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    6 concerns about practice consolidation

    Big cash offers not always best for the practice or patient.

     

    “Due to the speed with which this transformation is occurring, the specialty urgently needs to have an open conversation about the risks and benefits for our profession and our patients. The consolidation and commoditization of dermatology practices and their services is rapidly changing the specialty and the choices of practice venues for future dermatologists."

    —     Jack S. Resneck Jr., M.D., University of California San Francisco School of Medicine

    EXTERNAL INVESTORS

    Among factors that attract external investors to dermatology include high patient demand, high rates of cutaneous cancers, an aging population, the shortage of dermatologists and expanded insurance coverage.

    The methods that some private equity firms employ to improve profitability, such as changing ancillary referral patterns, encouraging additional procedures and widening the use of unsupervised physician assistants could be problematic. “It may ultimately carry risks of Stark law noncompliance, False Claims Act exposure, and malpractice litigation,” Dr. Resnick writes. In 2005, a Georgia consolidated dermatology practice agreed to a $3.2 million settlement in response to allegations that it routinely required employed dermatologists to use its in-house pathology laboratory.

    There is a scenario for which consolidation trend could reverse. “If consolidation leads to overvaluation of practices and an unsustainable debt burden, there is a risk of bankruptcies affecting these consolidated entities and a change in the trend,” Dr. Resnick says.

    Not every private equity firm investing in dermatology is the same. “And certainly not every dermatologist who has sold has had a negative experience,” he said.

    Still, the goal of private equity investors is typically to exit the investment in three to seven years and transfer the entity to another private or public investor at a higher multiple. As a result, “dermatologists may find themselves working overtime for a variety of different owners with different values that are not always in line with physician values, thus leading ultimately to diminished autonomy for practicing physicians.”

    RADICALLY DIFFERENT SPECIALTY

    Dermatologists and their patients should have choices about where they deliver or receive care, he said. There is still time to affect this rapidly evolving landscape.

    “Due to the speed with which this transformation is occurring, the specialty urgently needs to have an open conversation about the risks and benefits for our profession and our patients. The consolidation and commoditization of dermatology practices and their services is rapidly changing the specialty and the choices of practice venues for future dermatologists,” Dr. Resneck said. “There is still time to have some influence, or we may soon wake up to a radically different specialty that we had not paused to contemplate.”

     


    REFERENCES

    Jack S. Resneck Jr, M.D. "Dermatology Practice Consolidation Fueled by Private Equity Investment, Potential Consequences for the Specialty and Patients," JAMA Dermatology. Published online Nov. 21, 2017. DOI:10.1001/jamadermatol.2017.5558

     

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