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Private equity-backed groups acquiring more dermatology practices

One hundred eighty-four dermatology practices were acquired by private equity-backed groups from 2012 to 2018, with more acquisitions occurring over time and broadening in geographic reach.

“The results suggest that PE-backed dermatology practice consolidation is increasing, which is consistent with data reporting that fewer dermatologists are working in solo practice than they were a decade ago,” Sally Tan, MD, MPH, of the department of dermatology at Brigham and Women’s Hospital in Boston, and colleagues wrote.

The researchers identified private equity (PE)-backed transactions through a search of five financial databases: Capital IQ, CB Insights, Zephyr, Thomson ONE and PitchBook. PitchBook was used to identify PE-backed financing rounds into dermatology management groups (DMGs).

A DMG is a physician practice management company that operates several dermatology clinics and strives to acquire and open new clinics, according to researchers.

From 2012 to 2017 the number of practices acquired by PE-backed DMGs increased each year, with five acquisitions in 2012, seven in 2013, 13 in 2014, 26 in 2015, 40 in 2016 and 59 in 2017. From January to May 2018, 34 practices were acquired.

Seventeen PE-backed DMGs participated in the acquisitions and listed on their websites as owning an estimated 743 dermatology clinics by mid-2018.

The researchers noted a regional focus, with 36% of the acquired practices in Florida and Texas; acquisitions occurred in 30 states.

Between 2012 and 2017, the number of practices acquired increased by a mean of 65% each year.

“Large group practices may also negotiate more favorable reimbursement contracts with payers; alternatively, practices may offer below-market rates in exchange for relative exclusivity of a managed care patient population,” the researchers wrote.

Physicians have voiced concerns about the loss of physician autonomy and conflicts of interest related to the acquisitions, according to the report. In addition, the effect of consolidation on clinical outcomes and health care expenditures has not been addressed.

“Further research is needed to assess whether and how PE-backed ownership influences clinical decision-making, health care expenditures and patient outcomes,” the researchers wrote. – by Abigail Sutton

Disclosures: Tan reports no relevant financial disclosures. Please see the study for all other authors’ relevant financial disclosures.