◼ FINANCE Bloomberg Businessweek November 2, 202024
THEBOTTOMLINE Manyprivateequity-backedacquistions
of medical practices are so small that they fly under the radar of
regulators, but they can have a big impact on local communities.Private equity has played a key role in the
radiation-oncology market’s consolidation. For
almost a decade, New York-based private equity
firm Vestar Capital Partners owned 21st Century
Oncology, building it through acquisitions. (Vestar
declined to comment.) The cancer-care chain filed
for bankruptcy protection and in 2018 emerged
from reorganization with new owners. In May, it
changed hands again when it was taken over by
Australia’s GenesisCare, which is partly owned
by KKR & Co., one of the world’s largest private
equity companies. Then 21st Century adopted the
GenesisCare name.
Authorities are starting to look more closely
at the industry in Florida. In April, the Justice
Department announced that Fort Myers-based
Florida Cancer Specialists & Research Institute
had admitted to conspiring until at least 2016
with another company to carve up the Southwest
Florida cancer-care market to curb competition.
Prosecutors didn’t name the second company, but
other court documents indicate it was 21st Century.
Florida Cancer Specialists agreed to pay $100 mil-
lion, the statutory maximum, to settle the Justice
Department’s case in a deferred-prosecution agree-
ment. The government says the investigation is ongo-
ing; 21st Century hasn’t been charged. “GenesisCare
and its leadership are not subject to any liability” for
that firm’s conduct before the reorganization and
their purchase of it, a company spokesperson said.
Many other marquee private equity names
are pursuing medical roll-ups. Apollo Global
Management Inc., led by billionaire Leon Black,
owns LifePoint Health, which has been snapping
up rural hospitals. Goldman Sachs Group Inc.’s
private equity arm owns Capital Vision Services,
which is assembling a chain of optometry practices.
Bain Capital, founded by U.S. Senator Mitt Romney,
backs Surgery Partners Inc., an acquirer of surgi-
cal practices. “The M&A pipeline is as robust as
we’ve ever seen it,” said Surgery Partners Executive
Chairman Wayne DeVeydt, citing the pandemic’s
damage to medical practices, speaking to analysts
during an earnings conference call in August.
Ravi Parikh, a retina specialist who wrote a
paper about consolidation in ophthalmology, says
private equity-owned groups are building local
monopolies. “This means there are fewer options
for patients, fewer options for doctors, and less
control over delivery of care, all of which may hurt
patients,” he says in an interview.
Some researchers cite the dialysis market as
a cautionary tale. Dialysis cleans the blood of
patients with kidney failure and typically requires
three treatments a week. Kidney care is one of themost expensive interventions and is largely covered
by the government, costing U.S. taxpayers more
than $100 billion a year. Thanks to years of acqui-
sitions—a number of them by private equity firms,
including Bain—two publicly traded companies
now dominate treatment: Fresenius Medical Care
AG, a German company, and Denver-based DaVita
Inc., which counts Warren Buffett’s Berkshire
Hathaway Inc. as its biggest shareholder.
A working paper published this year by the
National Bureau of Economic Research found that
the small-company loophole in the antitrust law
made it easier for companies in the dialysis indus-
try to merge, resulting in less pressure to compete
on quality and more hospitalizations and deaths
than there otherwise might have been. The study
examined data from 1996 to 2017. Last year, Duke
University researchers, examining data from 1998
to 2010, found the big chains replaced skilled nurses
with less-trained technicians, increased patient
loads, and raised Medicare costs by prescribing
more drugs. Fresenius and DaVita representa-
tives say patient care has only gotten better as the
industry has consolidated and advanced, citing an
improvement in mortality and hospitalization rates
over time.
Before receiving his second kidney transplant
severalyearsago,DaleRogers,a formerauto
mechanic,chafedatthefewchoiceshehadfor
dialysis, as well as their quality. Rogers recalled
driving 30 miles several times a week for dialy-
sis treatment at Fresenius from his home in Silver
Valley, Idaho. “It was a herd-animal experience,”
says Rogers, 51, a board member of the American
Association of Kidney Patients. “It was sit back in
your chair, shut up, and do what I tell you.”
Fresenius spokesman Brad Puffer pointed to the
experience of patients such as Gloria Stephens, a
71-year-old from Jacksonville, Fla., who praised the
company. “They know me, and they know how I
am, and every once in a while remind me, ‘Make
sure you do this and that,’ ” Stephens says. “It is
very much like sisters and brothers.”
One thing is clear: With the two companies
delivering care to 75% of U.S. dialysis patients, some
doctors have struggled to remain independent.
Raffi Minasian, a nephrologist, sold a dialysis center
to DaVita in 2013, saying it was too small to compete.
“They were purchasing everything so much cheaper
than I was,” Minasian says. “They were beating me
by $30 or $40 on treatments just because they were
so much bigger.” �Sabrina Willmer“This means
there are fewer
options for
patients”