A Problem with Private Equity

The funniest physician on the internet, ophthalmologist and comedian Dr. Glaucomflecken, sparked quite a debate over private equity’s healthcare impact last week with this banger of a Valentine’s Day tweet:

“Every physician who sells their practice to private equity is choosing to make health care worse for everybody. I hope the money helps you sleep at night, because you have made life worse for every single patient and employee walking into your PE Daddy’s practice.”

Within three days, Dr. Glaucomflecken’s attack on healthcare PE garnered 1.2M views, 1,150 retweets, and 12k likes, while inspiring some telling conversations about private equity’s impact on radiology.

RadTwitter’s many private equity critics

  • Celebrated one of their biggest concerns gaining viral attention
  • Warned that this trend is putting MBAs in control of patient care
  • Theorized that PE is “driving physician satisfaction into the ground”
  • Highlighted PE-backed rad practices’ staffing/retention challenges
  • Joked that Dr. Glaucomflecken is now uninvited from the ACR meeting

Meanwhile, a few brave radiology PE leaders and defenders….

  • Countered that Dr. Glaucomflecken’s post was unfairly broad
  • Emphasized the challenges that private practices face on their own
  • Reasoned that health systems just are as money-driven, and worse at leading practices
  • Contended that PE improves radiology access in rural areas (others disputed this)
  • Inferred that PE is “in the arena” working to improve care, while critics sit on the sidelines

The hundreds of other comments from non-radiologists in the Dr. Glaucomflecken thread made many of the same arguments about their specialties, while revealing an overall consensus that the healthcare incentive system is flawed, insurer influence is playing a big role in practice consolidation, and many physician practices aren’t in a position to exclusively sell to physician owned/led organizations. 

The Takeaway

Regardless where you stand in the healthcare private equity debate, Dr. Glaucomflecken’s Twitter responses make it very clear that providers are concerned about the state of U.S. healthcare economics. That same discussion thread also might contain more ideas about areas that the U.S. healthcare system should improve than any published report we’ll cover this year.

Radiology’s Nonphysician Service Expansion

A new Harvey L. Neiman study showed that the recent expansion of nonphysician practitioners (NPPs) across US radiology practices coincided with similar increases in NPP-billed services — services that have traditionally been performed and billed by radiologists.

The Study – Researchers reviewed 2017-2019 data for Medicare claims-submitting nurse practitioners and physician assistants (together “NPPs”) who were employed by US radiology practices, finding that:

  • The number of radiology-employed NPPs who submitted claims increased by 16.3% between 2017 and 2019 (523 to 608 NPPs), while the number of US radiology practices that employed claims-submitting NPPs jumped by 14.3% (196 to 224 practices)
  • This NPP service expansion was driven by clinical evaluation and management services (E&M; +7.6% to 354), invasive procedures (+18.3% to 458), and image interpretation services (+31.8% to 112).
  • Meanwhile, total NPP wRVUs increased by 17.3%, similarly driven by E&M services (+40% to 111k wRVUs), invasive procedures (+5.6% to 189k), and image interpretation (+74% to 8,850 wRVUs)
  • Some radiologists might be concerned that image interpretation saw the greatest NPP headcount and wRVU growth (see +31.8% & +74% stats above), although imaging only represented a small share of overall NPP wRVUs (2.9% in 2019), and 86.7% of NPP-submitted imaging services were for either DEXA scans or swallowing studies. 

The Takeaway

Although roughly 87% of radiology practices still don’t employ NPPs who submit Medicare claims (as of 2019 anyway), this study reveals a clear trend towards NPPs performing more billable procedures — including image interpretation. 

Given previous evidence of NPPs’ growing employment in radiology practices and the major role NPPs play within other specialties, this trend is very likely to continue, leading to more blended radiology teams and more radiologist concerns about the NPP ‘slippery slope.’

Envisioning A Difficult Future

S&P Global Ratings’ decision to downgrade Envision Healthcare might have been largely overlooked during another busy healthcare news week, but it could prove to be part of one of the biggest stories in healthcare economics.

About Envision – The private equity-backed mega practice employs more than 25k clinicians across hundreds of US hospitals, including roughly 800 radiologists who perform over 10 million reads per year. 

The Downgrade – S&P downgraded Envision Healthcare to ‘CCC’ (from CCC+) and assigned it a ‘Negative’ CreditWatch rating, citing the company’s “inadequate” liquidity, a missed financial filing deadline, and a challenging path forward. Envision owes $700M by October 2023 (and more after that), but S&P expects the company to end 2022 with less than $100M in cash, risking more short-term downgrades and bigger long-term disruptions.

The Background – If you’re wondering how Envision found itself in this situation, a recent Prospect.org exposé has some answers (or at least its version of the answers):

  • When private equity giant KKR acquired Envision in 2018, it burdened the company with billions in debt, including a $5.3B first-lien term loan due in 2025
  • KKR’s initial strategy involved keeping most of Envision’s clinicians out-of-network (and earning higher surprise billing rates), but Envision moved many of its physicians in-network amid public backlash and looming legislation 
  • Ongoing surprise billing legislation spooked investors, causing Envision’s first-lien term loan to trade for 50 cents on the dollar in early 2020, before bouncing back to a somewhat-less-distressed 70-80 cent range later that year
  • The COVID pandemic further strained Envision’s finances, as many of its core specialties saw major volume declines (emergency, anesthesiology, radiology, GI, etc.)
  • Envision avoided bankruptcy thanks to an estimated $100M CARES Act bailout and help from its creditors
  • The final surprise billing legislation turned out to be pretty favorable for Envision, but not as favorable as back in the pre-legislation days
  • As of March 2022, Envision’s $5.3B first-lien term loan was still trading in distressed territory (73 cents), and it has other loans to pay off too

The Path Forward – It’s hard to predict how this will work out for Envision, although Prospect.org suggests that it might involve KKR splitting Envision into two companies. One could be saddled with all the debt and destined for bankruptcy, while the other entity (and KKR) could emerge “unscathed.”

The Takeaway

For many in healthcare this is a cautionary tale about what can go wrong when private equity influences are combined with an over-reliance on a disputed business model (in this case surprise billing) and a global pandemic. It also makes you wonder if other mega practices are in similar situations.

Radiology’s Nonphysician Expansion

A new JACR study detailed nonphysician practitioners’ (NPPs) expansion across US radiology practices, mirroring a trend already seen in other parts of healthcare and raising questions about how much further radiology NPPs might expand.

The Study – The study reviewed 2017-2019 Medicare data for nurse practitioners and physician assistants (together “NPPs”) employed by US radiology practices, finding that:

  • Radiology practices employing NPPs increased by 10.5% (228 to 252 practices), while the number of overall radiology practices declined by 36.5% (2,643 to 1,679)
  • As a result, the share of radiology practices with NPPs on staff nearly doubled (8.6% to 15% of US practices)
  • NPP-employing practices expanded their NPP workforce at a much faster rate (+17.5%, 588 to 691) than they added radiologists (+10.4%, 6,596 to 7,282)
  • The growth of urban practices employing NPPs (10% to 17% share) significantly outpaced rural practices (5% to 7% share), despite a greater need for radiology coverage in rural areas
  • Radiology practices were also more likely to employ NPPs if they were larger, staffed more interventional radiologists, or had a high number of early-career radiologists

The study was limited to radiology-only practices, which employ two-thirds of U.S. radiologists, but excludes many academic, hospital-employed, and multi-specialty groups. That said, it’s possible that radiology NPP growth would be even greater if these groups were included.

The Takeaway

Although 85% of practices didn’t employ NPPs and radiologists still outnumbered NPPs by a 32:1 ratio (as of 2019 anyway), this study reveals a clear trend towards more practices employing NPPs and rising overall radiology NPP headcounts. That’s probably not surprising given the historical growth of NPPs within other specialties, and radiology’s continued shift towards national and PE-owned practices, but it’s still interesting to see how it’s taking place. 

It’s also interesting that this study wasn’t met with the level of radiologist uproar that we saw the last few times radiology NPPs made it into the industry news cycle. Even though NPPs’ expansion across radiology practices doesn’t mean that they will start encroaching into radiologists’ clinical territory (as some rads fear), it does suggest that we’ll see a lot more blended rad/NPP workforces going forward.

A Practice Trinity

Three independent radiology practices just merged with the goal of better serving their shared client, Trinity Health, representing an interesting example of how private rad groups can adapt to hospital and practice consolidation.

Becoming AIA – Michigan’s Huron Valley Radiology (54 radiologists), Indiana’s X-Ray Consultants (11 rads), and Connecticut’s Naugatuck Valley Radiological Associates (11 rads) will now become Advanced Imaging Alliance (AIA). Although technically a corporation, AIA is wholly owned by the groups’ physician shareholders, and will continue to operate as three separate divisions.

Trinity’s Consolidation – Trinity Health itself was created by the 2000 merger of the Holy Cross Health System (Indiana) and Mercy Health Services (Michigan), before acquiring St. Mary’s Hospital (Connecticut) in 2015 and eventually expanding to 89 hospitals in 25 states. Trinity’s expansion is what motivated the three groups to merge, allowing them to provide “a single level” of service for their shared client.

Consolidation Options – Mergers like this could represent a viable option for rad groups looking to remain independent and competitive, allowing them to better support multi-state hospital clients, while giving them workforce advantages (more subspecialists, shared overnight coverage) and better administrative / IT scale. 

The Takeaway
It appears that the trends towards multi-state hospital systems and expanding PE-backed radiology groups are here to stay, creating challenges for private radiology practices that have thrived on local relationships. That doesn’t mean that we’ll see a major trend towards three-practice mergers, but these mergers might make sense for some practices in similar situations.

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