Until there’s greater transparency – and greater understanding of the clinical and economic impact – it’s time for dermatologists to stop selling their practices to private equity firms.
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That’s the opinion of Joshua Sharfstein, MD, and Jamar Slocum, MD, both of Johns Hopkins University, Baltimore, who published their views in an editorial in JAMA Dermatology.
“At current pace, by the time more is understood about the takeover of dermatology practices by private equity firms, it will be too late to change course,” Dr. Sharfstein, former principal deputy commissioner at the Food and Drug Administration, and Dr. Slocum wrote. “Efforts to protect the field of dermatology and the American public from the potential adverse consequences should begin now.”
Investment in dermatology practices has spiked in recent years.
Between May 1, 2012, and May 22, 2018, 17 private equity–backed dermatology management groups (DMG) acquired 184 practices, accounting for 381 dermatology clinics, according to a study by Sally Tan, MD, of Brigham and Women’s Hospital, Boston, and colleagues.
The findings “likely underreported direct acquisitions of small physician-owned practices by small PE [private equity] firms,” Dr. Tan and colleagues wrote. “In addition, the data underestimated the number of clinics transitioning from physician to PE-backed ownership because the specific clinics associated with each DMG at the time of the DMG’s initial PE investment has not been disclosed.”
More than one-third of clinics associated with private equity–acquired practices are in Texas and Florida; however, clinics have been acquired in at least 30 states (JAMA Dermatol. doi: 10.1001/jamadermatol.2019.1634).
Physicians have raised concerns about the loss of autonomy and conflicts of interest from investors more concerned with a return on investment ahead of clinical concerns, Dr. Tan and colleagues noted.
From a clinical perspective, there are a number of things that have raised a red flag, Dr. Sharfstein noted.
There have been reports of inappropriate procedures being conducted, he said in an interview. “Another [concern] is unnecessary marketing of cosmetic procedures – the sale of various products that are not adding much of anything to health. So I think it is the unnecessary procedures on the one end and the huge focus on just driving up revenues without any real benefit.”
The flood of private equity money could, over the long term, create access to care and viability issues, he added.
“If you think of a doctor’s office as a revenue-generating machine, that could have pretty profound implications for the nature of treatment and the nature of access to care for different people,” he said. “There is reason to be worried about the viability of access to care in the ways that has been traditionally understood.”
To that end, Dr. Sharfstein and Dr. Slocum make recommendations on what to do in the near term.
First, they are calling for a moratorium on private equity investment either via a conscious decision by dermatologist to reject private equity investment or legislative/regulatory action preventing it.
“Until meaningful data are available on what happens to the quality of care and affordability for patients and payers, dermatologists should stop selling their practices to private equity firms, and legislators should prohibit such transactions,” they wrote in JAMA Dermatology. Exceptions could be made when “a practice can make a strong and public case to health officials that doing so is in the public interest.”
More transparency around these deals is needed as well.
They call on the American Academy of Dermatology to solicit, curate, and release data on the ownership of all dermatology practices, “as well as core measures related to their use of nonphysicians, access to essential and emergency care, the provision of uncompensated care, and revenue growth.”
Dr. Sharfstein and Dr. Slocum cautioned that “the basic approach and incentives of private equity are not aligned with health and value in dermatology. By focusing on short-term revenue opportunities, private equity acquisitions will likely add to the immense cost and stark inequality of our health care system, with the added risks of unnecessary treatments and significant disruptions in care.”
SOURCE: Tan S et al. JAMA Dermatol. 2019 Jul 24. doi: 10.1001/jamadermatol.2019.1634.