Private Equity in Otolaryngology: What Is the Impact on Medicare Payments?

Abstract

This study aims to assess whether private equity (PE) acquisitions of otolaryngology-head and neck surgery (OHNS) practices are associated with changes in Medicare payments and procedure volume. A cross-sectional study. PitchBook and the Medicare Provider Utilization and Payment Data File. PE acquisitions of OHNS practices were determined using the PitchBook database and linked to the 2016-2022 Medicare Provider Utilization and Payment Data File based on practice address. Non-PE practices were included as control if located in a state where an acquisition occurred, with the index point corresponding to the year of acquisition. Medicare payments for all procedures were totaled and averaged. PE-affiliated and non-PE-affiliated practices were compared before and after the acquisition. A total of 9 acquisitions of OHNS practices across 7 states were identified. Pre-acquisition, PE-affiliated otolaryngologists performed more procedures per year (1289 vs 1006, P < .001) compared to their non-PE counterparts, with average payments per procedure of $92.8 versus $91.36 (P = .398), respectively. Post-acquisition, PE-affiliated otolaryngologists performed more procedures per year (1166 procedures vs 950, P = .015) compared to their non-PE counterparts, with average payments of $105.2 versus $91.3 (P < .001), respectively. PE-acquired OHNS practices had increases in average Medicare payments per procedure after acquisition with minimal changes in procedure volumes. In addition, PE firms had a greater number of procedures in both periods. This finding suggests that PE may emphasize both performing high-payout procedures and investing in high-volume practices, although this can be firm-dependent.