Ave. Suite 530, Latest Orleans, LA 70115; email: [email protected].
- Harry L. Gewanter, MD, can be reached at 1504 Santa Rosa Rd., Suite 210, Richmond, VA 23229; email: [email protected].
- Allan Gibofsky, MD, JD, can be reached at 525 E 71st St. 7th Floor, New York, NY 10021; email: [email protected].
- Michael C. Schweitz, MD, can be reached at 1411 N Flagler Dr. #5600, West Palm Beach, FL 33401; email: [email protected].