The exponential growth of private equity ownership in health care is sparking bipartisan backlash from federal and state lawmakers and regulators, who warn about the potential for higher prices, increased medical errors and reduced patient choice.
In an interview, Oregon House Majority Leader Ben Bowman (D) discussed a bill he expects to refile next year and why he thinks it is an issue every state will soon be addressing.
The following interview was edited for clarity and length.
Pluribus News: I understand that private equity investors have not been buying medical practices in Oregon at the same rate as they have in other states. Could you tell us why you filed this bill and explain the situation in Oregon?
Ben Bowman: Over the course of the several months that we worked on this bill, what we discovered is that actually, corporate ownership and private equity ownership is in fact here in Oregon. And there are all sorts of examples popping up that I didn’t know about, and I think most of my colleagues didn’t know about, and I think most of the journalistic community in Oregon didn’t know about.
PN: Can you give me some examples?
Bowman: Optum is here. Amazon is here. Private equity-owned dialysis clinics are here. There’s private equity-backed dermatology clinics that are here. There are private equity-backed ambulatory surgical centers that are here. There’s a whole long list of entities that are owned by actors that we were seeking to regulate in our bill.
The first important piece of context for Oregon, and in most states, red and blue: They have what are called corporate practice of medicine laws or corporate practice of medicine doctrine. Sometimes it’s in statute, sometimes it’s their medical board. But basically, what those statutes or doctrine say, is that medical practices and medical decisions need to be controlled by licensed providers, usually a physician. Some states have 100% ownership requirements. A clinic has to be 100% owned by physicians. In Oregon, it is a 51% ownership requirement. The doctrine basically says every medical practice, medical clinic has to have 51% ownership by doctors.
You might then wonder, well, then how is it possible for private equity or big corporations to be assuming ownership? What is not well understood, but that we’re trying to increase awareness of, is there’s a workaround — a loophole — that basically allows big corporations and private equity firms to circumvent that law.
Sometimes it’s called the friendly PC model. Oftentimes, it’s called the captive PC model. They devised a business relationship, where on paper, the clinic is owned by a doctor, but in practice, through a management services agreement, that doctor or physician has ceded their control over clinic decision making, on all kinds of different levels, to what’s called an MSO, a management service organization, which is almost always a subsidiary of some large corporation or private equity firm.
In exchange, that doctor is oftentimes given equity stake in the corporate owner. And the doctor is forced to sign what’s called a stock transfer restriction agreement, which basically means that equity, that ownership stake that they have, they are not allowed to sell, or they don’t get to choose [who they sell to]. That is determined by the corporate owner. So essentially, it’s like the corporation wholly owns the thing, but on paper, they’re still in compliance with the corporate practice of medicine doctrine, because on paper the doctor is the listed owner.
These doctors who are the listed owners: They don’t have to live in the state. They don’t have to ever have set foot in the clinic. They just have to be a licensed physician on paper. So that was the problem we were trying to address in our bill.
What our bill basically said is, doctors have to remain in charge of the clinics. Doctors have to retain ultimate control over decisions. That doesn’t mean they can’t contract it out. That doesn’t mean that they can’t hire people to do this for them. It just means, if they think there’s something unethical happening or inappropriate happening or something that’s contrary to the best interests of their patients, they have to have the ultimate ability to intervene.
PN: The bill was passed in the House but stalled in the Senate. Could you tell me about the groups that came out to lobby against it?
Bowman: People are recognizing that the corporatization of health care is a real problem for patients and for providers, and they’re itching for a solution. We’ve got the outline of one in Oregon, and I think their instincts that this could spread when it’s passed are correct. So we’ve just got to get across the finish line.
PN: Why do you think more states haven’t addressed this?
Bowman: Part of the issue is, it is so complicated. Even if I was explaining the friendly PC or captive PC model, it takes a while for people to understand that.
‘Like, wait, so it is owned by a doctor, but the doctor is not in charge, but we already have a law that says doctors have to be in charge. How is this allowed? This doesn’t make any sense.’
It takes a while for people to understand what the reality is on the ground, and that these doctors are not in control.
The dynamic that is important to understand is: Private equity firms are oftentimes not in the long-term ownership game. A private equity firm’s obligation to its shareholders is to generate maximum returns in as short of a time as possible. That’s why they exist. It’s not good or bad.
So what are the levers they can pull to quickly generate more revenue? Well, one really easy way is you can change the payer mix. What does that mean? It means you stop seeing Medicaid patients. Stop seeing low-income Oregonians, because the reimbursement rate for Medicaid patients is way too low. But do we really want a health care system where low-income people can’t access care because corporate donors denied services?
So that’s one thing you can do. You can also require your doctors to see more patients. Say you’re seeing 15-minute back-to-back appointments all day. We’re gonna maximize the number of people you’re seeing because we get more money for every patient you see. You could change the staffing ratios. You can say, ‘We’re gonna hire staff, and we’re gonna make nurses do that work.’
You could hire less qualified people who have less training or fewer degrees to do the things that you have more qualified people doing. There’s a whole host of ways that you can, quote, create efficiencies that really just result in worse patient care.