Kada Health News & Insights

David Wainer's May 30 WSJ article "You Can Thank Private Equity for That Enormous Doctor’s Bill" is a must-read that brings up many important points to consider. Among them...

1. 1. Bigger often doesn't equal better as it relates to health systems. Excessive consolidation drives up the cost of care by creating more market power for pricing. An open and competitive market would result in substantial price reductions similar to those seen in other industries where competition is fierce.
   
   
   2. "Rent-seeking" behavior in the industry is real. Government leaders and self-funded companies that pay for care should first recognize that healthcare is local. Market competition among providers of care has to be measured one metropolitan statistical area (MSA) at a time, not across states or regions.
   
   
   3. Leaders of health systems should spend their time making care more affordable and accessible, not on enhancing pricing power through consolidation within an MSA. The latter makes care less affordable and less accessible, hurting patients and the business community.
   
   
   4. Private Equity (PE) acquisition of physician practices may or may not lead to price increases but too often fail to achieve meaningful practice efficiency. They do little to lower the price and cost of care. The impact on providers can be devastating. For physicians, the sale of a practice you love might be economically advantageous if you are ready to retire and are looking for a financial boost at the end of your career, but can be bad for doctors with years of practice remaining. They will likely take a pay cut somewhere down the road and are typically stuck working for a PE firm instead of themselves under strict non-compete terms that will force their families to move if they ever want out of the deal.

While the structural challenges of the healthcare industry are real and significant, there is reason for hope. Opportunities abound to improve quality and reduce the cost of care. It takes a servant-leader approach focused on (1) making it easier for physicians and providers to practice great medicine and (2) making it easier for patients to access great care.

We help health systems achieve great results using the Kada Health Operating System.


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