Private equity acquisition of health care services such as clinics, hospitals and imaging facilities is on the rise in Australia, yet there is scant information on its scale or the resulting impact on clinical care and costs, a study suggests.

Researchers say doctors should be aware of the motivations and dynamics of private equity companies, as they are increasingly likely to interact with them.

The study, conducted by a Harvard University researcher, drew from a commercial database on mergers and acquisitions to identify private equity purchases of Australian hospital services, clinics, and imaging and in vitro fertilisation services.

Findings showed that private equity firms made at least 75 acquisitions of health care delivery assets in Australia during 2008– 2022, with the annual number rising from three acquisitions to 18 over that time period for a 14% annual growth rate.

However, only around half (52%) of the acquisitions had an ascertainable purchase price, which totalled an estimated $24.1 billion.

Writing in the MJA [link here], Dr Victoria Berquist also noted that many smaller private equity acquisitions were often not publicised, meaning that her report might have underestimated the number of deals made over the time period.

The total known private equity investment in healthcare assets was $258 million in 2008, and grew to $4.5 billion of acquisitions in the following 15 years.

The medical specialty most frequently involved in private equity acquisitions between 2017 and 2022 was general practice, with 16 firms or chains and 256 clinics sold. However, private equity acquisitions also included ophthalmology (24 clinics), oncology (60 clinics), cardio-respiratory clinics (101) and radiology.

This differed from the US where dermatology, ophthalmology, anaesthesia, and emergency medicine were the leading specialties involved in acquisitions, perhaps reflecting the difference in funding arrangements and service use, the author said.

Rich target for profit

“It is clear that private equity plays a major role in Australian health care delivery, and investigating its effects on health care is especially important given national attention to health care costs, particularly in the area of primary care,” she wrote.

She pointed to estimates that almost 3% of all Australian general practices had been purchased by or changed hands between private equity owners since 2017.

Writing in an accompanying editorial [link here], researcher Professor Martin Hensher from the University of Tasmania said many countries, including the US, had concerns around the financialisation of healthcare, which was increasingly seen as a “rich target for profit”.

“Rising private equity ownership of Australian health care inherently drives increasing levels of foreign ownership. This increases the exposure of Australian health policy makers to claims from foreign (but not domestic) owners and shareholders for reflective losses — potentially lost income and profits linked with policy reforms — under international investor state dispute settlement mechanisms included in many international trade agreements. Badly needed reforms could be stifled by the chilling effect of this threat of potential litigation,” he wrote.

He said while doctors working for a private equity owner was increasingly common, alternatives to private equity and large corporate models included non-profit and social benefit ownership models or direct public employment.

“Australian doctors should be equipped to make informed choices about whom they wish to work for or sell their most critical professional asset to,” he said.