Re: Braun et al.: Association of private equity firm acquisition of ophthalmology practices with Medicare spending and use of ophthalmology services (Ophthalmology. 2024;131:360–369)
Authors: Sean T. Berkowitz, Avni P. Finn, Jayanth Sridhar
Journal: Ophthalmology (2023)

We read with interest the study by Braun et al on the association of private equity (PE) acquisition of ophthalmology practices, which concluded that these acquistions had no overall effect on total Medicare spending based on 2012–2019 fee-for-service claims.1Braun R.T. Lelli G.J. Pandey A. et al.Association of private equity firm acquisition of ophthalmology practices with Medicare spending and use of ophthalmology services.Ophthalmology. 2024; 131: 360-369Abstract Full Text Full Text PDF Scopus (1) Google Scholar They found an increase in beneficiaries seen per quarter (23.92%), intravitreal injection spending (25.00%), and usage of ranibizumab (74.09%) compared with bevacizumab (–12.91%), corroborating prior work showing increased spending on higher priced anti-VEGF medications after PE acquisition.2Singh Y. Aderman C.M. Song Z. et al.Increases in Medicare spending and use after private equity acquisition of retina practices.Ophthalmology. 2024; 131: 150-158Abstract Full Text Full Text PDF Scopus (2) Google Scholar There was also a 23.92% relative increase in unique patients seen by PE-acquired optometrists per quarter, which aligns with prior studies of PE acquisition.3Bruch J.D. Foot C. Singh Y. et al.Workforce composition in private equity-acquired versus non-private equity-acquired physician practices.Health Aff (Millwood). 2023; 42: 121-129Crossref PubMed Scopus (16) Google Scholar Although these results show interesting potential trends, the study's methodology may limit our ability to draw meaningful conclusions. Analysis of the Medicare dataset as a surrogate for PE influence is inherently limited. PE firms are risk averse and must consider an alternate risk-free rate of return (a theoretical profit from a seemingly near-guaranteed safe investment). They are unlikely to try to grow cash flow with sizable changes in auditable Medicare claims, beyond expected optimization in billing and coding. Based on the gross figures from Tables 2 and 31 (in the original article) and the lack of control calculation for inflation or discounting, it is difficult to presume how the cash flow from these claims would provide PE firms with their required 20% to 30% return on investment relative to alternate financial instruments. Rather, Medicare, with lower reimbursement rates than comparable private payers, is likely the tip of the iceberg. Although ophthalmology practices in general serve the lion's share of Medicare beneficiaries, Medicare payment may only be a fraction of the bottom-line revenue. Instead, PE firms likely increase cash flow by promoting a more profitable payer mix and increasing alternate revenue streams, which would not be captured by the present analysis. Providers are known to shift the supply of services in response to Medicare fee reductions via spillover into other services4Mitchell J.M. Hadley J. Gaskin D.J. Spillover effects of Medicare fee reductions: evidence from ophthalmology.Int J Health Care Finance Econ. 2002; 2: 171-188Crossref PubMed Scopus (27) Google Scholar; therefore, the relatively minor changes found by Braun et al1Braun R.T. Lelli G.J. Pandey A. et al.Association of private equity firm acquisition of ophthalmology practices with Medicare spending and use of ophthalmology services.Ophthalmology. 2024; 131: 360-369Abstract Full Text Full Text PDF Scopus (1) Google Scholar do not capture the potentially large growth in the supply of non-Medicare services. Moreover, neither the current study nor any previous work have captured the financial implications from sources not reported publicly: pharmaceutical rebates, cash pay procedures (such as refractive services, premium intraocular lenses, cosmetic procedures), indirect industry payments and direct industry payments (such as clinical trials with associated imaging, medication, service, or device revenue), and internal gains from vertical integration (investment in ambulatory surgical centers, optical stores, and referral or comanagement networks). Even the relatively small increased use of ranibizumab found by Braun et al is likely accompanied by significant financial gains not captured by Medicare allowable data. There are no Securities and Exchange Commission (SEC) requirements for clinical data reporting, and practice deals are often further protected with nondisclosure agreements. Third-party payer data are not public, and Centers for Medicare and Medicaid Services open payments may not include the breadth of indirect cash flow to large practices. As a result, any study of PE providers is reliant on a piecemeal approach using surrogate public data exhaust. Some groups have even explored debt markets, given the leveraged buyout approach taken by most firms.5Desai S. Memon R. Chen E. et al.Financial health of private equity-backed groups: perspectives from ophthalmology and optometry.medRxiv. 2022; (2022.11. 12.22281833)Google Scholar Braun et al and others use disparate datasets and creative methods to form a patchwork outcome cohort for analysis, but these approaches are unfortunately fraught with gaps and likely to miss the most enlightening streams of cash flow. As a result, although the authors must be commended for a timely study, we caution readers that the modest economic findings here may be inadequate to quantify the true clinical and financial impact of PE acquisitions in ophthalmology and general medicine. Association of Private Equity Firm Acquisition of Ophthalmology Practices with Medicare Spending and Use of Ophthalmology ServicesOphthalmologyVol. 131Issue 3PreviewPrivate equity (PE) firms increasingly are acquiring ophthalmology practices; little is known of their influence on care use and spending. We studied changes in use and Medicare spending after PE acquisition. Full-Text PDF ReplyOphthalmologyVol. 131Issue 3PreviewWe thank Berkowitz et al for their generous, specific, and extremely important comments on our article. We agree with Berkowitz et al that studies of private equity based on Medicare data are likely to substantially underestimate the impact of private equity acquisition of physician practices. Full-Text PDF