A new report published in Health Economics, Policy and Law July 6 pushes back on the narrative that private equity is the primary driver of rising healthcare costs, arguing hospital affiliation — not private capital — is more closely tied to costly site-of-care decisions.
The authors — Lauren Makhoul, Owen Ayers and Shareef Ghanem, MBA, built their argument around an analysis of 32 CPT codes across cardiology, gastroenterology, orthopedics and urology, comparing site-of-care decisions and total service costs across four physician affiliation models: unaffiliated private practice, private equity-affiliated practice, corporate and hospital.
Editor’s note: The report’s authors disclose they are paid consultants to the private equity industry.
Six findings for ASC leaders:
1. HOPD reimbursement for the same service ran 1.2 to 8.6 times higher than in an ASC or physician office under Medicare, and 1.1 to 13.4 times higher under commercial insurance — a gap the authors said makes site-of-care choice one of the biggest levers on unit cost.
2. Private equity-affiliated physicians were the most likely of any affiliation model to perform the studied procedures in an ASC or office rather than a hospital outpatient department, doing so 63% of the time. Hospital-affiliated physicians did so just 37% of the time, the lowest rate of any model.
3. In 59% of the codes where the ASC was the lower-cost setting, the ASC’s commercial professional fee was actually higher than the HOPD’s. The authors said that finding alone could wrongly suggest ASC-based care costs more, but the facility fee savings at the ASC outweighed the higher professional fee in every one of those cases.
4. Private equity affiliation remains rare, with PE-backed providers representing just 4% to 6% of the physician market, according to the report — a scale the authors said undercuts arguments that private capital is a leading driver of consolidation-related cost growth.
5. The authors flagged a structural hurdle for site-neutral payment policy that bears directly on ASCs: unlike hospitals, ASCs do not currently report cost data, making it difficult to set an accurate payment benchmark under any site-neutral proposal.
6. The report recommends the CMS Innovation Center pilot payment models that raise physician professional fees for procedures performed in ASCs, rather than cutting hospital reimbursement outright. As one example, the authors modeled a 15% professional fee increase for total knee replacements performed in an ASC — a change they said could shift meaningful volume toward ASCs even with modest adoption.
The authors said their findings should push policymakers and health system leaders to weigh site-of-care incentives and referral patterns — not just capital structure — when evaluating what is driving healthcare cost growth.
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