Our Publications

Monetizing Medicine: Private Equity and Competition in Physician and Practice Markets Addendums

“The addendums provide additional data and more detailed information regarding metropolitan statistical areas (MSAs) that had a private equity (PE) firm with 30+% or 50+% market share in 2021 for one or more of the ten physician specialties analyzed in the report. Addendum 1 provides the physician specialty, the name of the physician practice, and the PE firm with the 30+% or 50+% market share for most of the MSAs mentioned in the original report. Addendum 2 presents the MSA-level three year post-PE price increase for the affected specialty.”

Addendums authored by by Richard M. Scheffler and Daniel R. Arnold | Link to the addenda and full report.

Monetizing Medicine: Private Equity and Competition in Physician and Practice Markets

Check out the Petris Center’s recent report on the rise of private equity firms in acquiring physician practices, in collaboration with AAI and the Washington Center for Equitable Growth. The study covers ten medical specialties across the United States, offering insights into private equity’s impact on market concentration and healthcare expenditure. Lead author Richard Scheffler expresses concerns over shifts towards prioritizing profits over patient care, with far-reaching implications in the practice of medicine.

By Richard M. Scheffler, Laura Alexander, Brent D. Fulton, Daniel R. Arnold, Ola A. Abdelhadi | Link to the full report here

Comments of Professors of Law and Economics, Economists, and Health Policy Researchers on the Draft Merger Guidelines

By Thomas L. Greaney, Richard M. Scheffler, Katherine L. Gudiksen, Jaime S. King, Amy Y. Gu, Brent D. Fulton, Paul B. Ginsburg, and Daniel R. Arnold | Link to Full Comment

The Draft Merger Guidelines (DMGs) constitute a major step forward in providing economically sound guidance to practitioners and courts for evaluating the potential competitive impact of mergers and acquisitions. These comments are offered by a group of law professors, economists, and policy experts who have devoted most of their professional careers to issues concerning market and regulatory issues involving health care providers and payors. The comment focus on several proposed changes that are of particular importance to improving oversight of consolidation in the health care sector.

The Better Care Plan: a blueprint for improving America’s healthcare system

By Stephen M Shortell, John S Toussaint, George C Halvorson, Jon M Kingsdale, Richard M Scheffler, Allyson Y Schwartz, Peter A Wadsworth, Gail Wilensky | Published June 20, 2023 in Health Affairs Scholar | Link to Full Article

The United States falls far short of its potential for delivering care that is effective, efficient, safe, timely, patient-centered, and equitable. We put forward the Better Care Plan, an overarching blueprint to address the flaws in our current system. The plan calls for continuously improving care, moving all payers to risk-adjusted prospective payment, and creating national entities for collecting, analyzing, and reporting patient safety and quality-of-care outcomes data. A number of recommendations are made to achieve these goals.

Private Equity and Your Doctor: Profits Before Patients | Public Policy & Aging Report

By Richard M. Scheffler, Ola Abdelhadi | Published April 21, 2023 in Oxford Academic | Link to Full Article

Older Americans have unique health needs that require specialized care and support. As people age, they are more likely to develop multiple chronic conditions such as cancer, diabetes, heart disease, and arthritis, which can greatly affect their quality of life (Boyd et al., 2019). Additionally, older adults may also experience physical and cognitive declines, which can make it difficult for them to manage their own healthcare. Access to healthcare and supportive services is crucial for older Americans to maintain their health and independence. Services such as home healthcare, nursing homes, and hospice care play a vital role in helping older adults lead fulfilling lives and maintain their quality of life for as long as possible. The majority of hospice patients are diagnosed with one or more chronic conditions, with cancer being the most common (29.6%), followed by circulatory or heart disease (17.4%) and dementia (15.6%) (Hospice Facts & Figures, 2020). Meanwhile, as the American population of persons aged 65 years and over will soon outnumber those under 18 year of age, there are concerns about the quality of care for older Americans as the healthcare industry shifts towards private equity (PE) ownership (Braun, Stevenson, et al., 2021).

Association Between a Capitated, Low-cost, County-Based Public Health Insurance Option and Affordable Care Act Premium Growth in California

By Arjun Teotia, Daniel R. Arnold, Richard M. Scheffler | Published April 21, 2023 in JAMA Health Network | Link to Full Article

Is a low-cost, county-based public insurance option associated with slower premium growth on the California Affordable Care Act exchange?

On Covered California (CC), the state-run Affordable Care Act (ACA) exchange in California, gross annual premiums for members have increased by 41% since CC started in 2014 ($9612 in 2022 vs $6804 in 2014).1 Through CC, individuals and their families can purchase private health insurance plans. Exchange coverage is generally intended for those who do not have access to health insurance through their employer, Medicare, or Medicaid. Nearly 90% of CC enrollees receive subsidized coverage in the form of reduced (often 0) premiums and reduced cost sharing.1 California is one of the few states that uses an active purchaser model for its exchange, which allows it to standardize benefits and cost sharing, selectively contract with insurers, and negotiate premiums.2 Premiums and insurers vary across the 19 regions of CC. Los Angeles (LA) has some of the lowest premiums and premium growth rates on CC. It is also the only region with a public plan—LA Care—which competes with 6 private insurers on the exchange.

Our work extends this research and is the first known study to empirically evaluate how a county-based public option performs in the ACA Marketplace in California. Specifically, we statistically evaluated whether LA Care was associated with reduced premium growth in LA compared with premium growth in other regions of CC.

A Proposed Public Option Plan to Increase Competition and Lower Health Insurance Premiums in California

By Richard M. Scheffler, Stephen M. Shortell | Published April 21, 2023 in The Commonwealth Fund | Link to Full Article

A public option is a government-established health insurance plan designed to inject more competition into the market and improve coverage affordability over time. Despite widespread support, little progress has been made at the federal or state level toward creating such a plan. We propose a public option plan for California, Golden Choice, that would be based on the state’s “delegated model” of health care under which provider organizations accept the financial risk for delivering health care services.

Even though a “public option” health plan has support from the Biden administration as well as the majority of voters, little progress has been made in creating one at the federal level.1 At the state and county levels, public options — simply, health insurance plans established by governmental entities — have been introduced to increase competition in the insurance market and improve affordability of health coverage over time. Governmental authorities can either directly administer these plans or establish a public–private partnership whereby the state sets requirements for private health plans to offer coverage.

Absent federal action, several states like Washington, Colorado, Nevada, and Minnesota have developed their own public option plans, with many other states in the process of developing plans.2 These plans rely on price caps or regulations, such as a requirement that insurers offer a public option plan to participate in Medicaid.3 To date, however, they have had little success in attracting enrollment or increasing competition among insurers to lower premiums.4

We propose a different type of public option plan for California. It would be based on the state’s “delegated model” of health care: provider organizations accept the financial risk of delivering health services, and their earnings are linked to their ability to keep patient care costs within a budget. Below we describe this new approach to a public option, which we call Golden Choice, and evaluate its potential impact on consumers’ health insurance premiums.

Golden Choice: California’s Public Option

By Richard M. Scheffler, Stephen M. Shortell, and Daniel R. Arnold | Published April 21, 2022 | Link to Full Report

California’s challenge and opportunity is to provide accessible, affordable, equitable, and
continuously improving quality of care to its entire population. Governor Newsom has expanded
Medi-Cal to cover undocumented adult immigrants, which when combined with the Biden
administration’s premium subsidy increases, will result in near universal coverage for all in
California. Nonetheless, the affordability of such coverage remains a major challenge for the
state. A recent CHCF / NORC survey of Californians reported that just over half (52%) of
respondents said they skipped or postponed care due to costs. Additionally, more than 1 in 3
(36%) reported having medical debt, with 1 in 5 (19%) of those with medical debt owing $5,000
or more. Just over half (52%) of people with lower incomes surveyed reported having medical
debt, compared to 30% for those with higher incomes. Furthermore, Latino/x (52%) and Black
(48%) Californians were more likely to have medical debt than White (28%) and Asian (27%)
Californians. Between 2008 and 2018, Californians’ health care spending experienced a 68%
increase, compared to only a 16% increase in median household income. The growth in health
insurance premiums has far exceeded that of wages over the last two decades.

Building on the success of Covered California (the state’s innovative health insurance
exchange) and the presence of organized/integrated medical groups and independent practice
associations (IPAs) with experience in providing care under risk-adjusted per member per
month payments, the state has the potential to develop a public option that increases
competition in the health insurance market, which would lower price and can improve quality. A
public option plan (POP) is a state plan to offer health insurance for the purpose of increasing
competition, consumer choice, and affordability of coverage. Improvements in affordability
would be particularly important for low-income and minority populations, as their wages are
lower. We test the viability of our POP on Covered California and CalPERS. Furthermore, we
show how the L.A. Care county-based plan was successful in attaining enrollment while
lowering premium growth for all plans in the LA Regions of Covered California. At this time, we
are not recommending that a POP be offered on Covered California or by CalPERS. This
decision will need to be made by them, legislators, or the governor. Nonetheless, our analysis
shows that our POP would have lower premiums than many of the plans currently on the
Covered California.

This study was funded by the Commonwealth Fund (Grant No. 20223713).

The Rise of Cross-Market Hospital Systems And Their Market Power in the US

By Brent D. Fulton, Daniel R. Arnold, Jaime S. King, Alexandra D. Montague, Thomas L. Greaney, and Richard M. Scheffler | Published November 11, 2022 in Health Affairs | Link to Full Article

Although hospital consolidation within markets has been well documented, consolidation across markets has not, even though economic theory predicts—and evidence is emerging—that cross-market hospital systems raise prices by exerting market power across markets when negotiating with common customers (primarily insurers). This study analyzes hospital systems using the American Hospital Association Annual Survey Database and defines hospital geographic markets as commuting zones that link workers to places of employment. The share of community hospitals in the US that were part of hospital systems increased from 10 percent in 1970 to 67 percent in 2019, resulting in 3,436 hospitals within 368 systems in 2019. Of these systems, 216 (59 percent) owned hospitals in multiple commuting zones, in part because 55 percent of the 1,500 hospitals targeted for a merger or acquisition between 2010 and 2019 were located in a different commuting zone than the acquirer. Based on market-power differences among hospitals in systems, the number of systems in urban commuting zones that could potentially exert enhanced cross-market power increased from thirty-seven systems in 2009 to fifty-seven systems in 2019, an increase of 54 percent. The increase in cross-market hospital systems warrants concern and scrutiny because of the potential anticompetitive impact of hospital systems exerting market power across markets in negotiations with common customers.

Private Equity’s Entry into Healthcare Reveals Gaps in Competition Policy

By Laura Alexander, Ola Abdelhadi, Brent Fulton, and Richard Scheffler | Published October 27, 2022 in the Competition Policy International (CPI) Antitrust Chronicle | Link to Full Article

The large and increasing amount of money under private equity (“PE”) management and the huge push by PE into healthcare, raises concerns and challenges for healthcare policy, but also for competition policy. Emerging evidence about the adverse impact of PE investment in healthcare on competition, prices, quality of care, and patient health is a serious concern. These troubling findings raise the question of how, if at all, antitrust law and antitrust enforcers should treat conduct and deals involving PE owners. While one of the virtues of the antitrust laws is their broad applicability, application of those laws to particular markets and companies is only effective when it is rooted in the realities of competition in those market and the competitive incentives that those companies face. PE’s impact on healthcare reveals significant gaps in the tools and methods for using the antitrust laws to protect competition. We conclude, however, that competition laws applicable only to PE are not generally needed; rather, when policymakers, regulators, and enforcers are applying competition laws to PE-owned companies, they need to take account of the unique incentives facing PE managers, the competitive implications of the PE ownership structure, and types of competition concerns that tend to arise surrounding PE deals. In markets that already face limited competition, such as healthcare, the incentives and ownership structures of PE may exacerbate existing competition concerns and anticompetitive impacts, potentially necessitating PE-specific policies.