Private equity and healthcare firm behavior: Evidence from ambulatory surgery centers

Abstract

Healthcare firms regularly seek outside capital; yet, we have an incomplete understanding of external investor influence on provider behavior. We investigate the effects of private equity investment, divestment, and an initial public offering (IPO) on ambulatory surgery centers (ASCs). Throughput is unchanged while charges grow by up to 50% for the same service mix. Affected ASCs witness declines in privately insured cases and rely more on Medicare business. Private equity increases physician ASC ownership stakes, and both simultaneously divest when the ASC is sold. Our findings appear more consistent with private equity influencing the financing of ASCs, rather than treatment approaches.

Keywords: Ambulatory surgery centers; Outpatient surgery; Physician ownership; Private equity.

Appendix Figure A1:. Sensitivity Analysis of Private Equity Investment Effects on Average Charges per Case

Notes: Authors’ calculations using the Florida AHCA universe of ambulatory discharge records and subset to our ASCs of interest described in Section 4. Sensitivity analysis based on Rambachan and Roth (2023).

Appendix Figure A2:. Private Equity Investment Effects on Charges Per Case by Payer

Notes: Authors’ calculations using the Florida AHCA universe of ambulatory discharge records and subset to our ASCs of interest described in Section 4. When restricting to specific payers, some ASC-quarter combinations will have missing data if no such cases are performed for the specific payer. This is mostly an issue with Medicare Advantage, which had only modest market penetration during the early years of the analytic data.

Appendix Figure A3:. Private Equity Investment Effects on ASC Rates of Routine Discharge to Home and Transfer to Acute Care Hospital

Notes: Authors’ calculations using the Florida AHCA universe of ambulatory discharge records and subset to our ASCs of interest described in Section 4. 99.9% of ASC cases in the analytic data have a routine discharge to home.

Appendix Figure A4:. Private Equity Investment Effects on ASC Procedures per Case by Payer

Notes: Authors’ calculations using the Florida AHCA universe of ambulatory discharge records and subset to our ASCs of interest described in Section 4. The outcome is the average number of procedures performed per case. When restricting to specific payers, some ASC-quarter combinations will have missing data if no such cases are performed for the specific payer. This is mostly an issue with Medicare Advantage, which had only modest market penetration during the early years of the analytic data.

Appendix Figure A5:. Within-Market Competitor ASCs’ Average Charges Per Case by Payer

Notes: Authors’ calculations using the Florida AHCA universe of ambulatory discharge records and subset to our ASCs of interest described in Section 4. When restricting to specific payers, some ASC-quarter combinations will have missing data if no such cases are performed for the specific payer. This is mostly an issue with Medicare Advantage, which had only modest market penetration during the early years of the analytic data.

Appendix Figure A6:. Within-Market Competitor ASCs’ Payer Mix Changes

Notes: Authors’ calculations using the Florida AHCA universe of ambulatory discharge records and subset to our ASCs of interest described in Section 4. When restricting to specific payers, some ASC-quarter combinations will have missing data if no such cases are performed for the specific payer. This is mostly an issue with Medicare Advantage, which had only modest market penetration during the early years of the analytic data.

Appendix Figure A7:. Private Equity Investment Effects on Provider Counts and Share of New Providers Using the ASC

Notes: Authors’ calculations using the Florida AHCA universe of ambulatory discharge records and subset to our ASCs of interest described in Section 4.

Appendix Figure A8:. Private Equity Divestment Effects on Provider Counts and Likelihood of New Provider-ASC Pairing

Notes: Authors’ calculations using the Florida AHCA universe of ambulatory discharge records and subset to our ASCs of interest described in Section 4.

Appendix Figure A9:. Post-Private Equity Divesture Remaining Corporate Ownership Breakdown

Notes: Restricts to treatment group ASCs described in Table 1, with the exception of three ASCs that have an ongoing private equity (PE) investment by the conclusion of our analytic data (i.e., a divestment time point has not been reached). Examination of remaining corporate ownership mix at the conclusion of our analytic data.

Appendix Figure A10:. Private Equity Ownership and IPO Effects on ASC Chain Charges per Case among Key Payers

Notes: Authors’ calculations using the Florida AHCA universe of ambulatory discharge records and subset to our ASCs of interest described in Section 5. Solid line demarcates the introduction of private equity ownership for the Surgery Partners chain, and the dashed line represents its IPO

Appendix Figure A11:. Private Equity Ownership and IPO Effects on ASC Case Intensity and Complexity

Notes: Authors’ calculations using the Florida AHCA universe of ambulatory discharge records and subset to our ASCs of interest described in Section 5. Solid line demarcates the introduction of private equity ownership for the Surgery Partners chain, and the dashed line represents its IPO.

Appendix Figure A12:. Private Equity Ownership and IPO Effects on Avg. Number of Procedures Per Case by Payer

Notes: Authors’ calculations using the Florida AHCA universe of ambulatory discharge records and subset to our ASCs of interest described in Section 5. Solid line demarcates the introduction of private equity ownership for the Surgery Partners chain, and the dashed line represents its IPO. When restricting to specific payers, some ASC-quarter combinations will have missing data if no such cases are performed for the specific payer. This is mostly an issue with Medicare Advantage, which had only modest market penetration during the early years of the analytic data.

Appendix Figure A13:. Private Equity Ownership and IPO Effects on Physician ASC Equity Holdings

Notes: Authors’ calculations using the Florida AHCA universe of ambulatory discharge records and subset to our ASCs of interest described in Section 5. Solid line demarcates the introduction of private equity ownership for the Surgery Partners chain, and the dashed line represents its IPO.

Appendix Figure A14:. Private Equity Ownership and IPO Effects on Provider Counts and Likelihood of New Provider-ASC Pairing

Notes: Authors’ calculations using the Florida AHCA universe of ambulatory discharge records and subset to our ASCs of interest described in Section 5. Solid line demarcates the introduction of private equity ownership for the Surgery Partners chain, and the dashed line represents its IPO.

Fig. 1.. ASC to HOPD Ratio for Florida Counties in 2005 and 2015

Notes: “HOPD” stands for hospital outpatient department. There are 67 Florida counties in total. Scatter plot excludes the few counties where no facilities are present in one or both years or that the number of HOPDS is zero in either year—making the ratio undefined.

Fig. 2.. Geographic Incidence of Private Equity ASC Ownership Events in Florida

Notes: Private equity events restricted to those germane to our analytic sample.

Fig. 3.. Distribution of Private Equity ASC Ownership Stake Duration

Notes: Restricts to ASCs belonging the analytic sample for our stacked differences-in-differences event study estimations. Three treatment group ASCs have an ongoing private equity (PE) investment by the conclusion of our analytic data (i.e., a divestment time point has not been reached) and are consequently not included in this figure since their total PE duration is not yet known.

Fig. 4.. Private Equity Investment Effects on ASC Case Volumes and Avg. Charges per Case

Notes: Authors’ calculations using the Florida AHCA universe of ambulatory discharge records and subset to our ASCs of interest described in Section 4. Stacked difference-in-differences event study estimation using Equation 1.

Fig. 5.. Private Equity Investment Effects on ASC Case Intensity and Complexity

Notes: Authors’ calculations using the Florida AHCA universe of ambulatory discharge records and subset to our ASCs of interest described in Section 4. The Medicare facility fee for the main procedure performed in a given case is used as a proxy for case complexity in panel (c). Stacked difference-in-differences event study estimation using Equation 1.

Fig. 6.. Private Equity Investment Effects on ASC Payer Mix

Notes: Authors’ calculations using the Florida AHCA universe of ambulatory discharge records and subset to our ASCs of interest described in Section 4. The outcome is the percentage of cases covered by the specified insurance type. Stacked difference-in-differences event study estimation using Equation 1.

Fig. 7.. Private Equity Investment Effects on ASC Physician Equity Holdings

Notes: Authors’ calculations using the Florida AHCA universe of ambulatory discharge records and subset to our ASCs of interest described in Section 4. Stacked difference-in-differences event study estimation using Equation 1.

Fig. 8.. Private Equity Divestment Effects on Physician ASC Equity Holdings

Notes: Authors’ calculations using the Florida AHCA universe of ambulatory discharge records and subset to our ASCs of interest described in Section 4. Stacked difference-in-differences event study estimation using Equation 3.

Fig. 9.. Private Equity and IPO Effects on ASC Chain Case Volumes and Average Charges per Case

Notes: Authors’ calculations using the Florida AHCA universe of ambulatory discharge records and subset to our ASCs of interest described in Section 5. Solid line demarcates the introduction of private equity ownership for the Surgery Partners chain, and the dashed line represents its IPO.

Fig. 10.. Private Equity Ownership and IPO Effects on ASC Chain Payer Mix

Notes: Authors’ calculations using the Florida AHCA universe of ambulatory discharge records and subset to our ASCs of interest described in Section 5. The outcome is the percentage of cases covered by the specified insurance type. Solid line demarcates the introduction of private equity ownership for the Surgery Partners chain, and the dashed line represents its IPO.