Does PE ownership improve care?
Do private equity-owned health and care providers perform better – on quality and cost efficiency – than their public, not-for-profit and doctor-owned counterparts? A new review of the scientific evidence suggests perhaps not.
One of the speakers at HBI’s annual conference last month made a bold statement during the ‘Investing in DACH’ session.
“I’m prepared to make a serious wager: if you did a proper scientific study comparing all doctor-owned clinics and all private equity-owned clinics you would find that, on average, the private equity-owned ones are better quality,” said Philipp von Hammerstein, a partner at Gimv, a Belgian PE firm.
“Why? Because they are bigger structures, more professionalised, and they have to undergo frequent due diligence. Nobody wants a scandal on quality. That’s the reality.”
Whilst it may have come across as audacious to put it so starkly, he was saying what probably most of the people in the room believed, even if they might not want to say so on record.
But the view amongst the majority of the public is almost always the opposite. Most ordinary people are quick to assume that ruthless private investors will put profit before the interest of patients, providing worse quality care at a higher cost. And policy and regulations are very often crafted on this assumption, especially in major Western European countries.
Whilst it may be tempting to dismiss this view as leftist dogma, a new study published in the British Medical Journal finds evidence suggesting there may be some truth to it.
The study examined the evidence from eight countries and 55 studies, all of which sought to measure the impact of PE ownership on health outcomes, costs to patients or payers, costs to operators, and quality. The evidence covered a range of sub sectors, including hospitals, nursing homes, primary care clinics, ophthalmology as well as other types of specialist outpatient clinics.
Out of eight studies that looked at the effect of PE ownership on health outcomes, two found beneficial impacts from PE ownership, three found harmful impacts, and in three the findings were neutral. “Because the volume of studies determining the impacts on health outcomes was low, and findings were mixed, no definitive conclusions could be drawn,” the authors concluded.
“OK, but surely PE-owned providers are more efficient,” you might be thinking. And the researchers did indeed find a bit of evidence to support this. Whilst only five studies looked at the impact of PE ownership on operator costs, three of the five found it was associated with reduced operator costs, and only two found it was associated with increased costs.
But across the twelve studies which looked at the effect of PE ownership on costs to patients and payors, not one found a beneficial impact, whilst nine found it was associated with higher costs. This would appear to support the popular view that PE investors will try to reduce costs but will be loath to pass on the savings to patients and payors. “Of all the impacts measured, costs to patients or payers showed the most consistent pattern,” the authors stated.
Of the 27 studies that looked at the impact of PE ownership on health care quality, 12 found harmful impacts, three found beneficial impacts, nine found mixed impacts, and in three the results were neutral.
“To summarise, 21 studies in total identified at least some form of harmful impact, whereas 12 identified some form of beneficial impact,” the authors stated. “Although these findings are inconsistent, the greater prevalence of harmful impacts and studies finding solely harmful impacts suggest that PE ownership may have mixed effects on quality of care, and that there is more evidence to show that PE degrades it.”
What should those who subscribe to Hammerstein’s view make of all this?
There may undoubtedly be some bias present in some of the evidence – bias in the strict statistical sense of the word (the authors go into quite some detail evaluating this), but also quite possibly in the every-day sense of the term – academic researchers do tend to lean left politically after all!
And all of the studies were observational studies rather than randomised control trials (conducting a randomised control trial on this would be almost impossible!), so their results shouldn’t be taken as gospel.
Another point to bear in mind is that, whilst the evidence was drawn from a total of eight countries, most of it came from the US, and hence might not be generalisable to the very different health systems of European countries.
But it is difficult to ignore the conclusion which the authors themselves come to: “The fact that no consistently positive effects of PE in healthcare were identified (…) provides an evidentiary basis to remain cautious about claims that PE ownership is a self-evident benefit to healthcare provision.”
The results, whilst far from conclusive, should at the very least give pause for thought.
We would welcome your thoughts on this story. Email your views to Martin De Benito Gellner or call 0207 183 3779.
