Private equity gobbles up dermatology practices, raising questions about outcomes, costs

By | July 24, 2019

Dive Brief:

  • Fewer dermatologists are working solo compared to a decade ago as private equity has upped its stake in dermatology practices nationwide, according to a new report in JAMA Dermatology.
  • The latest study found 17 different PE groups acquired 184 practices over a six-year period, snapping up about 381 clinics overall.
  • PE acquisitions helped drive regional consolidation, boosting a practice’s market share in that region. About 36% of acquired practices are in Texas and Florida alone, according to the research. 

Dive Insight:

Private equity investment in healthcare isn’t new — transactions hit a record last year with more than 300 deals valued at just above $ 63 billion, according to Bain & Company. The consulting firm said “competition for assets will not likely decline in the near future” and 2019 “should be another banner year for healthcare private equity.”

But this recent study attempts to show the growth of PE-backed dermatology acquisitions and their spread geographically over time.

Consolidation, particularly among payers, and regulations have made selling to PE firms more attractive over the years, George Hruza, president of the American Academy of Dermatology, told Healthcare Dive.

“It’s a symptom of consolidation in medicine in general,” Hruza said.

Having greater scale can help balance the playing field when taking on large payers, especially in certain regions where there may be only one dominant player.

As an independent physician, “you have no chance” of out-leveraging a large insurance provider, Hruza said. It’s harder for smaller practices to negotiate because they can’t threaten to walk away from a contract as it would mean losing access to networks that provide a significant number of patients, he said.

JAMA Dermatology

What the study can’t answer is the effect private equity ownership has on patient outcomes and overall health expenditures. The study authors encourage further research in this area.

But there are some benefits to turning to private equity. They can infuse a practice with cash, capital and help alleviate administrative burdens, they said

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