A recent article in the Wall Street Journal highlighted newly introduced federal legislation that would restrict the role of private equity in healthcare by closing loopholes. There are meritorious components of this legislation. Physicians—not investors, hospital executives, insurers or anyone else—should make decisions about patient care. Bad actors should be held accountable. Financial incentives should never override clinical judgment. And provisions of the Stop Corporate Takeovers of Physicians Act that strengthen physician autonomy, including restrictions on physician noncompetes, deserve serious consideration.
But protecting physicians from inappropriate financial influence is not the same as restricting the capital and operational support available to independent practices. And if Congress wants to protect physician independence, it should be careful not to make independence harder to sustain.
That is the tension missing from much of the current debate.
Independent medical practices are already under enormous pressure. They face rising costs, increasingly complex regulatory requirements, technology investments, staffing challenges and administrative burdens that have little to do with practicing medicine. At the same time, healthcare markets have become increasingly consolidated. Today, only about 42% of physician practices are solely physician-owned.
For many practices, the question is no longer whether to accept outside support. It is where that support will come from.
Private investment and management partnerships can provide capital, technology, infrastructure and administrative expertise that allow physicians to compete without becoming employees of a large health system. That does not mean every investment is good, every structure should be permitted, or every investor has behaved responsibly. They certainly haven't. It means policymakers should distinguish between financial arrangements that support medical practices and financial control that compromises medical judgment.
The Stop Corporate Takeovers of Physicians Act risks blurring that distinction. It would restrict some financing and management arrangements available to physician practices while exempting hospitals, hospital-affiliated clinics and nonprofit healthcare providers from its general prohibition on corporate ownership.
That raises a question: If independent practices lose access to some sources of capital and operational support, do they become more independent—or more likely to sell to larger healthcare systems?
That answer matters for patients.
Vertical consolidation in the health care sector is not cost-neutral. When hospitals acquire physician practices, services can sometimes become eligible for higher hospital-based payments, including facility fees. Vertically consolidated providers can also gain greater bargaining power with commercial insurers and command higher prices. Policymakers have spent years trying to address those incentives.
Evaluating the risks of financial influence based primarily on who owns or funds the organization risks losing sight of the larger picture. Financial incentives are not unique to private equity, and neither are concerns about consolidation, cost or control. Hospitals respond to financial incentives. Insurers do. Physician-owned organizations do. Investors do.
The better question is not which ownership model we should trust. It is what rules should apply across healthcare to protect patients and physicians regardless of who provides the capital.
Responsible healthcare investment requires clear lines.
Clinical decisions belong to clinicians and nothing should interfere with the doctor-patient relationship. Investors and business partners should not dictate how a physician diagnoses or treats a patient. Conflicts should be transparent. Abusive practices should be prohibited. Organizations that put financial interests ahead of patients should face meaningful accountability.
But those principles should be applied consistently. A tax status, corporate structure or medical license does not on its own guarantee that financial incentives disappear.
Congress should also confront the economic conditions driving physicians toward consolidation in the first place. If independent practices cannot afford the technology, infrastructure, compliance resources and administrative capabilities necessary to compete, restricting their financing options does not solve that underlying problem.
It may simply narrow their choices.
There is a better path: protect clinical independence aggressively while preserving responsible pathways to capital and operational expertise. Regulate conduct that harms patients. Increase transparency. Preserve competition. And hold healthcare organizations accountable based on what they do—not simply what type of organization they are.
Patient access, physician autonomy, competition and accountability should not be competing goals. Good healthcare policy should pursue all four.
Regan Parker is the CEO of the Association for Responsible Healthcare Investment.
