Spending on healthcare accounts for around 18% of total spending in the US. The size of this market has attracted private equity groups, and hospital chains into the industry. They are buying up privately owned physician practices, and putting the physicians on their payrolls. As employees of the hospitals, they are under control of hospital administrators. This article reports on some of the unsavory practices that have occurred. Doctors are encouraged to refer their patients to testing facilities, and to specialists within the system. This has resulted in more referrals and higher prices for diagnostic testing. Emergency room physicians are also encouraged to admit patients that they treat to the hospitals, even when they believe that admission is not necessary.
There are also reports about potential abuses in Accountable Care Organizations (ACO). They are being developed to improve patient care and to cut the cost of healthcare. ACO's are paid a fee for delivering a bundle of services associated with a diagnostic category. They share a portion of the savings that they might achieve in delivering the services. There are reports that ACO's have cut back on services at the expense of their patients. They deny those charges and they defend their healthcare outcomes. It is clear, however, that there is a potential for abuse in such programs.
We need the healthcare system to provide more value to it's clients. Providers should deliver quality care at lower costs to reach that goal. That is not likely to happen if we allow provider organizations to monopolize local markets. Private equity firms have only one objective. They need to provide a high rate of return to their investors in order to attract and retain investors. This creates the risk that patients will be viewed as profit centers rather than as clients in facilities that they control. We have to be careful about the trends that are developing in the healthcare industry.