PESP response to industry claims about medical debt

Private equity profiting from U.S. medical debt

PESP published a report in September detailing how private equity both profits from and contributes to the $220 billion U.S. medical debt crisis through the ownership of revenue cycle management (RCM) companies.

Private equity-owned RCM companies provide services from “end-to-end” along the revenue cycle, including medical credit card providers which can leave patients with high interest payments, as well as debt collection companies which use aggressive tactics that sometimes violate the law.[1]

The private equity industry’s leading trade association – the American Investment Council (AIC) – has published a response to the report, titled “No, Private Equity is Not Driving Medical Debt: Refuting Another Half-Baked Activist ‘Study.'”[2]

The short blog post uses scare quotes (“debt crisis”) when referring to rising U.S. medical debt as a crisis[3] – a very real, nationwide market failure impacting 14 million people and totaling at least $220 billion[4] and an issue deserving serious treatment from major private equity industry representatives.

The brisk response to our report – a clickbait headline above a 500-word listicle containing 14 links, five which refer back to other AIC sources and one which helpfully links to our report – lacks one substantive word on PESP’s findings and refutes nothing.

Instead, it repeats misleading industry talking points, making sharply clear the need for additional transparency around private equity investments in healthcare and demonstrating the importance of actually-informed discussion regarding private equity’s role in driving up U.S. medical debt.

Many revenue cycle management companies receive private equity backing

Revenue cycle management, according to private equity-owned accounting and consulting firm Baker Tilly, “involves the control of payments as they flow through the healthcare ecosystem, amongst patients, providers, facilities and suppliers. Activities falling under the RCM umbrella include billing, collections, coding, data analytics and compliance.”[5]

Leading healthcare industry publication Becker’s Hospital Review has prepared a helpful list that illustrates RCM’s scope – “354+ healthcare revenue cycle management companies to know” – which was updated in October 2024 to include 397 companies.[6]

Among the companies listed are private equity-owned debt collectors and medical credit card companies – including some companies which have, at one end, placed debt with high-interest rates onto patients unable to afford health costs or, at the other end, aggressively pursued collections from patients who are unable to keep up with medical debt payments.[7]

PESP identified 113 private equity-owned companies providing healthcare RCM services, or 28.5% of companies included on the Becker’s list.

For a list of the private equity-owned RCM companies, see this PESP document. For descriptions, please refer to the complete Becker’s list of 354+ companies.[8]

For a list including other private equity-owned revenue cycle management companies, see the appendix in our recent report: Private Equity’s Revenue Cycle: Creating and Collecting U.S. Medical Debt.

The AIC blog post does not refute PESP’s findings

The American Investment Council claims private equity has made “limited” investments in revenue cycle management companies.[9] In support of this claim it cites one of its own public comment letters, in which the group tells federal regulators that it is “unaware of any AIC members” investing in five companies.[10]

According to the U.S. Securities and Exchange Commission, in 2021 there were more than 18,000 private equity funds.[11] The American Investment Council has approximately 120 members: 86 principal and general members and 32 associate members including law offices, consulting firms, and private equity firms.[12]

The AIC clarifies that one of the five companies, medical payments provider AccessOne, had received some investment from a private equity firm, which the AIC emphatically described as a small “non-controlling” investment.[13]

It is not entirely clear what the Council’s words mean here — AccessOne announced a majority equity investment from private equity firm Frontier Growth in early 2017.[14] As of November 2024, AccessOne counts two current Frontier Growth partners on its three-member board. The board also has two advisors who have both served as operating partners at Frontier Growth.[15]

Many people do not know that private equity has invested in healthcare revenue cycle management: “Many people don’t realize it,” wrote the Investment Council’s president in an op-ed published in July 2023, “but there is a good chance that the medical technology used at your last appointment, the new urgent care center near your home, or the platform you use for virtual appointments were funded by private equity.”[16]

The piece claims that “private equity investors help providers with day-to-day operations and remove administrative burdens, such as billing, accounting, and management…”[17]

The industry’s leading representative sometimes makes opportunistic, contradictory statements about private equity investments in RCM companies, and about healthcare generally.

The American Investment Council has historically used contradicting data regarding the scale of private equity investments in healthcare. It cites data suggesting that private equity acquisitions have never exceeded – and only once even approached – 300 healthcare deals per year.[18] But it has also presented data suggesting more than 300 private equity healthcare deals each year since at least 2010, and more than 1,400 private equity healthcare deals in 2021.[19]

Those who seek to understand the private equity industry should not take claims from its boosters at immediate face value. As noted in the section above, PESP identified 113 private equity-owned companies providing healthcare RCM services, or 28.5% of companies included on a list created by Becker’s.

Private equity increases healthcare costs

In recent years, several studies have confirmed private equity’s role in driving up healthcare prices and costs for providers, payers, and patients:

• A study from August 2020 in JAMA Internal Medicine found private equity acquisition was associated with increases in annual net income, hospital charges, charge-to-cost ratios, and case mix index among hospitals. According to the authors, a higher charge-to-cost ratio after being acquired could indicate higher charges for services, reductions in operating costs, or both.[20]
• In April 2021, National Bureau of Economic Research published a working paper which found that the overall bill is more than 10 percent higher for patients at private equity-owned nursing homes compared to other homes, but that the higher fees did not translate into better care.[21]
• A research article in Health Affairs from May 2021 found that private equity-acquired hospitals had higher charge-to-cost ratios and operating margins, which widened during the study period. Higher cost-to-charge ratios can induce higher payments from patients and insurers.[22]
• In October 2021, USC-Brookings Schaeffer Initiative for Health Policy white paper found that private equity may more aggressively exploit market failures and payment loopholes than other potential acquirers, which could result in higher patient costs.[23]
• JAMA Health Forum published a study in November 2021 finding private equity acquisition of nursing homes was associated with higher Medicare costs and increases in emergency department visits and hospitalizations for ambulatory sensitive conditions.[24]
• In April 2022, JAMA Internal Medicine published a study reviewing data on privately insured patients who received anesthesia services from 2012 to 2017, noting that physician management companies with private equity backing charged prices higher than those without private equity backing.[25]
• In September 2022, JAMA Health Forum published a study of 578 private equity-acquired dermatology, gastroenterology, and ophthalmology physician practices, as well as 2,874 similar independent practices. The report found that private equity acquisitions of physician practices were associated with increases in healthcare spending and utilization, as well as some changes to practice patterns.[26]
• In July 2023, BMJ published a systematic review of 55 empirical research studies evaluating private equity-owned healthcare operators in eight countries. The review found that private equity ownership is often associated with harmful impacts on costs to patients or payers.[27]
• The American Antitrust Institute published data in July 2023, which found price increases associated with private equity acquisition in 8 of 10 physician practice specialties reviewed by the authors.[28]
• In September 2023, the Journal of Health Economics published a study of private equity investments in ambulatory surgery centers, finding that charges for services gradually increased over time. According to the study, by 4 to 5 years following private equity investment, average charges per case increased approximately 50% above their baseline levels.[29]

For patients who cannot afford these growing costs, private equity-owned companies have created healthcare debt through medical credit cards, installment loans, and other payment products, which can burden patients with high interest payments on top of the debt itself – this debt can later be collected by a private equity-owned debt collector – some which have suggested they are more aggressive than other debt collection companies.[30]

Contrary to what industry proponents may say, private equity is deeply linked to the medical debt crisis. For people with medical debt, private equity may be present at every juncture: high healthcare prices paid in credit; interest rates making it harder to cover costs; and the aggressive collectors of unpaid debts. At every step private equity firms are positioned to take a cut of funds meant to go towards healthcare – contributing to and benefiting from an unsustainable crisis that burdens millions of people under billions in debt.[31]

Appendix

For a list of the private equity-owned RCM companies, see this PESP document. For descriptions, please refer to the complete Becker’s list of 354+ companies.

Resources

[1] Michael Fenne. “Private Equity’s Revenue Cycle: Creating and Collecting U.S. Medical Debt.” Private Equity Stakeholder Project PESP, September 12, 2024. https://pestakeholder.org/reports/private-equitys-revenue-cycle-creating-and-collecting-u-s-medical-debt/ (for discussion on AccessOne, FinThrive, Harris & Harris, Meduit, and other private equity-owned RCM companies). See also, Tina Reed. “Private Equity Drives up U.S. Medical Debt: Report.” Axios, September 18, 2024. https://www.axios.com/2024/09/18/private-equity-us-medical-debt-report; Peter Whoriskey. “The Big Business That Opposes Wiping Medical Debt from Credit Reports.” Washington Post, October 18, 2024. https://www.washingtonpost.com/business/2024/10/18/medical-debt-credit-reports-bill-collectors/.

[2] Private Investment Works. “No, Private Equity Is Not Driving Medical Debt: Refuting Another Half-Baked Activist ‘Study,’” September 27, 2024. https://www.privateinvestmentworks.com/2024/09/27/no-private-equity-is-not-driving-medical-debt-refuting-another-half-baked-activist-study/.

[3] See Department of Informatics, University of Sussex. “Scare Quotes : Quotations,” 1997. https://www.sussex.ac.uk/informatics/punctuation/quotes/scare.

[4] Shameek Rakshit, Matthew Rae, Gary Claxton, Krutika Amin, and Cynthia Cox. “The Burden of Medical Debt in the United States.” KFF, February 12, 2024. https://www.kff.org/health-costs/issue-brief/the-burden-of-medical-debt-in-the-united-states/. For discussion on how private equity exploits market failures and legal loopholes in the healthcare system, see Erin Fuse Brown, Loren Adler, Erin Duffy, Paul B. Ginsburg, Mark Hall, and Samuel Valdez. “Private Equity Investment As A Divining Rod For Market Failure: Policy Responses To Harmful Physician Practice Acquisitions.” Brookings, October 5, 2021. https://www.brookings.edu/articles/private-equity-investment-as-a-divining-rod-for-market-failure-policy-responses-to-harmful-physician-practice-acquisitions/.

[5] Baker Tilly. “Healthcare M&A Update: Q2 2019,” September 11, 2019. https://www.bakertilly.com/insights/healthcare-ma-update-q2-2019. Stephen Foley, Antoine Gara, and Arash Massoudi. “Private Equity Buys Majority Stake in US Accounting Firm Baker Tilly.” Financial Times, February 5, 2024. https://www.ft.com/content/ca7d9384-7255-4b43-a84e-01a8b48b232d.

[6] Anna Falvey. “354+ Healthcare Revenue Cycle Management Companies to Know | 2024,” September 23, 2024. https://www.beckershospitalreview.com/lists/354-revenue-cycle-management-companies-to-know-2024.html.

[7] Michael Fenne. “Private Equity’s Revenue Cycle: Creating and Collecting U.S. Medical Debt.” Private Equity Stakeholder Project PESP, September 12, 2024. https://pestakeholder.org/reports/private-equitys-revenue-cycle-creating-and-collecting-u-s-medical-debt/ (for discussion on AccessOne, FinThrive, Harris & Harris, Meduit, and other private equity-owned RCM companies). See also, Tina Reed. “Private Equity Drives up U.S. Medical Debt: Report.” Axios, September 18, 2024. https://www.axios.com/2024/09/18/private-equity-us-medical-debt-report.

[8] Anna Falvey. “354+ Healthcare Revenue Cycle Management Companies to Know | 2024,” September 23, 2024. https://www.beckershospitalreview.com/lists/354-revenue-cycle-management-companies-to-know-2024.html.

[9] Private Investment Works. “No, Private Equity Is Not Driving Medical Debt: Refuting Another Half-Baked Activist ‘Study,’” September 27, 2024. https://www.privateinvestmentworks.com/2024/09/27/no-private-equity-is-not-driving-medical-debt-refuting-another-half-baked-activist-study/.

[10] American Investment Council. “AIC Comment Letter to Treasury/HHS/CFPB Regarding Medical Payment Products,” p. 2, September 11, 2023. https://www.investmentcouncil.org/aic-comment-letter-to-treasury-hhs-cfpb-regarding-medical-payment-products/. See also Private Investment Works. “No, Private Equity Is Not Driving Medical Debt: Refuting Another Half-Baked Activist ‘Study,’” September 27, 2024. https://www.privateinvestmentworks.com/2024/09/27/no-private-equity-is-not-driving-medical-debt-refuting-another-half-baked-activist-study/.

[11] Gary Gensler. “Testimony Before the Subcommittee on Financial Services and General Government, U.S. House Appropriations Committee.” U.S. Securities and Exchange Commission, May 26, 2021. https://www.sec.gov/newsroom/speeches-statements/gensler-2021-05-26.

[12] American Investment Council. “About the AIC.” Accessed October 1, 2024. https://www.investmentcouncil.org/about-the-aic/.

[13] American Investment Council. “AIC Comment Letter to Treasury/HHS/CFPB Regarding Medical Payment Products,” p. 4, September 11, 2023. https://www.investmentcouncil.org/aic-comment-letter-to-treasury-hhs-cfpb-regarding-medical-payment-products/.

[14] Business Wire. “Frontier Capital Announces Investment in AccessOne,” January 5, 2017. https://www.businesswire.com/news/home/20170105005379/en/Frontier-Capital-Announces-Investment-in-AccessOne.

[15] AccessOne. “About AccessOne: Our Company.” Accessed October 1, 2024. https://accessonepay.com/our-company/; Frontier Growth. “AccessOne, Frontier Portfolio Company.” Accessed October 1, 2024. https://frontiergrowth.com/portfolio/accessone/. WBL. “Board of Directors.” Accessed November 26, 2024. https://www.wbl.org/board-of-directors/.

[16] Drew Maloney. “New Op-Ed: How Private Equity Is Improving Health Care Across America.” American Investment Council, July 18, 2023. https://www.investmentcouncil.org/new-op-ed-how-private-equity-is-improving-health-care-across-america/.

[17] Drew Maloney. “New Op-Ed: How Private Equity Is Improving Health Care Across America.” American Investment Council, July 18, 2023. https://www.investmentcouncil.org/new-op-ed-how-private-equity-is-improving-health-care-across-america/.

[18] Rebecca Springer. “Quantifying PE Investment in Healthcare Providers,” pp. 3-4.  PitchBook Data, Inc., July 8, 2024. https://files.pitchbook.com/website/files/pdf/Q3_2024_PitchBook_Analyst_Note_Quantifying_PE_Investment_in_Healthcare_Providers.pdf. See Private Investment Works. “No, Private Equity Is Not Driving Medical Debt: Refuting Another Half-Baked Activist ‘Study,’” September 27, 2024. https://www.privateinvestmentworks.com/2024/09/27/no-private-equity-is-not-driving-medical-debt-refuting-another-half-baked-activist-study/.

[19] American Investment Council. “Private Equity Industry Investment Report,” Q4 2022. https://www.investmentcouncil.org/wp-content/uploads/2023/04/2022-Q4-Private-Equity-Industry-Investment-Report92.pdf.

[20] Joseph D. Bruch, Suhas Gondi, and Zirui Song. “Changes in Hospital Income, Use, and Quality Associated With Private Equity Acquisition.” JAMA Internal Medicine 180, no. 11 (November 1, 2020): 1428–35. https://doi.org/10.1001/jamainternmed.2020.3552.

[21] Atul Gupta, Sabrina T. Howell, Constantine Yannelis, and Abhinav Gupta. “How Patients Fare When Private Equity Funds Acquire Nursing Homes.” NBER, April 1, 2021. https://www.nber.org/digest/202104/how-patients-fare-when-private-equity-funds-acquire-nursing-homes.

[22] Anaeze C. Offodile II, Marcelo Cerullo, Mohini Bindal, Jose Alejandro Rauh-Hain, and Vivian Ho. “Private Equity Investments In Health Care: An Overview Of Hospital And Health System Leveraged Buyouts, 2003–17.” Health Affairs 40, no. 5 (May 2021): 719–26. https://doi.org/10.1377/hlthaff.2020.01535.

[23] Erin Fuse Brown, Loren Adler, Erin Duffy, Paul B. Ginsburg, Mark Hall, and Samuel Valdez. “Private Equity Investment As A Divining Rod For Market Failure: Policy Responses To Harmful Physician Practice Acquisitions.” Brookings, October 5, 2021. https://www.brookings.edu/articles/private-equity-investment-as-a-divining-rod-for-market-failure-policy-responses-to-harmful-physician-practice-acquisitions/.

[24] Braun, Robert Tyler, Hye-Young Jung, Lawrence P. Casalino, Zachary Myslinski, and Mark Aaron Unruh. “Association of Private Equity Investment in US Nursing Homes With the Quality and Cost of Care for Long-Stay Residents.” JAMA Health Forum 2, no. 11 (November 19, 2021): e213817. https://doi.org/10.1001/jamahealthforum.2021.3817.

[25] Ambar La Forgia, Amelia M. Bond, Robert Tyler Braun, Leah Z. Yao, Klaus Kjaer, Manyao Zhang, and Lawrence P. Casalino. “Association of Physician Management Companies and Private Equity Investment With Commercial Health Care Prices Paid to Anesthesia Practitioners.” JAMA Internal Medicine 182, no. 4 (April 2022): 396–404. https://doi.org/10.1001/jamainternmed.2022.0004.

[26] Yashaswini Singh, Zirui Song, Daniel Polsky, Joseph D. Bruch, and Jane M. Zhu. “Association of Private Equity Acquisition of Physician Practices With Changes in Health Care Spending and Utilization.” JAMA Health Forum 3, no. 9 (September 2, 2022): e222886. https://doi.org/10.1001/jamahealthforum.2022.2886.

[27] Alexander Borsa, Geronimo Bejarano, Moriah Ellen, and Joseph Dov Bruch. “Evaluating Trends in Private Equity Ownership and Impacts on Health Outcomes, Costs, and Quality: Systematic Review.” BMJ 382 (July 19, 2023): e075244. https://doi.org/10.1136/bmj-2023-075244.

[28] Richard M. Scheffler, Laura Alexander, Brent D. Fulton, Daniel R. Arnold, and Ola A. Abdelhadi. “Monetizing Medicine: Private Equity and Competition in Physician Practice Markets.” American Antitrust Institute, Petris Center on Health Care Markets, Washington Center for Equitable Growth, July 10, 2023. https://www.antitrustinstitute.org/wp-content/uploads/2023/07/AAI-UCB-EG_Private-Equity-I-Physician-Practice-Report_FINAL.pdf.

[29] Haizhen Lin, Elizabeth L. Munnich, Michael R. Richards, Christopher M. Whaley, and Xiaoxi Zhao. “Private Equity and Healthcare Firm Behavior: Evidence from Ambulatory Surgery Centers.” Journal of Health Economics 91 (September 1, 2023): 102801. https://doi.org/10.1016/j.jhealeco.2023.102801.

[30] See Michael Fenne. “Private Equity’s Revenue Cycle: Creating and Collecting U.S. Medical Debt.” Private Equity Stakeholder Project PESP, September 12, 2024. https://pestakeholder.org/reports/private-equitys-revenue-cycle-creating-and-collecting-u-s-medical-debt/.

[31] See Michael Fenne. “Private Equity’s Revenue Cycle: Creating and Collecting U.S. Medical Debt.” Private Equity Stakeholder Project PESP, September 12, 2024. https://pestakeholder.org/reports/private-equitys-revenue-cycle-creating-and-collecting-u-s-medical-debt/.