How Does Private Equity Impact Oncology Market Share and Health Care Prices?

This Research Insights explores a study conducted by Ola Abdelhadi and Daniel Arnold, published in the International Journal of Radiation Oncology, Biology, Physics.

Synopsis

As private equity (PE) investment in health care accelerates, a new study examines its growing role in oncology. Analyzing more than 400 PE-acquired oncology practices between 2013 and 2022, researchers found that the compounded annual growth rate of acquisition was 27%, with nearly half of the acquisitions occurring in the South.

PE acquisitions have been linked to increased local market share, potentially enabling firms to leverage higher prices without improving outcomes. In 2022, PE firms controlled over 30% of the oncology market in 17 metropolitan areas and more than 50% in 9, with the highest concentrations in Arkansas, Pennsylvania, Michigan, Georgia, New Mexico, and Texas. One year after acquisition, PE-owned practices charged 5.3% more for office visits and had 50.1% higher radiotherapy spending than non-PE practices, with the largest increases in low-income regions.

These findings offer important insights for policymakers evaluating PE’s influence on health care pricing, market competition, and equitable access to cancer care across local markets.

A Conversation with the Researchers

In this Q&A, Ola Abdelhadi discusses the impact of private equity (PE) firm investment in oncology practices.

Q: What was the most unexpected finding?

A: One of the most unexpected findings was the significant increase in radiotherapy spending—50.1% higher for PE-acquired practices compared to matched controls immediately following acquisition. This stark increase, particularly in low-income areas, suggests that PE acquisitions may exacerbate existing health care disparities, raising concerns about affordability and access to care for vulnerable populations.

Q: How does the market share of PE-owned oncology practices impact pricing and competition?

A: The market share of PE-owned oncology practices significantly impacts pricing and competition by creating higher market concentration. In Metropolitan Statistical Areas (MSAs) where PE firms hold over 50% market share, we observed a Herfindahl-Hirschman Index (HHI) of 6204, indicating a highly concentrated market. This concentration allows PE firms to leverage their position to negotiate higher prices, leading to increased costs for patients without corresponding improvements in care quality.

Q: What impact might PE investment have on health care disparities, including access to care?

A: PE investment may exacerbate health care disparities by concentrating resources and services in areas that are already economically advantaged, while potentially neglecting underserved communities. Our findings indicate that PE acquisitions in low-income areas were associated with an increase in prices and spending, which could limit access to essential oncology services for disadvantaged patients.

Q: New Mexico and Texas have the highest concentrations of PE acquisitions in oncology in the nation. What might be contributing to these rates?

A: Several factors contribute to the high concentration of PE acquisitions in New Mexico and Texas, including the fragmented nature of the oncology market in these states, the presence of ancillary services that PE firms find attractive, and the growing demand for oncology services driven by an aging population. Additionally, the regulatory environment and potential for high returns on investment in these regions may also play a role.

Q: What impact does PE acquisition have on the health care workforce in oncology practices, and how do these changes impact health care delivery?

A: PE acquisitions often lead to changes in the health care workforce, including a lower percentage of female physicians and altered physician-to-practice ratios. These changes can impact care delivery by potentially reducing diversity in the workforce and affecting the quality of care provided. The focus on profitability may also lead to staffing reductions or changes in practice dynamics that could compromise patient care.

Q: How might increasing PE acquisitions in oncology inform antitrust regulations or other policies?

A: The increasing market share of PE acquisitions in oncology raises significant antitrust concerns, as it can lead to reduced competition and higher prices for patients. Policymakers may need to consider stricter regulations on PE acquisitions to ensure that market dynamics do not compromise patient access to affordable care. Transparency in ownership structures and monitoring of market concentration will be crucial for effective antitrust enforcement.

Q: The trends observed in this study are similar to those seen in previous studies of private equity across various specialties. How does the overall growth of PE investment impact health care?

A: The overall growth of PE investment in health care has been associated with increased costs, higher utilization rates, with no added improvements in care quality across various specialties. Our study aligns with these trends, indicating that PE acquisitions in oncology lead to higher prices and spending, raising concerns about the sustainability of such investments in the long term.

Q: PE firms frequently divest from acquisitions within seven years of purchase. How might the roll-up and turnover strategies employed by these firms impact subsequent ownership and health care delivery?

A: The roll-up and turnover strategies employed by PE firms can lead to instability in health care delivery, as frequent changes in ownership may disrupt established care practices and relationships with patients. This short-term focus on profitability can result in practices prioritizing financial performance over patient care, potentially compromising the quality and continuity of care provided to patients.

Q: Is there anything else that you would like to add?

A: It is crucial for policymakers and health care administrators to closely monitor the impact of PE acquisitions on health care delivery, particularly in oncology. Our findings highlight the need for increased regulatory oversight to ensure that the growing influence of PE does not compromise access to affordable, high-quality care, especially for vulnerable populations. Continuous research is necessary to assess the long-term effects of these acquisitions on patient outcomes and health care disparities.