PE-Backed Ownership of Dermatology Practices Is On The Rise

More than 700 unique dermatology clinics in the United States are now owned by private equity firms, but is this a good thing?

Private equity firms have increased their financial stakes in dermatology practices throughout the United States, but exactly how this affects care is not fully understood yet.

Private equity-backed dermatology management groups acquired 184 dermatology practices from 2012 to 2018, with the number of acquisitions increasing over time and broadening in geographic reach, according to a cross-sectional study of five financial databases in JAMA Dermatology.  These acquired practices comprised an estimated 381 dermatology clinics as of mid-2018, and the number of financing deals in which dermatology management groups raised capital increased over time, the study found. Specifically, there were nearly 12 times as many takeovers in 2017 as in 2012 and more than 700 unique dermatology clinics in the United States are now owned by private equity firms.

“Further research is needed to assess whether and how private equity-backed ownership influences clinical decision-making, health care expenditures, and patient outcomes,” conclude the authors who were led by Arash Mostaghimi, M.D., M.P.A., M.P.H., of Brigham and Women’s Hospital in Boston and an associate editor of JAMA Dermatology.

Is It Too Late Already?

In an editorial accompanying the new study, Drs. Joshua M. Sharfstein and Jamar Slocum, both from  Johns Hopkins Bloomberg School of Public Health, Baltimore, Maryland, urge extreme caution in the face of the rapid takeover of the private practice of dermatology by private equity firms.

“The more compelling case today…is that the basic approach and incentives of private equity are not aligned with health and value in dermatology.“ Private equity acquisitions will likely add to the immense cost and stark inequality of our health care system by focusing on short-term revenue opportunities, they write.

And the time to act is now, they write. “At the current pace, by the time more is understood about the takeover of dermatology practices by private equity firms, it will likely be too late to change course. Efforts to protect the field of dermatology and the American public from the potential adverse consequences should begin now.”

In addition to greater transparency, the editorial authors urge dermatologists to stop selling their practices to private equity firms. “Legislators should prohibit such transactions,” they write. “Exceptions should be permitted for situations in which a practice can make a strong and public case to health officials that doing so is in the public interest—based on a review of access to care for the local community, plans to maintain and improve quality of care, and anticipated costs.”