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Charlotte's Largest Private Physician Practice Turns To Private Equity

A growing number of doctors are turning to a new source of funding — private equity. According to a UC Berkeley study, the number of private equity acquisitions of physician practices grew sixfold between 2012 and 2020. One joining that list is Charlotte's largest independent physician practice.

The doctors of Tryon Medical Partners formed the practice after breaking away from Atrium Health six years ago. Michelle Crouch looked into this trend and what it might mean for patients and wrote about it for the Charlotte Ledger business newsletter and NC Health News. She joins WFAE's Marshall Terry to discuss.

Marshall Terry: So give me a quick overview, if you will, of Tryon Medical Partners. Why did these doctors break away from Atrium?

Michelle Crouch: Tryon Medical Partners actually received a lot of attention back in 2018 for going against the trend of hospital consolidation. They left Atrium, about 88 doctors, because they said at the time that Atrium's practices were bad for patients. And that they wanted more freedom to do what was best for patients. Essentially, they said they could provide better care at a lower price by going out on their own.

Terry: OK, so why is Tryon turning to this private equity group TPG, which is based in San Francisco?

Crouch: I talked to Tryon CEO Dr. Dale Owen this week and he told me the biggest reason they are partnering with TBG is that Tryon wants to grow, growing will help them serve more patients, and it will help them compete against the big hospital systems in Charlotte, Novant and Atrium. It will also give them more leverage when they're negotiating with insurance companies on rates. In order to grow, you have to have money and this deal will give Tryon an infusion of cash and that money can help them buy real estate, open new clinics and hire doctors to serve patients.

Terry: And what does TPG expect out of the deal?

Crouch: Well, that's hard to say, but generally speaking, the goal of private equity firms is to make money. They are investment funds. They buy companies, restructure them and then resell them for a profit, usually three to seven years later.

Terry: It kind of seems like Tryon Medical left one big money-making organization to now be associated with another big money-making organization. Is it a good idea for investment firms to be getting into healthcare? What do critics say?

Crouch: Well, as you said earlier, Marshall, a lot of private equity firms are getting into the health care space. And so there's been a lot of research on the impacts and generally speaking, the research shows that when private equity gets involved, prices go up both for patients and for health insurance. And in some cases, the quality of care goes down, but the research on that is not as definitive.

Terry: And those who are more supportive of this growing trend. What's their argument?

Crouch: Well, Dr. Owen told me repeatedly that this change will not impact patient care, he said. TPG is a top-notch company, that it shares Tryon's goals of providing excellent patient care at a lower cost. He also said that TPG is going to be involved only in the business side of the practice and that the clinical side that handles patient care is going to continue to be physician-led and owned.

Terry: So what will this potentially mean for patients? I mean, you kind of already mentioned it a little bit talking about prices and the quality of care.

Crouch: Well, I don't think we know the answer at this point. As I said, Dr. Owen repeatedly stressed that patients should see no changes whatsoever. But critics say that business decisions and health care almost always impact patient care. Because the business side and the clinical side of a practice are so deeply intertwined. So I think we're going to have to wait and see what kind of effect this has on the patients of Tryon Medical.

The Hidden Fees Holding Physicians Back

Physicians are facing increasing economic challenges that threaten their autonomy as healthcare consolidations.

One significant issue, according to James Krantz, MD, family medicine physician at Frederick, Md.-based Catoctin Medical Group, is the growing disparity between the facility fees hospitals can charge and those available to independent practices.

Hospitals are permitted to charge facility fees when medical services are performed in outpatient settings, even if the facility is far removed from its main campus. This allows the hospital to tack on additional charges for services that would cost less if performed at a private physician's office. 

Additionally, as health systems continue to acquire more physician-owned practices, they can not only charge hospital-level rates for the same services but also add expensive facility fees, increasing costs for patients.

These facility fees have contributed to the erosion of physician autonomy, Dr. Krantz told Becker's, and the introduction of nonclinical businesspeople into medicine decades ago helped set the stage for this decline.

"One very doable strategy to empower physicians is to make it more economically feasible to run a private practice," he said. "A change that could immediately affect this is to give physicians in private practice the same facility fees that hospital-owned practices routinely receive."

Private practice physicians are left at a disadvantage, as they cannot charge these facility fees. 

"Hospitals can open their own practices or extensions and call them hospitals, benefiting from a 50% [facility fee] advantage that I don't receive as a private practice physician," he said.

While equalizing facility fees could empower physicians, Dr. Krantz notes that this type of reform is unlikely to happen anytime soon. Any meaningful change would need to come from federal lawmakers, he said. And physicians lack the political power necessary to influence such decisions. 

While hospitals have powerful and effective lobbies, "doctors are often infighting," Dr. Krantz said. 

Other leaders are also concerned about the disparity, particularly amid the stark declines in physician pay. 

"Resources for small groups are limited, and we see any increasing share of revenue is derived from facility fees and hospital fees versus doctor fees, which are declining," Harel Deutsch, MD, co-director of the RUSH Spine Center, told Becker's. 

While it's "unlikely that equal facility fees will happen," Dr. Krantz expects more physicians will opt out as the "existing medical system deteriorates."

This opting out has already been seen with concierge care, he said, allowing patients who can afford it to turn to physicians who charge a fee for access "to have a more personalized experience without waiting in line."

Concierge care fees not are not covered by insurance and can range from annual fees of $199 for Amazon's One Medical to $10,000 or more for top-branded practices such as Boston-based Massachusetts General Hospital's concierge service.

There are 5,000 to 7,000 physicians and practices providing concierge care in the U.S., according to Concierge Medicine Today, and the market is expected to grow in revenue by 10.4% annually through 2030.

Practice Challenges Piling Up For Independent Physicians

Private practice physicians are facing mounting challenges threatening financial stability and ability to provide care. 

As more physicians consider leaving private practice for corporate employment, the future of independent medicine hangs in the balance.

Here are five major challenges facing private practice physicians: 

Reimbursement declines

Physicians are growing increasingly frustrated with the continuing decline in pay. According to a new study from the Harvey L. Neiman Health Policy Institute, reimbursement amounts per Medicare patient decreased around 2.3% between 2005 and 2021 when accounting for inflation.

CMS have further cut overall physician pay by 1.25% for 2024. The rule updates the Medicare conversion factor to $32.74, a 3.4% decrease from 2023. Some physicians may also face additional cuts due to the cost-performance category of the merit-based incentive payment system, which could reduce Medicare payments by up to 9%. 

Physician pay cuts show no signs of slowing. CMS released its annual proposed changes to the physician fee schedule for 2025 in July, which includes a proposed 2.8% conversion factor decrease from 2024. The proposed conversion factor for 2025 is $32.36, down from $33.29 in 2024.

"Continued cuts in the face of unprecedented consolidation while at the same time facing high inflation will lead to a continual collapse of private practice," Adam Bruggeman, MD, CEO and surgeon of San Antonio-based Texas Spine Care Center told Becker's. "This leads to reduced access, increased costs and lower quality. Physicians are rapidly leaving independent practice and this will only accelerate the run to the exits. Congress must stop putting the thumb on the scale of corporatized medicine."

Some specialties are hurt worse than others. Sixteen specialties saw reimbursement declines in 2024, with 13 of those seeing cuts despite higher volumes per beneficiary. These included psychiatrists, cardiologists, urologists, OB-GYN, internal medicine, internists, pulmonologists, radiologists, gastroenterologists and anesthesiologists. 

Rising practice costs

The cost of practicing medicine continues to rise, driven by inflation, especially within healthcare. The Medicare Economic Index, which measures medical practice cost inflation, increased 4.6% in 2023, the highest in the last 23 years.

Additionally, medical and surgical supply costs per full-time physician increased by 82% from 2022 to 2023,  according to a report released in May by the Medical Group Management Association.

"Many physicians face the challenge of effectively managing their practice's financial aspects," David Rosenfield, MD, anesthesiologist and interventional pain specialist at Peachtree City, Ga.-based Alliance Spine & Pain, told Becker's. "This includes dealing with insurance reimbursements, understanding complex billing codes, and controlling operational costs.  Every year many of us find ourselves working harder and longer hours just to maintain our incomes. The costs of practicing medicine (rent, equipment, employee costs) continue to rise, while reimbursement often declines year over year."

Loss of leverage

A report from the Physicians Advocacy Institute and Avalere Health found that as of 2023, 58.5% of practices are owned by either health systems or corporations. Corporations own slightly more practices than health systems, accounting for 30% of ownership.

Additionally, 78% of physicians are now employed by hospitals, health systems and other corporate entities as of 2023, according to the Physician Advocacy Institute report. 

As healthcare continues to consolidate, it becomes increasingly difficult for physician practices to benefit from economies of scale. This, in turn, makes it more challenging to secure favorable payer contracts.

About 80% of physicians who own their practices said the ability to negotiate higher payment rates with insurance companies influenced their decision to sell their practice, according to an American Medical Association report.

Shrinking patient base

Patient bases have also consolidated as hospitals and health systems vertically integrate.

"Private practice physicians have lost their power in healthcare because their patient bases have dried up. … As the hospital systems have gobbled up the patients through their extensive network of non-physician practitioners, the few physicians who have remained in private practice have been gobbled up," Thomas Pliura, MD, a physician and attorney in Le Roy, Ill., told Becker's. 

Hospital network referral systems are particularly strong in some markets, redirecting patients away from private practices and into hospital networks.

"Those who hold out find a shrinking referral base, as those formerly loyal to them are being compelled to exclusively refer within the system," Kenneth Candido, MD, CEO and president of Chicago Anesthesia Associates, told Becker's. "It is a dirty business and a dirty, underhanded game that administrators are playing to monopolize their business models."

Regulatory challenges

Regulatory obstacles, such as prior authorizations and other payer-imposed burdens, also continue to hinder physicians.

Around 88% of physicians reported that prior authorizations put a high or extremely high burden on their practice, according to a 2022 American Medical Association survey, with practices completing an average of 45 authorizations per physician each week.

"Without a doubt the most dangerous trend in spine-adjacent fields is the minefield of prior authorization (which consumes endless time and phone calls with no guarantee of payment) and the dubious medical literature the insurance companies cite to justify harming their customers," pain management speciality Eric Mehlberg, MD, told Becker's. 

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