Private equity's growth in orthopedics leads to cost, quality concerns


As private equity investment continues to branch out in the orthopedic industry, some are worried the trend comes at a cost to patient quality and spending, Kaiser Health News reported Jan. 6.

There are 15 private equity-backed management companies that own orthopedic practices, according to Gary Herschman, a lawyer who advises physicians in deals. Last year, at least 15 orthopedic practices were sold to private equity-owned platforms.

One of those practices was Atlanta-based Resurgens Orthopaedics. In December 2021, the practice sold a 60 percent share in its own management company to private equity firm Welsh, Carson, Anderson & Stowe.

Advocates for private equity say investments may lower total costs on orthopedic care and improve quality, the report said. For instance, more procedures could go to ASCs, and practices could shift to value-based care payment models.

For Resurgens, its management company, United Musculoskeletal Partners, later brought in another private equity firm investor and acquired orthopedic practices in Dallas and Denver. Sean Traynor, a general partner at Welsh Carson, told KHN that the physicians retain full governance while being able to negotiate stronger contracts, get better deals on supply and build more ASCs.

However, critics worry private equity investment could lead to higher prices for patients and insurers. A study found that within two years of a sale, private equity-owned practices in other specialties had average claim charges 20 percent higher than those not owned by private equity.

"Private equity has no interest in reducing the cost of medicine," Louis Levitt, MD, chief medical officer of management services organization MedVanta, told KHN. "Their goal is to increase profitability in three to five years and sell to the next group that comes along. They can only do it by making the doctors work longer and reduce service delivery."

Large employers who use self-funded plans to cover orthopedic care for workers are also wary of private equity in the specialty, KHN reported. Their fear is that new owners will take advantage of the fee-for-service system instead of using effective, low-cost services for lower back pain.

Two private equity-backed groups, U.S. Orthopaedic Partners and Healthcare Outcomes Performance Co., are addressing those concerns and say they have systems to provide episodes of care at lower costs compared to fixed-payment models.

David Jacofsky, HOPCo's chair, told KHN private equity owners should move toward value-based care, but currently it's rare. 

"Private equity has lofty goals of wanting to build these things, but the time frame it takes is much longer than private equity wants to stay in these deals," he said.

Copyright © 2024 Becker's Healthcare. All Rights Reserved. Privacy Policy. Cookie Policy. Linking and Reprinting Policy.


Featured Webinars

Featured Whitepapers