Everyone should read this article I am posting below from the world conference of dermatology about the effects of private equity on their profession. The part about the residencies is diabolical my opinion. Everyone can do what they want, but you should know who you’re dealing with.
There was also a published article in the Journal of dermatology that was removed because it criticized private equity for buying influencers in the dermatology profession and then convincing others to sell their practices to private equity. This is a known practice by them.
WCD 2019: The Perils of Private-Equity Dermatology Practices Are Many and Far-Reaching
Potential to affect both practice and access to care
PracticeUpdate Editorial Team
Save Recommend
Share
Jane M. Grant-Kels, MD
June 12, 2019—Milan, Italy—A warning against private-equity dermatology practice was delivered in a presentation made here at the 24th World Congress of Dermatology, which took place from June 10 to 15. “Is private equity-controlled medical care the kind of medical care that we want to be a part of?” presenter Jane M. Grant-Kels, MD, from UConn Health in Farmington, asked the audience.
“The running of a dermatology practice in the United States, or anywhere, is running a small business,” said Dr. Grant-Kels during her presentation, which was attended by Elsevier’s
PracticeUpdate. “Overhead is going up. There is a vocabulary list of new paperwork and bureaucracy. There are contracts that you need an attorney to understand that you have to sign with insurers, and it takes a very sophisticated physician to understand what they are signing. There are mandated electronic medical records, and a new phenomenon is that medical students are graduating with more debt than that they've ever had.”
In addition, older dermatologists eyeing retirement are looking to sell their practices. This opens the door for private equity, and the impending takeover is alarming. Currently, about 10% of dermatology practices in the United States are controlled by private equity. In 2009 there were 229 dermatology practices bought by private equity. In 2019, there were 747. “They are bragging that in 5 years they are going to own 80% of dermatology in the United States,” said Dr. Grant-Kels.
The notion of partnering with a private equity firm can be appealing on the surface, but Dr. Grant-Kels describes it as “a pig with lipstick.” A private equity firm might easily offer to pay a dermatologist the equivalent of six times the practice’s annual earnings before interest, taxes, depreciation, and amortization. This can amount to a huge windfall and certainly more than dermatologists could hope to earn by selling their practices to anyone else.
There are other benefits as well. Private equity firms, noted Dr. Grant-Kels, are “good at centralizing practice and lowering overhead. They are good at running the business, streamlining them, making them more profitable, and relieving dermatologists of management [responsibilities].”
But the disadvantages far outweigh the benefits. “Private equity firms and venture capitalists are interested in one thing: making money,” she said. “Those of us in medicine have many other goals, and many of us make decisions for our patients where we actually lose money because patient care comes first. I don’t see how these values can overlap.”
Dermatologists are usually required to stay on as employees but lose much of their autonomy, right down to being mandated what equipment and instruments to purchase and use. Typically, 20% of the profits of the practice go directly to the equity partners, which makes reinvesting in the business difficult. Private equity firms may let go of more seasoned physicians in the practice, replacing them with younger physicians, who will work for less, as well as physician extenders such as nurse practitioners and physicians’ assistants. A single physician may oversee as many as 5 to 10 physician extenders, who often see new patients or perform complex diagnoses and procedures that are beyond their scope of training. The private equity firm may also mandate more expensive treatment options, even if it goes against the patient’s best interests. “Any primary skin cancer on the face has to be sent for Mohs, even if you think you can excise it,” said Dr. Grant-Kels.
“They offer a young dermatologist a pretty good salary to start, and then they ‘normalize’ those salaries and lower them,” she continued. “They make them sign a noncompete [agreement]. … You owe your soul to them because the noncompetes can be very wide and very unreasonable. And although you could fight them if you go to court, that's very expensive to do it. Most young people don't have the funding to do that.”
There are wider consequences. Private equity firms are starting their own residencies and then hiring their own residents. “Residents are paid an unlivable wage and are [therefore] required to borrow from the private equity practice. When they graduate, they immediately have to pay it back or work for the private equity firm,” said Dr. Grant-Kels. “It’s a form of indentured servitude.” Specialists are hired away from academic medical centers, making it more difficult to train new dermatologists in academic settings.
Private equity firms purchase an “anchor” practice and then buy up other practices in the area, creating “mega-groups.” With the focus set on profits, practices in disadvantaged communities or those that largely serve more complex cases or Medicaid patients will close. “Ultimately, there will be bankruptcies, lack of dermatology jobs, lack of access to care for patients, and loss of diversity in practice,” predicted Dr. Grant-Kels.
“I think private equity is not the model that we should aspire to,” she concluded. “You lose control. Patients are not notified that the practice has been sold to private equity. I do not believe that the physician extender model, to the extent that they are using it, is a good one. I think the consequences of private equity dermatology are huge, particularly as it relates to education. It’s going to have a huge impact on residencies. It’s going to have an impact on access, … and I think it's going to impact the work/life satisfaction of dermatologists who are used to controlling their own environment.”
Copyright © 2019 Elsevier Inc. All rights reserved.
