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Emergence of private equity funds in healthcare raise concerns over quality

On Behalf of | Apr 11, 2023 | Medical Malpractice |

Private equity funds pool investments from wealthy individuals to create companies in several industries. It’s a proven model for Wall Street investors, many of whom have no intent to stick around for the long haul. Most private equity firms slash spending and look to sell in three to five years.

What’s troubling to many is that PE funds are gaining footholds in the U.S. healthcare industry, offering a staffing strategy that leaves many hospitals and emergency rooms with fewer doctors. The plan is to replace M.D.s with physician assistants and nurse practitioners.

Does the “blended” model work?

Some medical staffing companies substitute ER physicians with “midlevel practitioners” to reduce costs and increase profits. Physician assistants and nurse practitioners can perform many of the same duties as doctors for less than half the pay. Staffing companies argue this “blended” approach helps keep ERs fully staffed.

But critics say prioritizing profits over patient outcomes is not a sound strategy. They say midlevel practitioners have far less training than physicians, which leaves patients more at risk for misdiagnoses and other avoidable errors. They say under this model; patients are far more likely to receive inadequate care and pay higher medical bills.

Research published by the National Bureau of Economic Research says, on average, ER patients treated by nurse practitioners experience an 11% increase in the time they are being treated, increasing patient medical bills by 7%. The study analyzed over 1 million patient visits to 44 Veterans Health Administration ERs.

A decade-long trend

Over the past 10 years, PE funds have spent $1 trillion buying medical staffing companies that hospitals depend on to manage their ERs. The largest are TeamHealth, owned by private equity behemoth Blackstone, and Envision, bought in 2018 by KKR. They are being challenged by American Physician Partners, which has rapidly expanded to 17 states. So far, out of the three, only TeamHealth provides medical staffing in Iowa.