As more private equity firms acquire physician practices and healthcare moves from a fee-for-service system to value-based care, potential ethical implications of both are important for physicians to consider in prioritizing their duty to patients, according to the American College of Physicians.
The organization outlined recommendations for doing so in a position paper published in the Annals of Internal Medicine.
“Today, changing practice dynamics place greater focus on the business aspects of medicine,” the authors wrote. “Although employment or consolidation within larger organizations may not be problematic per se, physicians, regardless of practice setting, should challenge business concerns that are placed above the best interests of patients.”
Due to financial strain from the COVID-19 crisis, changing dynamics may include an uptick in the already increasing number of physician practices being acquired by private equity firms, according to the paper. Private equity firms typically take a large stake in the practice, invest in it to increase market share and revenue, take actions to decrease costs, and sell the practice within a few years to generate returns for investors. Those buyers include other private equity firms, large corporations, the public via an initial public offering, and insurance companies.
“This desire to sell the practice soon after acquisition can create the incentive to sell off parts of the practice or undertake drastic short-term cost-cutting measures, including staff layoffs, to make a potential sale more attractive,” the authors wrote. “Insurance companies may further narrow their networks or restrict patient access to only their employed physicians.”
“Because of their current value, relatively limited supply, and perceived future earning potential, dermatology, radiology, and ophthalmology practices particularly interest private equity firms,” they added.
Though private equity can provide resources to maintain solvency and promote innovation, it can also limit physician control, the authors wrote. The need to generate returns quickly can also compete with other interests, such as long-term investments in safety and quality.
The authors cited the example of Hahnemann University Hospital in Philadelphia, which was bought by a for-profit corporation and shuttered just a year later.
Patients were left without access to care, the authors noted, and hundreds of medical residents and fellows were left in limbo, MedPage Today previously reported.
Additional concerns are that private equity firms may limit Medicaid and Medicare patients due to lower rates of reimbursement and more complex medical needs, the authors added. Physician practices owned by private equity firms have also been accused of aggressive or surprise out-of-network billing practices.
“Physicians who sell to a private equity firm must assess doing so with attention to potential effects on ethics and professionalism,” the authors wrote. “At present, there is insufficient evidence comparing the clinical performance and ethical implications of private equity ownership versus other practice arrangements (partly because of nondisclosure agreements in some private equity agreements).”
Put simply, “Caution is needed,” they wrote.
As for value-based payment, it’s designed to promote high-quality care. However, the authors wrote, concerns include inappropriately influencing patient or physician choice, failing to account for complex medical illnesses, and creating access-to-care barriers for disadvantaged patient groups.
“A fundamental concern is whether the use of extrinsic incentives — financial or nonfinancial — actually undermines the intrinsic motivation of physicians (a phenomenon known as ‘motivational crowding’),” they wrote. “Paying physicians incentives could reduce intrinsic reasons or motivations of professionalism, clinical integrity, and the sense of medicine as a calling.”
The authors added that similar concerns exist for referral-based incentives. They can be efficient and benefit coordinated care, but also restrict patient choice. Incentives for referrals must be transparent, they wrote.
The authors’ recommendations about contract clauses included that confidentiality clauses should not interfere with patient well-being or physician responsibility to promote community health and quality improvement.
Another recommendation in the paper was that organizations should value time when it comes to patients’ appointments with physicians. Time is needed for effective communication, counseling and physical examination as well as expressing compassion, the authors wrote.
New physicians as well as those with decades of experience have a role to play in being aware of how business practices and employment terms can affect ethics and professionalism, they concluded.
“The challenges to care and medical practice during and after the COVID-19 pandemic underscore the need to reemphasize the ethical foundation of medicine,” the authors wrote. “Looking anew at the environment in which care is delivered, physicians should lead in ensuring that business relationships explicitly recognize and support the fundamental and timeless commitments of physicians and medicine to patients.”
Jennifer Henderson joined MedPage Today as an enterprise and investigative writer in Jan. 2021. She has covered the healthcare industry in NYC, life sciences and the business of law, among other areas.