The healthcare system has a new bogeyman: private equity.

In Washington and state capitals, lawmakers and regulators are fomenting panic about private equity firms rolling up physician practices and squeezing them for a quick profit. Patients are collateral damage.

There’s just one problem with this narrative. It’s not true. Research empirically debunks it.

Medicare expenditures are lower for beneficiaries under the care of physicians in independent medical practices affiliated with private equity than for those in hospital- or corporate-affiliated practices. And when physicians shift from an unaffiliated model to a private equity-affiliated one, their per-beneficiary Medicare expenditures go down.

There’s also evidence that private equity-affiliated physicians provide a better patient experience and better-quality care. Medicare beneficiaries in private equity-affiliated private practices spend fewer days in the hospital and go to the emergency department than their counterparts in hospital-affiliated practices.

The research was published in September by healthcare consulting firm Avalere. The study analyzed 2022 risk-adjusted Medicare claims data across five medical specialties: cardiology, gastroenterology, medical oncology, orthopedics and urology.

Researchers found that in the specialties, Medicare expenditures for patients in private equity-affiliated practices were, on average, 9.8 percent lower than for beneficiaries in hospital-affiliated practices.

That means the typical beneficiary in a hospital-affiliated practice had annual Medicare expenditures of thousands of dollars higher than the typical beneficiary in a private equity-affiliated practice.

Across all five specialties, beneficiaries in PE-affiliated practices had, on average, 13.5 percent fewer inpatient days than beneficiaries in hospital-affiliated practices — and, on average, 7.9 percent fewer visits to the emergency department.

Avalere also investigated what happened to Medicare expenditures after unaffiliated physicians in the five specialties decided to affiliate with a larger body — whether a hospital, a corporation, or a private equity-backed management services organization that furnishes operational and financial support.

These partnerships are becoming increasingly common. In 2022, 12 percent of Medicare-billing physicians across the five specialties studied were unaffiliated. Nearly four in 10 physicians were affiliated with corporate entities, and 45 percent were affiliated with hospitals. Only 6 percent were affiliated with private equity.

More attention must be paid to hospitals and corporate entities such as insurance companies purchasing medical practices.

It’s the physicians in this last group — those whose independent practices had affiliated with private equity — who are associated with the steepest decline in Medicare expenditures, according to Avalere.

Contrary to the popular narrative, Medicare expenditures decreased in the 12 months after an unaffiliated physician moved to a private equity-affiliated model across all five specialties. The yearly decline per beneficiary ranged from $231 for orthopedic physicians to $1,423 for gastroenterologists.

By contrast, Medicare expenditures increased in the 12 months after an unaffiliated physician transitioned to a corporate or hospital affiliation across all five specialties. The increases ranged from $852 per beneficiary yearly for unaffiliated urologists who transitioned to a corporate model, to $1,595 for unaffiliated cardiologists who affiliated with hospitals, to $2,562 for unaffiliated medical oncologists who made the move to corporate affiliation.

Given these findings, policymakers should encourage more physician practices to partner with private equity-backed entities. At the very least, policymakers should seek to understand how private equity-affiliated practices deliver high-quality care at lower cost to patients and the healthcare system.

Private equity-backed management services organizations offer physician practices access to capital that they can use to expand access to care. Some may use that capital to hire additional fellowship-trained physicians or advanced practice providers. Others may use it to install cutting-edge therapeutic technology in the office setting, which is more convenient and less costly for patients than going to a hospital for the same treatment. Still, others may use it to open clinics in previously underserved communities.

For example, independent oncologists affiliated with private equity-backed management services organizations have been able to enroll their patients in more than 700 clinical trials for novel medicines. Without a financial partner, they never would have had the resources or the operational expertise to set up that kind of clinical trial infrastructure.

Independent urologists in Massachusetts affiliated with a private equity-backed management services organization have been able to launch an immunotherapy program to treat prostate cancer, which disproportionately affects African American men, in their community-based clinics outside Boston. Previously, patients had to travel to Boston to receive this innovative treatment.

For too long, some policymakers have cast all private equity involvement in health care in a negative light. However, evidence is mounting that private equity can empower independent physician practices to deliver quality outcomes at lower costs. That’s good not just for patients but for our healthcare system.

Paul Berggreen is the president of the American Independent Medical Practice Association. He wrote this for InsideSources.com.