In this episode, Scott Becker answers four reader questions, covering the impact of private equity on GI practices, the effects of health system consolidation on costs, how healthcare leaders can navigate a potential recession, and the role of physical therapy as a strategic service.
Chapter 1: What are the key reader questions addressed in this episode?
Chapter 2: Does private equity in GI prioritize profits over quality?
This is Scott Becker with the Becker Private Equity and Business Podcast. This morning, we're going to address four different reader questions. We're going to talk briefly about, and some of these are private equity, some of these are healthcare. And thank you for listening. First, we're going to talk about GI and private equity. Does private equity and GI prioritize profits over quality?
We'll give you some thoughts on that. Second, does hospital health system consolidation lead to rising costs in healthcare? Third, we're going to talk a little bit about what can hospitals do and health systems do in the face of potential recession and so forth as one of the most important actors in their communities.
Finally, fourth, we're going to talk about PT and should it be an extension of health systems and how we should look at physical therapy and so forth as part of a magnet for services. The first question is, does private equity in GI prioritize quality over profits or vice versa?
I would say that this issue can be somewhat not a definitive answer where you end up with the definitive answer is when the PE fund has over indebted the entity. And it's not so much that you're trying to prioritize profits over quality.
It's that they end up in a spot with it to be so much tighter in how they run the shop that you could end up with less clinical staff and less help than you want to have. I would think by and large, how they approach it, how much they push quality versus not. Some of the big GI roll-ups have been very focused on quality and really run by doctors.
And so I wouldn't say they prioritize profits over quality, but I do think when they get financially in a challenging spot, you could end up with some of those problems. A great question. The second reader question is, why has the rise in health systems coincided with the rising cost of care
And essentially, the movement away from small independent hospitals to large, large health systems has led to more market power and more ability to raise prices. And I think the answer is probably a guarded yes. I mean, on one hand, the big systems have really had to do this to offset the power of the massive payers. four of the largest payers are the four largest companies in America.
So you end up in a situation where systems have had no choice but to have some bargaining power with those payers to get bigger and bigger. They've also had to get bigger to be able to scale technology, to employ physicians, to invest in the systems, and so forth. So I don't think one is necessarily a cause and effect of the other, but certainly it has probably led to
Better care, the more systems that they become systems, but it's also probably led to some higher cost as well, but it's also allowed systems to survive. You've got 40% of systems in the country that are losing money currently still, and the other 60% aren't doing that well.
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