Category: Private Equity Myths

“As private equity firms make it rain on healthcare companies, some in the industry worry that patients will pay the price.”

So begins a recent Modern Healthcare article on private equity’s entry into areas including Ophthalmology, physician staffing services, and Dermatology. AMA President Dr. Barbara McAneny is quoted as calling this trend “just another wave” in a broader tide of consolidation. But to read most of the press around PE in Dermatology is to imagine that we’re handing over our specialty to Bernie Madoff. In this view, any Dermatologist practicing in a PE-backed group is merely an instrument of profit-seeking villainy; our “conflict of interest” means we no longer see our patients as people, but as dollar signs.

I joined Dermatology Associates of Wisconsin, the group practice that became Forefront, because of its values, its culture, and its focus on patient care. None of those have changed with the backing of PE—even while our access to resources and support certainly has. Forefront’s doctors enjoy PE backing but have retained decision-making power over every inch of the group’s operations. When asked by an interviewer how aware he was of PE involvement in Forefront, one Dermatologist answered, “It’s invisible to me honestly. I have almost no awareness of it. To me, Forefront is the doctors, it’s the [central support] people who are there to help me…” The invisibility of PE plus the utility of our shared central services and support staff is, to our minds, the ideal configuration. PE is our bank, but our physicians are our backbone.

PE-backed group practices are hiring nurse practitioners (NPs) and physician assistants (PAs)—but so is every other type of dermatological practice. According to the 2018 American Academy of Dermatology Association Member Profile, nearly half of all Dermatologists employ a PA or NP, and those physicians work in non-PE-backed group practices, multispecialty groups, solo practices, and academic medical centers as well as PE-backed groups. Dermatologists in PE-backed practices make up only about 8% of the total number of Board-certified Dermatologists.

The myth here, then, is to trace a broader trend in Dermatology to a single practice setting.

This myth is more a trick of perspective than anything else. If you asked the owner of a Dermatology practice “what’s the biggest threat to your practice?” you’d likely hear about the stress of working two full-time, high pressure jobs—being both a full-time Dermatologist and a full-time small business owner. Other threats might include complex regulatory reporting; coding, billing, and collecting; hiring and retaining staff; and just about everything associated with the EHR. The increasing difficulty in negotiating contracts with insurance companies would probably come up, as would the challenge of maintaining referral sources.

After naming these threats, Dermatologist-owners might remind themselves that they enjoy complete autonomy in all matters. They don’t have to answer to layers of hospital administration or vie with other specialties for resources. They also get to exercise their entrepreneurial side, not just their clinical skills, every day.

But what if they could have these things without the additional administrative burden?

One myth around private equity in Dermatology is that the PE backers will want to tell Dermatologists how to practice medicine—which services they should push, which equipment they can use, how many PAs or NPs they should employ.

For the Forefront Dermatologist, practicing with complete clinical autonomy is non-negotiable: we control everything that takes place in the walls of our clinic, from the curtains to the chair and from the people we hire to the amount of time we spend with each individual patient. As one Forefront Dermatologist recently put it, “Having joined Forefront after working in a large, hospital-based, multi-disciplinary group practice, I can say that I’ve never had the amount of practice autonomy that I have now. In my clinic—and I do call it my clinic—I’m the one making the decisions that matter to me. Yet I don’t have to make the decisions that I could care less about.”

Elsewhere I’ve cautioned people to avoid using a “broad brush” to describe private equity-backed group practices, and I want to avoid doing the same here with respect to individuals. I know that not every Dermatologist wants to practice with the same degree of autonomy. There are plenty of exceptional Dermatologists who are happiest with a hospital structure, for instance, and who provide excellent care within the constraints of that setting. And there are others who might not even consider working in a group practice setting. Autonomy, for them, extends well beyond patient care to the administrative nitty-gritty and back-end minutiae. Forefront Dermatologists have determined that they can provide optimal care by offloading many of these administrative tasks. For them, autonomy means freedom from these stresses as well as the freedom to make all clinical decisions.