Private equity and other corporate entity investment in physician practices increased exponentially in the past decade and concerns about care delivery, physician autonomy and health care market conditions come with that money.
One study found that private equity acquisitions in health care increased sixfold over a decade, with 484 deals in 2021, up from 75 in 2012. Corporations affiliated with major health insurers are acquiring physician practices at high rates too.
Meanwhile, research suggests that private equity ownership is associated with mixed to harmful impacts on the quality of care, increased health care costs, and in some cases can result in worse health outcomes in certain health care settings.
States are taking notice and taking action to protect physician practices’ integrity. The AMA Advocacy Resource Center has created a resource that breaks down five policy mechanisms that states are using to try to limit undue corporate influence when these entities invest in physician practices.
With “Legislative Approaches to Curb Corporate Influence in Health Care” (PDF), the AMA’s experts outlined the rationale behind each of the five approaches and provides examples to highlight areas where legislative requirements tend to diverge. It also includes an appendix that lays out some specific laws that states have proposed or passed.
Here are the five approaches the report identifies.
Supporting transparency and oversight of health care transactions through notification and review requirements. These laws aim to improve transparency by requiring health care entities to provide notice of certain health care transactions to the state attorney general’s office or another entity, such as a commission in the department of health and human services.
State laws vary on which transactions they apply to, the type of notice required, requirements to make reported notices public, as well as review and approval criteria. Provisions that establish a review or approval process can add more teeth to transparency laws.
Preserving physicians’ independent clinical judgment by strengthening the corporate practice of medicine doctrine. Some states have strengthened existing corporate practice of medicine bans and there is an opportunity for states without corporate practice laws to implement new prohibitions on the corporate practice of medicine.
These laws govern things such as ownership share and structure, non-interference with clinical decision-making and bans on “controlling or directing” a practice. Enforcement mechanisms are crucial.
Limiting the influence that management services organizations (MSOs) may exert on physician practices. States where lay ownership of a physician practice is prohibited see physicians and corporate investors often enter into arrangements that give both entities some equity in the practice.
When a physician practice contracts with an MSO, physician owners control the clinical aspects of the practice, while the MSO agrees to operate certain nonclinical aspects, such as financials. But the line of what is a clinical function versus an administrative one is blurry. States have attempted to restrict the level of control MSOs can exert by limiting dual affiliation between an MSO and a physician practice and expressly defining what constitutes clinical decision-making that must be done entirely by the physician-owned professional corporation.
Supporting fair contracting in physician employment agreements. Some states are banning noncompete agreements, nondisclosure agreements and nondisparagement agreements between their employers and, in some cases, MSOs. State legislation often proposes broad prohibitions with minimal exceptions. The AMA House of Delegates has adopted policy opposing restrictive covenants in physician employment contracts. Bans on nondisclosure and nondisparagement agreements empower physicians to speak out should they see harmful effects of corporate ownership in their practice.
Protecting patient access to care in consolidated markets where corporate entities invest in hospitals or medical practices. There is an opportunity for states to pass laws to help ensure financial stability of health care entities that are being acquired and to protect continuity of care if a facility closes after a corporate acquisition.
For example, there can be requirements around advanced planning for potential closures and mandates that investors make a minimum capital investment or set aside funds to support care delivery if there are service reductions or closures. State laws are still very much emerging on this front, but congressional legislation proposed in 2024, the Health Over Wealth Act, could serve as a guide for solutions at the state level.
The AMA has policy on the impact of private equity on medical training that, among other things, says that an institution or medical education training program academic mission should not be compromised by a clinical training site’s fiduciary responsibility to an external corporate or for-profit entity and that the AMA will encourage graduate medical education training institutions, programs and relevant stakeholders to demonstrate transparency on mergers and closures, especially as it relates to private equity acquisition.
The AMA also has created resources with advice for physicians (PDF) on venture capital and private equity investment.
