Physician Management Companies, Private Equity Investment, and Commercial Healthcare Prices (WITHDRAWN)

Financial institutions have fueled the corporatization of medicine by investing in and acquiring health care organizations. In particular, private equity (PE) firms have invested heavily in physician management companies (PMCs). A PMC is a for-profit entity that manages the back-end administrative functions of medical practices, such as insurance contracting and billing. Many PMCs also employ practitioners and contract with hospitals to provide professional staffing and management services. This type of PMC is especially common in anesthesia: the eight largest anesthesia-focused PMCs employ nearly 22% of all anesthesia practitioners in the U.S. In this paper, we create a novel dataset that combines commercial claims from the Health Care Cost Institute with data on PMC facility contracts for anesthesia staffing services to study 1) how prices paid to anesthesia practitioners change after a facility contracts with a PMC and 2) whether there are differences between PMCs with and without PE investment. Using difference-in-differences methods, we find that allowed amounts increase by 16.5% post-PMC contract, with significant differences by PE status: PMCs without PE investment increase allowed amounts by 12.9%, while PE-backed PMCs increase allowed amounts by 26.0%. We find similar patterns for unit prices (allowed amounts standardized by procedure type and length), suggesting that price increases are the result of higher prices paid per service and not service length or intensity. In additional analyses, we explore why PMCs may command higher prices, including the threat of moving practitioners out of network.