Oregon Lawmakers want to prevent private investor control of medical practices

This article was first published by the Oregon Capital Chronicle.

An Oregon lawmaker, backed by high-profile health care leaders, is pushing a bill to keep private investors and corporations focused on profits from buying out medical practices that put patient care first.

Ben Bowman, D-Tigard, argued in favor of House Bill 4130 last week, flanked by former Gov. John Kitzhaber and Dr. Bruce Goldberg, former director of the Oregon Health Authority. Bowman told legislators on the House Behavioral Health and Health Care Committee that his bill would stop private equity firms and large corporations from controlling Oregon medical practices, a trend that worries many analysts. One study published last year found that in about one-third of the country’s metropolitan areas, a private equity firm owns 30% of the medical practices. And in 13%, private investors owned a half.

Oregon has yet to have private investors swoop in and buy up medical practices as they have elsewhere, but big capital has gained a foothold in the state’s health care system. Two years ago, Amazon paid $3.9 billion to purchase One Medical, a primary care practice with five offices in Oregon. And Optum, a subsidiary of United Healthcare and the largest employer of physicians in the U.S., bought Oregon Medical Group in Eugene and GreenField Health in Portland and is trying to purchase the Corvallis Clinic, an 11-clinic physician-owned system in the mid-Willamette Valley.

Not surprisingly, the bill has grabbed the attention of large health care companies and investors like Amazon that are pouring on the pressure to kill the bill.

This trend should matter to consumers, analysts say: When private equity moves in, prices soar and care plummets.

A Harvard University study showed that private equity firms raise money and also borrow to purchase a medical practice, burdening the practice with debt to pay off. The investors then consolidate and sell in a relatively short time span – three to eight years on average, studies show – to turn a quick profit. This practice drives up prices, Dr. Jane Zhu of Oregon Health & Science University said at last week’s hearing.

“Our research and that of our colleagues has really shown that when private equity acquires a medical practice prices go up, both for payers and patients, on the order of 20 to 30%,” Zhu said. “That’s immediate. Evidence today also suggests that private equity acquisitions are associated with staffing changes with higher volumes of services but without commensurate improvements on quality of care.”

Kitzhaber, Goldberg testify

Kitzhaber, a former emergency physician and a major voice in shaping Oregon’s health care system during his 24 years as a senator and governor, said allowing private equity to control more Oregon practices would diverge from the state’s tradition of independence in health care.

“Oregon has a long and robust tradition of shaping our own health care future from the Oregon Health Plan to our coordinated care organizations,” Kitzhaber said during last week’s hearing. “These innovations were rooted in the belief that Oregon should not remain passively at the mercy of inaction by the federal government or unregulated corporate interests.”

He added that private equity buyouts and clinic sales for profit takes money out of Oregon and enriches Wall Street while 250,000 Oregonians lack health insurance because they can’t afford it.

“To me, there’s something wrong with that picture,” Kitzhaber said. “House Bill 4130 is not a complete answer to this problem, but it is a very important step towards that answer.”

Goldberg echoed those sentiments, pointing out that Oregon’s health reforms have been based on a belief that patients and their providers should make decisions about care – not outsiders focused on their bottom lines.

“Sadly, patient-physician trust may be breached when patient care decisions are influenced by income considerations and when the undue influence of corporate investors, shareholders and compensation models leads to the prioritization of financial gain over patient care,” Goldberg said.

The issue affects both urban and rural communities and could be especially detrimental to rural areas when investors close clinics that aren’t as profitable as they’d like, Goldberg said.

Opposition from telehealth providers

Bowman’s bill, which is scheduled for a committee vote Wednesday afternoon, would exclude telehealth providers. It would also ban non-compete clauses for most physicians, meaning they could take patients with them when they switch practices, and bolster transparency requirements so that patients would know who controls their health care clinics. The bill has support from physician groups, patient advocates and health care unions like the Service Employees International Union, or SEIU, and the Oregon Nurses Association, which represent thousands of health care workers in Oregon. It is also backed by insurers, think tanks, the Oregon Academy of Family Physicians and the Oregon Pediatric Society, according to a news release.

But big health care companies have rallied against it, and they’re pouring on the pressure to kill the bill, lawmakers said. Optum hired a high-profile lobbyist to strong arm legislators, and even entities that don’t operate in Oregon now have lobbyists in Salem to fight this bill.

Lawmakers said they’re using usual tactics: pressuring supporters of the bill to take their names off, asking for exemptions, calling for it to be turned into a study and saying the bill is too complicated for a short session.

“There’s been a lot of push,” one source said. “It’s easier to kill a bill in a short session.”

Some opponents have testified. Maureen McGee of Rayus Radiology, which is owned by private investors and works with independent physicians in Oregon, said the bill would limit innovation and force providers to change their operations, which would drive up costs.

Even though telehealth companies would be excluded, Kyle Zebley, senior vice president of the American Telemedicine Association, also opposes the bill. He said it would discourage private investment in Oregon health care because it offers no safeguards for protecting investors’ money.

Another opponent, Jessica Rigsby, a vice president of Ophelia, a telemedicine addiction treatment provider, said the bill would discourage telehealth providers from entering Oregon. Ophelia does not currently operate in Oregon.

Rep. Rob Nosse, D-Portland and chair of the committee, made it clear he supports the bill and dismissed their concerns. He said the Legislature has eased the way for telehealth companies to operate in Oregon.

“If you’re so afraid of this bill, why do I want you to come and invest in my state?” Nosse asked. “We have other people and other entities that would come and make investments.”

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