Physician Practice Costs Grew 20% Per Claim

September 13, 2022  by  Allzone MS   189

Physician-Practice-Costs-Grew-20

Following a private equity acquisition, physician practices saw a 20.2 percent increase in charges per claim, an 11 percent raise in the allowed amount per claim, and a 37.9 percent increase in new patient visits.

Private equity acquisition of physician practices in dermatology, gastroenterology, and ophthalmology was associated with increased healthcare spending and utilization, according to a study published in JAMA Health Forum.

Private equity firms have been increasingly acquiring physician practices in recent years. Private equity acquisitions may help practices improve technology and operations, but firms tend to have short-term financial goals, which may lead to adverse access, quality, and spending outcomes.

Researchers examined spending, utilization, and practice patterns among acquired and non-acquired dermatology, gastroenterology, and ophthalmology practices between 2016 and 2020 to determine the impact of private equity acquisition.

The study reflected data from 578 practices acquired by a private equity firm and 2,874 practices that were not acquired.

Following a private equity acquisition, physician practices saw consistent growth in spending during the next eight quarters. Acquired practices saw a mean increase of $71 in charges per claim or a 20.2 percent increase. In addition, practices saw an increase of $23 in the allowed amount per claim—an 11 percent increase.

Patient utilization of healthcare services grew as well after practices underwent acquisitions.

Across the eight post-acquisition quarters, the mean number of unique patients increased by 25.8 percent. This increase was mainly driven by more new patient visits, which rose by 37.9 percent. The number of encounters grew by 16.3 percent and the number of evaluation and management (E/M) visits increased by 37.1 percent.

The increase in patient visits may reflect changes in management and practice operations or overutilization of profitable services and low-value care, the study suggested. This could lead to higher healthcare spending without corresponding benefits.

Additionally, researchers said the growing number of visits was consistent with private equity firms’ common strategy to maximize revenue through a fee-for-service delivery system.

Compared to non-acquired practices, private equity-acquired practices saw a 5.4 percent decrease in the share of total spending on out-of-network services and a 9.4 percent increase in the percentage of E/M visits for established patients billed as longer than 30 minutes.

Researchers noted some variation in spending and utilization outcomes among the three specialties. For example, allowed amounts per claim increased for ophthalmology and gastroenterology practices after private equity acquisition but not for dermatology practices.

In addition, gastroenterology practices had a larger share of patients with higher-intensity E/M visits before acquisition compared to dermatology and ophthalmology practices. Following acquisition, the share of patients with higher-intensity visits rose for dermatology and gastroenterology but not for ophthalmology.

In this instance, private equity acquisition of physician practices was associated with potential overutilization of healthcare services and higher spending. However, private equity acquisition may have different effects on other healthcare settings.

A recent Health Affairs study found that private equity acquisition of ambulatory surgical centers (ASCs) was not associated with changes in care quality, total costs, or volume.

Researchers analyzed 91 ASCs acquired by private equity firms and 57 ASCs acquired by non-private equity entities between 2011 and 2014.

They used the probability of a seven-day unplanned hospital visit to measure clinical quality at the ASCs.

The average unadjusted probability of an unplanned hospital visit for private equity acquired-ASCs before acquisition was 1.33 percent. After acquisition, the probability was 1.32 percent. The average change in the likelihood of an unplanned hospital visit at private equity-acquired ASCs relative to ASCs acquired by non-private equity entities was 0.09 percentage points.

The average change in total costs for private equity-acquired ASCs relative to the other acquired ASCs was $50.25 and the average change in the number of encounters was -49.09.

“It is possible that we did not observe relative changes in quality or volume because the acquiring companies do not meaningfully change the management, workflow, or staffing of ASCs after acquisitions,” researchers wrote.

Other studies have revealed similar findings, including research from April 2022, which found that private equity acquisition of short-term acute care hospitals did not impact patient outcomes or healthcare spending among Medicare beneficiaries.

However, a past Health Affairs study found that hospitals saw higher operating margins, decreased costs per adjusted discharge, and increased inpatient utilization after being acquired by a private equity firm

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