Experts Warn of Looming Private Equity Interest in Cardiology Care

Private equity firms have been increasingly active in acquiring medical practices for a number of years, but cardiologists are warning that their specialty has become increasingly attractive to these types of investors who are primarily concerned with maximizing their bottom line.

An aging population with a high burden of cardiovascular disease, along with a shift to high-priced outpatient procedures, make cardiovascular healthcare a particularly appealing target.

“Private equity involvement in medicine started 10 or 12 years back and initially they were interested in radiology, dermatology, emergency medicine, or gastroenterology because those were highly profitable sectors or specialties,” Partha Sardar, MD (Columbia University Irving Medical Center/NewYork-Presbyterian, New York, NY), told TCTMD. “In the last 2 or 3 years, there has been a significant interest in cardiology,”

Sardar, who also has an affiliation with the Columbia Business School, said the transition from inpatient to outpatient services, such as office-based labs (OBLs) and ambulatory surgery centers (ASCs), has been largely responsible for the attention from private equity. In 2020, the Centers for Medicare & Medicaid Services (CMS) added diagnostic heart catheterizations and PCI to their ASC-covered procedure list.

“With all the outpatient procedures that have been approved in cardiology, private equity believes it looks like this can be a profitable sector for them,” said Sardar.

Samuel Jones IV, MD (Memorial Hospital/Chattanooga Heart Institute, TN), past chair of the American College of Cardiology’s (ACC) health affairs committee, agreed.

“Cardiology is ripe for a lot of reasons,” he told TCTMD. “The population is aging and that has led to increased demand of services. Private equity likes a fragmented system of many different private practices that are yearning to have some sort of improvement and I think that’s cardiology. In terms of why now? Probably one of the biggest things that's happened is that the procedures we do just continue to shift. Procedures that were always done on an inpatient-only hospital list are continuing to migrate to where they can be done in an outpatient setting.”

Profit is the Intention

This week, Sardar, along with Saurav Chatterjee, MD (Maimonides Medical Center, New York), and Zirui Song, MD, PhD (Massachusetts General Hospital, Boston, MA), published an article in JAMA Cardiology outlining the risks and benefits of private equity investment in cardiovascular medicine. Private equity firms pool money from institutional investors, pension funds, and wealthy individuals to buy practices and this investment allows the doctors to retain equity and financially benefit from future acquisitions, they write.

“If we talk about value propositions, private equity may bring a few advantages to medical practices,” said Sardar. “If a small practice is no longer profitable, they are being sold right now to hospitals or larger institutions. Private equity buys up these small practices and puts together a big practice so they can negotiate better prices with insurance companies.” Administrative tasks can also be centralized by being part of the larger private equity-backed platform, which can decrease costs.

“If the practice was struggling financially, they can survive,” said Sardar.

These firms aim for annual profits of 20% with a typical investment lasting anywhere from 3 to 10 years, he said. To achieve those profit margins, they’ll cut costs wherever they can, including staff, and aim to boost volumes and prices. In a normal healthcare practice, profits tend to hover between 7% to 10%, while larger nonprofit hospitals might have an annual profit margin of 5%. Even for-profit hospitals don’t get 20% annual returns, said Sardar.

“The issue is that the primary focus of the private equity firm is to achieve a higher return for investors, and the interests of patients might not be given priority,” Sardar said.

Pitchbook, a research company that provides information on capital markets, reported that there were 863 deals made by private equity companies into the healthcare space in 2022, with a dozen companies investing in cardiovascular medicine. Firms include Webster Equity Partners, Lee Equity Partners, Deerfield Management, and Ares Management, among others. CVAUSA, one of the largest private equity-backed practice management groups, has invested in or acquired a number of physician-led practices since they launched in 2021. They have partner groups in more than 140 locations in eight different states, with approximately 500 physicians and advanced practice providers working under their umbrella.

The issue is that the primary focus of the private equity firm is to achieve a higher return for investors, and the interests of patients might not be given priority. Partha Sardar

Right now, the verdict is still out on whether private equity will improve or degrade cardiovascular care. However, if other specialties provide any clues, the data don’t look good, with studies suggesting private equity investment leads to higher patient costs, increased government spending, and poorer patient care.

In one analysis of private equity-backed dermatology, gastroenterology, and ophthalmology physician practices, researchers found significant increases in the allowed amount and charges per claim, volume of patient encounters, and new patients treated. In JAMA last month, researchers analyzed more than 660,000 hospitalizations at 51 private equity-acquired hospitals and found that they were associated with a significant 25% increase in hospital-acquired conditions, such as falls and central line-associated bloodstream infections when compared with matched control hospitals. The heightened risk was seen even though private equity-backed hospitals treated younger, healthier patients. 

Additionally, a 2023 systematic review of studies investigating the impact of private equity found that the investment “is often associated with harmful impacts on costs to patients or payers” and had a “mixed-to-harmful” effect on quality metrics. 

Option for Cardiologists

For Jones, the creeping advance of private equity into cardiovascular medicine is a worry.

“I think that any time you see a change in healthcare, you have some hope that this could be a benefit because we know that our healthcare system needs to have efficiencies,” he said. “If there are ways in which we can lower the total cost of healthcare, I think that many of us are for that. If that is done in a way in which profit is the overarching goal, that’s not something we’re going to be happy with, and this is not what any of our physicians are going to want.”

In a recent survey by the ACC, most cardiologists had some familiarity with private equity acquisitions of private practices, with 7% reporting that they’d been approached by a firm about acquiring their practice, Jones said. A majority of members said they had concerns that private equity would lead to a decline in the quality of patient care and more than 40% worried about rising costs.

It’s pretty clear with most private equity firms, front and center, the goal is profit. Samuel Jones IV

“When I talk to members of the American College of Cardiology, that’s the thing that everybody wonders—what is the goal here?” said Jones. “It’s pretty clear with most private equity firms, front and center, the goal is profit. If the goal is profit, what does that mean for the patient? When we went to medical school, the goal was the patient and I think that's what we've staked our careers on. So, that's a big concern.”

Jones and Sardar both pointed out that physicians who own smaller, unprofitable cardiovascular practices may be searching for a way to make their clinic financially viable while also looking for a way to retain their autonomy. Private equity might look like an appealing option—decreased administrative burden, economies of scale, and so on—but Jones says cardiologists should be aware of both the advantages and disadvantages of such a marriage. Private equity is short-term focused, which would work for a doctor nearing retirement who is looking to cash out.

“This is a good exit plan for some, but the younger physicians may be left holding the bag with something that really wasn’t their desire,” he said. “So, everyone needs to be sure they’re all in agreement with the decision that’s made.”

Lax Regulation at the Moment

To TCTMD, Sardar added that given the commercialized nature of the US healthcare system, it may not be feasible to outlaw private equity firms from purchasing private clinics.

“You have to deal with them,” he said. “If you can make it better, then I think that’s the way to go.”

Song, Sardar’s coauthor on the viewpoint, published another last year in JAMA, along with Christopher Cai, MD (Brigham and Women’s Hospital, Boston), and noted that current federal regulation is fairly lax, with only mergers above a transaction threshold of $111.4 million undergoing regulatory review. When purchases are reviewed, the vast majority are green-lit.

So far, most private equity purchases of cardiology practices have occurred in southern and southwestern states with limited regulation, such as Florida, Texas, and Arizona, but experts believe state regulation can help curb anticompetitive practices and monitor billing and access to care. Sardar pointed out that private equity-backed practices often deploy nondisclosure agreements and noncompete clauses and are not obligated to disclose acquisitions and sales. In their article, he and his colleagues note that profit-driven firms may prioritize setting up new clinics in higher-income areas, which could further exacerbate health inequities.

Establishing safeguards, including a comprehensive corporate practice of medicine policy, can help prevent “excessive control” by private equity-backed medical management companies, said Sardar. Transparency is critical, he said.

To TCTMD, Jones stressed that if private equity continues its march into cardiology, tracking outcomes and quality of care through adjudicated registries will be key to ensure nothing is compromised.

“It’s an exciting time, for sure,” said Jones. “We just need to make sure that whenever we see a disruption in healthcare that we follow it closely. At the end of the day, patients always have to come first.”