Radiology stakeholders weigh in on FTC’s exploration of how ‘corporate greed’ is impacting the specialty

Radiology stakeholders are weighing in on a recent request from the Biden administration about how “corporate greed” impacts the specialty.

In March, the Federal Trade Commission, Department of Justice, and Health and Human Services launched an inquiry into private equity and other corporations’ “increasing control over healthcare.” The deadline to submit comments was Wednesday, with respondents submitting 30-plus responses related to imaging.

Strategic Radiology—a coalition of nearly 40 independent practices encompassing 1,700-plus physicians—submitted its own letter on May 6. CEO Scott Bundy, MD, highlighted a recent Health Affairs study, which found a 608% increase in the number of private equity-acquired practices between 2012 to 2021. Just 15 PE firms own market shares in radiology greater than 30%, while four others control over 50%.

Data from the American Medical Association show that fewer than half of U.S. physicians work in private practice, with 70% of those under 40 working as employees rather than holding an ownership stake.

“This trend worries us, and it should worry you too,” wrote Bundy, who also is a practicing physician and partner at Radiology Associates of North Texas. “The aggressive acquisition strategies employed by PE firms prioritize short-term profit maximization over long-term investments in patient care and infrastructure. They take on an enormous debt load, aggressively use leverage to buy medical practices using borrowed money, and try to increase profits through negotiating clout, suppressed salaries, and unsavory financial schemes. As a result, we’re witnessing negative effects on patient care, workforce shortages, increases in healthcare costs and predatory billing practices.”

Strategic Radiology is suggesting six legislative remedies to help “enhance regulatory oversight and enforcement mechanisms to curb potentially anticompetitive acquisitions and mergers.” These could include:

  • Implementing a pre-acquisition notification requirement to antitrust agencies, if the cumulative value of a deal by a single parent company exceeds the reporting threshold.
  • Revising merger approval standards to make it easier to challenge deals and requiring proof that a merger “meaningfully” or “materially” lessens competition or “tends to create a monopoly,” rather than showing it “substantially” does so.
  • Enacting rebuttable presumptions against mergers that are based on objective criteria and develop streamlined procedures for evaluating and blocking such acquisitions.
  • Requiring parties to report smaller transactions in a streamlined, simple fashion so agencies can more easily track such physician practice sales.
  • Collecting and sharing data on healthcare competition, with the FTC, DOJ and HHS making it readily available to the public.
  • Issuing revised antitrust guidelines for enforcement in healthcare, reflecting the current landscape and evolving dynamics of the industry.

Along with legislative remedies, Strategic Radiology is suggesting other solutions to address some of the drivers that are forcing physicians to sell their businesses. Its comment mirrors points raised in a study this week about radiology practice consolidation, which suggested that complex regulatory requirements are pushing providers to join large multispecialty groups.  Bundy et al. believe the administration should strive to reduce administrative burdens, reform payment for off-campus hospital outpatient departments, and address the dangers of “excessive debt load associated with private equity.”

“Whether the target of acquisition is a physician private practice or a health system, private equity’s proclivity for excessive debt is a very real risk to our nation’s healthcare infrastructure, particularly during periods of high interest rates. Within the specialty of radiology, we have seen several of our largest and most sophisticated group practices absorbed by a corporate radiology practice that carries $3 billion in debt on its balance sheet; client hospitals taken to bankruptcy or near ruin; and a once-proud teaching hospital shuttered and sold for real estate value,” wrote Bundy, with the figure a reference to Radiology Partners, the country’s largest imaging group. “The effects of this trend have yet to be fully felt. To add insult to injury, these companies also employ sophisticated tax-avoidance strategies to shelter enormous fees collected by a firm’s partners from personal income taxes.”

“Addressing policies that inadvertently incentivize or facilitate consolidation is crucial for promoting competition, enhancing access to care and improving affordability in the healthcare sector,” Bundy added. “By reducing administrative burdens, reforming arbitration processes and implementing payment reforms, policymakers can create a more level playing field for providers, promote innovation, and ultimately benefit patients and consumers.”

Government officials weigh in

Strategic Radiology’s FTC comment letter is one of dozens related to radiology. There are also several from anonymous commenters, with some criticizing specific practices. Radiology Business is choosing not to highlight anonymous comments because it does not have the ability to verify the sources, nor their reasons for choosing to remain unidentified.

Among those weighing in were 11 state attorneys general and Sen. Elizabeth Warren, D-Mass., an outspoken critic of private equity in medicine. AGs in California, Connecticut, Delaware, Illinois, Minnesota, New Jersey, Oregon, Pennsylvania, Rhode Island, Washington and the District of Columbia cited the same Health Affairs study on consolidation as fuel for concern. They noted PE firm KKR’s acquisition of multispecialty radiology provider Envision Healthcare, which led to the organization’s eventual filing for Chapter 11 bankruptcy protection as it grappled with a massive debt load. Envision was a notorious abuser of out-of-network billing, with it and others’ actions eventually compelling Congress to create the No Surprises Act.

AGs are urging increased transparency around ownership and payments, banning anticompetitive contracting in federal programs, and utilizing joint enforcement against problematic mergers.

“The FTC’s recent lawsuit against U.S. Anesthesia Partners, also naming the private equity firm ultimately controlling the conduct (Welsh, Carson, Anderson & Stowe), was a good start, but it also illustrates the challenges enforcers face in this area,” state AGs noted. “The states urge a continued focus on holding those with ultimate control accountable, both through the increased transparency discussed above, and vigorous joint federal-state enforcement against those who are actually in control of the anticompetitive conduct, including across state lines where necessary and appropriate. The states are committed to addressing the challenges that private equity has brought to healthcare markets and look forward to working on these issues collaboratively with the DOJ, FTC and HHS.”

Sen. Warren similarly suggested actions to curb alleged corporate greed in healthcare. She believes the administration must “scrutinize serial roll-ups”—a practice that the FTC is targeting in its suit against U.S. Anesthesia Partners. Such an approach to M&A involves acquiring multiple smaller practices to control the market. Warren also urged the feds to analyze intercompany elimination/related party transactions, crack down on overpayments in Medicare Advantage, enforce Corporate Practice of Medicine Doctrine laws and undo mergers that are hampering competition.

“Your agencies should use all the authorities at your disposal to examine the competitive effects of consolidation in the healthcare industry and take decisive action to enforce structural separation of companies that use their vertically integrated structure to illegally crush competition,” Warren wrote.

The National Organization of State Offices of Rural Health also responded to the request, highlighting PE’s impact on such geographies. Part of the Health Resources & Services Administration, NOSORH cited the recent bankruptcy of Steward Health Care following alleged mismanagement by PE firm Cerberus Capital.

CEO Tammy Norville noted that use of bankruptcy by PE firms with healthcare holdings is “systematic and widespread.” A recent study estimated that about 20% of healthcare companies that filed for bankruptcy in 2023 were owned by PE firms. All but 3 of the 45 “most distressed” healthcare entities were owned by private equity, according to Moody’s.

“NOSORH believes that current regulations over healthcare consolidation transactions are fragmentary, uncoordinated and inadequate,” the organization wrote. “This includes authority at both the federal and state levels. NOSORH recommends expanding regulatory authority over healthcare consolidation transactions to protect consumers and the health system. NOSORH notes multiple rural exceptions to federal antitrust and anti-kickback authorities. These exceptions and safety zones exclude monopolistic and oligopolistic rural markets from appropriate oversight. NOSORH recommends that changes to regulatory authority specifically address rural exceptions and recognize the risks of healthcare consolidation in these communities.”

Others in medicine

Numerous associations also submitted comments that touched on the topic of radiology. Those included the American Independent Medical Practice Association, American College of Emergency Physicians, the Coalition Against Surprise Medical Billing and the Physicians Advocacy Institute.

The latter’s board is comprised of CEOs from medical associations in California, Connecticut, Georgia, Nebraska, New York, North and South Carolina, Tennessee and Texas. PAI believes lawmakers must increase regulatory oversight of practice acquisitions, protect providers from the threat of financial insolvency, reduce anticompetitive business practices, and reform payment policies that drive consolidation.

“Runaway healthcare consolidation poses enormous risks for patients and the physicians who serve them. As corporate entities buy up more and more physician practices, physicians are rightly concerned that corporations’ allegiance is with shareholders first, putting patients at risk,” Kelly Kenney, CEO of PAI, said in a statement. “Congress and the administration have a responsibility to protect patients from the dangerous effects of healthcare consolidation,” she added later. “Federal intervention is vital to protect patients from healthcare becoming increasingly inaccessible and unaffordable.”

Individual radiologists such as Joel David and Robert Wahlbrink, MD, commented, sharing negative experiences with private equity. Meanwhile, New Jersey cardiologist Edmund Karam, MD, responded, too, sharing a positive perspective after PE acquired his organization.

“This has not changed or influenced one thing about the way we practice medicine. We were given resources (through joint ventures) to expand our offices and to create an office-based laboratory for minor procedures. Moving more cardiology tests and procedures to the outpatient setting saves money for both the patient and the system as a whole—without negatively affecting outcomes. Because we are now part of a large network of cardiology practices, we can negotiate better prices for our supplies which helps our financial stability. This is like if everyone on your street went grocery shopping together as one entity and made one large order. You would get the lowest prices on everything, and the store would be happy to have made such a large sale. I am sure that you will hear negative stories about private equity involvement in healthcare, but it really all depends on the individual situation.”

Some of the anonymous comments criticized El Segundo, California-based Radiology Partners, the country’s largest imaging group, which is partially backed by PE. The organization shared a statement in response to these criticisms and pointed readers to its “Why RP” blog series, detailing its positive impact on the specialty.

“RP respectfully disagrees with the very inaccurate claims selected for comment,” a spokesperson told Radiology Business. “We stand by our locally led practices’ track record of delivering high quality care, driving innovation and increasing access to care for the patients we serve. We are proud of our radiologists and support teammates who deliver this care and have an average physician retention rate of over 90%. Because the comments cited are submitted via a one-way portal where anyone can voice any opinion, the [request for information] is not an appropriate venue to explain the complexities and challenges faced by providers in today’s environment.”

Marty Stempniak

Marty Stempniak has covered healthcare since 2012, with his byline appearing in the American Hospital Association's member magazine, Modern Healthcare and McKnight's. Prior to that, he wrote about village government and local business for his hometown newspaper in Oak Park, Illinois. He won a Peter Lisagor and Gold EXCEL awards in 2017 for his coverage of the opioid epidemic. 

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