Higher prices at private equity-acquired gastroenterology practices
February 25, 2025
New Health Affairs study from Singh, et al. adds to growing body of research showing PE’s impact on prices
In February, Health Affairs published a study providing fresh evidence that private equity ownership of physician practices is driving up healthcare costs.[1] The study found that prices increased 28.4 percent at gastroenterology practices after being acquired by private equity, driven by a 78.1% increase in professional fees.[2]
The analysis is the first to compare prices between private equity-acquired physician practices and health system-affiliated physician practices.[3] It concludes that, when compared with health system-affiliated practices, private equity acquisition is associated with higher prices for the same services, primarily due to increases in professional fees rather than changes in facility fees.[4]
The findings add to existing research that has examined the price-increasing effects of private equity ownership on specialty practices. The study’s authors highlight a recent study that found that health care spending, driven in part by increases in patient visits and service use, increased by 32 percent at private equity-acquired gastroenterology practices versus independent practices. They also cite a separate study that estimated prices increased by 18 percent at private equity-acquired gastroenterology practices, compared to independent practices.[5]
Gastroenterology consolidation by private equity and health systems
Private equity firms began to acquire gastroenterology providers in 2016 and by 2021 private equity controlled nearly 14 percent of practices, according to estimates cited by the study’s authors. [6]
The study also highlights that health systems have been actively acquiring gastroenterology practices. According to one estimate, the share of gastroenterologists employed by health systems increased from 23 percent to 38 percent from 2016 to 2018.[7]
The authors note that outpatient procedural specialty practices such as gastroenterology are likely targeted for acquisition because specialty sectors tend to be fragmented and include a high number of independent practices. Physician practices may be consolidated by private equity firms seeking higher revenues through economies of scale and increased market power.[8]Private equity consolidation also offers physician practices the potential to increase revenues through higher professional fees at acquired practices.[9]
Private equity-affiliated gastroenterology practices charge more than health system-affiliated practices
Using novel ownership data for gastroenterology practices — which was linked to commercial claims from 2015 to 2020 — the study’s authors tracked the effect of private equity acquisition on allowed amount per claim for gastroenterology services.[10]
The study found that when compared with health system-affiliated practices, private equity acquisition was associated with higher prices for the same services.[11]
According to the data, average allowed amounts per claim were lower at private equity-acquired gastroenterology practices before acquisition. After private equity acquisition, average allowed amounts at acquired practices increased by $92 per claim, or 28.4 percent through six calendar quarters post-acquisition.[12]
Increased prices at private equity-acquired practices were primarily due to increased professional fees. Practices acquired by private equity experienced a mean increase of $173 in professional fees per claim — or a 78.1 percent increase. There was no statistically significant change in facility fees per claim.[13]
Private equity counteracts policies to limit healthcare spending
The study has important implications for how policymakers seek to regulate healthcare spending.
The study’s authors point out that “even as policy makers work to shift care away from expensive hospital-based settings to outpatient office settings, the proliferation of PE ownership of outpatient practices, with increases in professional fees driving the price growth, has the potential to counteract policy efforts to address healthcare spending.”[14]
The authors raise questions about proposed reforms such as site-neutral payment policies, which aim to ensure that the same rate is paid for the same service, regardless of where it is provided. While site-neutral payment reforms can reduce incentives for hospital consolidation of physician practices and associated price increases, the study’s results “suggest that such policies will be insufficient to regulate price increases driven by PE firms.”[15]
The researchers conclude with several proposals aimed towards mitigating the risks from private equity investment in healthcare. These measures include greater antitrust enforcement, improved transparency of acquisitions, and closing of payment loopholes exploited by private equity firms such as surprise billing strategies.[16]
[1] Singh, Yashaswini, Zirui Song, Daniel Polsky, and Jane M. Zhu. “Increases In Physician Professional Fees In Private Equity–Owned Gastroenterology Practices.” Health Affairs 44, no. 2 (February 2025): 215–23. https://doi.org/10.1377/hlthaff.2024.00190.
[2]Id. at 219.
[3]Id. at 215.
[4]Id. at 221.
[5]Id. at 215.
[6] Ibid.
[7]Id. at 216.
[8]Id. at 215.
[9]Id. at 222.
[10]Id. at 215-216.
[11]Id. at 221.
[12]Id. at 219.
[13] Ibid.
[14]Id. at 222.
[15] Ibid.
[16] Ibid.
