Doctors tell Alaska committee private equity buyouts can raise costs and change care

The Alaska House Labor and Commerce Committee heard testimony Feb. 24 from physicians and medical groups warning that private equity investment and hospital consolidation can change how care is delivered and make independent practices more likely to be sold.

Cardiac electrophysiologist Steve Compton, of Alaska Heart and Vascular Institute and a recent president of the Alaska State Medical Association, told the committee private equity firms focus on accounting metrics rather than clinical outcomes. "Instead of measuring success in terms of patient outcomes and survival and quality of care and keeping costs low, what they were proposing is to measure success with an entirely different metric... it's EBITDA," Compton said, using the earnings measure private investors often cite. He said private equity offers he and his partners a large sum of money in exchange for giving up clinical control and that buyers then press for profit‑raising measures such as increased testing and broader use of lower‑trained providers.

Why it matters: Committee members were told the change matters to access and costs in Alaska because the Division of Insurance removed the state's "eightieth percentile" backstop for out‑of‑network pricing starting Jan. 1, 2024. Compton and other witnesses said the removal makes many small practices financially vulnerable; they described a pending provider lawsuit against the division and proposed legislation to restore a backstop for out‑of‑network reimbursement.

Committee testimony offered examples and national context. Family physician Mary Anne Foland of Primary Care Associates in Anchorage said her group had been bought by an out‑of‑state firm, then later affiliated with a physician‑owned group; she described changes after acquisition that she said reduced time with high‑risk patients and increased quotas and administrative burdens that contributed to early retirements. She told members her current, physician‑led practice model allows more time and local control than the prior corporate arrangement.

Constance Constantino, representing the Alaska Academy of Family Physicians, told the committee independent primary care practices help keep costs lower in communities and urged lawmakers to consider policies that support those practices rather than accelerate consolidation.

Emergency physician Nick Papakostas, representing the Alaska chapter of the American College of Emergency Physicians, described private equity's common approach: acquire practices or hospitals, leverage purchase debt, then seek margin improvements over a 3–6 year horizon by cutting staff, delaying equipment investment and increasing referrals or tests that generate revenue. "Their job is to maximize the amount of revenue they can generate... their goal is to kind of acquire a business and make a profit and then sell it at a profit for 3 to 6 years," Papakostas said.

Witnesses and legislators repeatedly linked the vulnerability of Alaska practices to two insurance‑market issues discussed in testimony: a change in the Division of Insurance's pricing backstop and differences in Medicare/hospital reimbursement that favor performing imaging and other services in hospital settings. Compton described a long‑term shift in cardiology from roughly 10 percent employment in private practice when he started to more than 90 percent employment today, and he said that trend, combined with the removal of the eighty‑percentile rule, creates pressure on small groups to consider buyouts.

No committee action was taken on policy in this hearing; witnesses provided studies and said they would share additional materials with staff. The committee indicated it may return to the topic in a later meeting.

Ending: Committee members thanked the witnesses and closed the panel. The committee reconvened Feb. 26 for other business and did not take votes on legislative changes tied to the testimony during this session.