New in Health Affairs with Erin Fuse Brown.

We discuss lessons from Oregon’s novel attempt to regulate private equity and corporate ownership of medical practices—a rapidly growing trend in health care. 1/x

healthaffairs.org/content/forefr…

Finally, we highlight the need for policy reform that creates viable alternatives to corporate ownership.

We suggest much stronger transparency and enforcement than exists in this legislation. Tasking Oregon’s merger review agency to scrutinize deals for CPOM violations is a good start, but it’s insufficient.

We also clarify that CPOM regulations—at least as traditionally conceived—wouldn’t address *facility* ownership, where some of the most concerning evidence of PE abuses has surfaced—eg nursing homes.

Yet today, the predominant form of medical practice ownership is, in fact, “corporate”—eg private-equity portfolio companies, subsidiaries of insurance companies, and retailers like Walgreens and Amazon.

To do this, the bill would ban several contracting practices known to subordinate the physicians to the MSO. This includes prohibiting stock transfer restriction agreements (STRAs), which effectively put the MSO in control of the physicians’ equity.

The bill would also require that the medical practice retain “de facto control” over the “administrative, business or clinical operations” of the practice that may affect the “nature or quality” of medical care delivered. It then provides a non-exhaustive list of such conduct.

Take UnitedHealth, the nation’s largest employer of physicians, with 90k. In reality, they only legally employ 10k physicians—the rest are functionally employees but legally “affiliates.” They use the MSO-PC workaround, as seen in their filings to acquire a practice in OR.

Congress could take a range of actions to curb vertical consolidation, but in this piece we make the case for a structural position: simply ban insurers and PBMs from owning or controlling pharmacies and providers.

thehill.com/opinion/health…

Mitchell Li MD Ben Bowman Dr. Glaucomflecken Hayden Rooke-Ley CMS Office of Burden Reduction - Parody Account Robert McNamara Vicki Norton, MD Rep. Christine Goodwin Cyrus Javadi Dr. Hai Pham Representative Thuy Tran 👊🏽

Hayden Rooke-Ley rad as hell

As important here is the political dimension—ie corporate power subverts democracy. Through privatization, we’ve built behemoth insurance companies that re-exert themselves in the political process, locking in wasteful subsidies through lobbyists. This is Medicare Advantage.

As for limitations and lessons, the bill grants a blanket exemption to hospitals, codifying an attorney general opinion from 1974. We think this is a serious flaw in the bill, but we also caution against traditional CPOM application here. We propose an alternative.

Which bring us to the legislation in OR. The bill seeks to restore the principal-agent relationship of the medical practice and the MSO—ie requiring that the MSO works for the physician owners, not the only way around.

Insurance companies owning physicians is yet another example of #CPoM . Anyone see a conflict of interest here? 🤔🤔🤔

Thank you, Hayden Rooke-Ley, for your continued work on this.

Michigan State Medical Society
Michigan DOs

We also discuss the dangers of carve-outs and grandfathering in the legislation, which can easily entrench existing “platform and roll-up” strategies if not carefully crafted.

So how does this square? How do these corps get around physician ownership requirements?

By and large, they don’t actually employ the physicians. Instead, they use an arrangement known as the “PC-MSO” or “friendly PC” model to circumvent CPOM bans.

Here, the corp establishes a management services organization (MSO), which is a vendor meant to help the medical practice (the PC) with “back office” admin. However, through legal engineering (more below), the corporate owner transforms the MSO into the de facto practice owner.

These laws have traditionally prohibited lay corps from owning physician practices or employing or controlling physicians. Though now weakly enforced, these laws remain on the books—ie most states still require some form of physician ownership of private practices.