By Michelle Crouch
Co-published with The Charlotte Ledger
Six years after breaking away from Atrium Health to build Charlotte’s largest independent physician practice, the doctors at Tryon Medical Partners are teaming up with a private equity firm in a move they say will help them reach more patients.
The deal, finalized in September, gives San Francisco-based TPG a stake in the business side of the practice, which includes billing, human resources, operations and technology, Tryon Medical CEO Dale Owen told The Ledger/NC Health News.
“The amount of interest in our organization from patients is just off the charts,” said Owen, a cardiologist who is one of the founders of the practice. “To meet that kind of demand, which we are excited about doing, requires financial investment.”
Owen described TPG as an innovative, top-notch investor with “deep-seated experience in health care services that will enable us to provide even better levels of care to our patients.”
Tryon Medical serves about 200,000 patients in 10 clinics across the Charlotte region.
With the deal, Tryon joins a growing number of physician practices nationwide turning to private equity for money in an increasingly competitive and complicated health care market.
The number of private equity acquisitions of physician practices grew six-fold between 2012 and 2021, according to a University of California-Berkeley study.
The trend has sparked concerns from critics who warn about potential downsides. They point to research showing that private equity involvement in health care often results in higher costs, greater reliance on lower-cost nurse practitioners and physician assistants, and pressure on doctors to see more patients in less time.
“The hope is that private equity capital will allow practices to stay independent, but the reality is that private equity investors aren’t coming in with altruistic motive — they’re there to make money,” said Erin Fuse Brown, a professor at Brown University School of Public Health who has researched the effect of private equity investment on physician practices.
Owen said he’s familiar with the research on the impact of private equity investment in health care, but he said that won’t be the case with this deal, because TPG shares Tryon Medical’s goals of providing the best care at the lowest cost.
“Patients should see absolutely no change whatsoever in any kind of day-to-day operations at all,” he said. “Our intent is to be the best care providers, period, and to be able to provide that care at the best pricing. … This is why we partnered with TPG. They see it the same way.”
Increasingly common arrangements
Private equity firms are investment funds that buy companies, restructure them to boost their value and then usually resell them for a profit — typically within three to seven years.
TPG lists a portfolio of dozens of health care organizations on its website, including Triangle-based Quintiles, which TPG combined with another company in 2016 to form a new company, IQVIA, in a deal worth upwards of $9 billion.
In Tryon’s case, TPG is investing in Tryon Management Group, the limited liability company that handles the business side of practice.
Owen said the clinical side of the practice, Tryon Medical Partners, will continue to be “100 percent physician-owned and -operated.”
Several experts told The Ledger/NC Health News that having two organizations — one for the clinical side and the other for the business side — is the typical arrangement when a private equity firm invests in a physician practice. Why? Because most states, including North Carolina, have laws that prohibit corporations from practicing medicine.
Despite the legal separation, business decisions often influence clinical ones, said Mary Bugbee, research and campaign director for health care at the Private Equity Stakeholder Project, a self-described watchdog of the private equity industry.
“I think on a certain level there is the intention to keep things completely separate,” Bugbee said. “It just doesn’t typically work like that in practice. At the end of the day, they are intertwined, and decisions to increase profit are going to impact the larger business of health care.”
In many cases, experts said, private-equity-owned management service organizations control billing and medical coding, staffing and work schedules, physician compensation and more — all levers that can influence clinical care. Some contracts also require physicians to sign noncompete clauses and to get approval before selling their ownership stake in the company.
“Physicians have been cheering”
Owen declined to share details about Tryon’s contract with TPG but stressed that its physicians are “100 percent in complete control of the practice of medicine” at Tryon Medical.
“Our financial partner … has no effect whatsoever on our physicians and how they practice,” he said.
Owen said the overwhelming majority of Tryon’s physicians are excited about the deal, which he described as something the practice had been planning since its inception. Tryon declined to say if the physicians are getting a payout from the deal.
“The physicians have been cheering,” Owen said. “We always knew we had this investment vehicle, and when was the time going to be right to utilize that capability? That time was clear and purposeful now. And so I think that just seeing that reality, the realization of our efforts, I think has been very inspiring to all the physicians.”
When asked about the recent departures of some physicians, Owen acknowledged a few have left the practice.
“There’s never going to be 100 percent unanimous consent,” he said, adding that he could think of only four departures related to the private equity news.
Tryon founders fled bureaucracy
Tryon Medical was launched by 88 physicians who walked away from Atrium in 2018 in a public split, accusing the hospital system of being “self-serving,” “monopolistic” and weighed down by a “bloated management bureaucracy,” according to a lawsuit at the time.
In the six years since, shifts in the health care market and hospital consolidation have made running a private practice increasingly challenging, said Zoey Kernodle, director of the UNC Center for the Business of Health in the UNC Kenan-Flagler Business School.
That’s especially the case for Tryon Medical, she said, because it competes in a market dominated by two major hospital systems: Novant Health and Atrium. Atrium combined with Advocate Aurora Health in 2022 to become the third-largest nonprofit hospital system in the U.S.
Likely cash infusion
Because of their size, independent practices have limited negotiating power when dealing with insurance companies to secure better reimbursement rates, Kernodle said. Meanwhile, the administrative burden, equipment and technology required to run a practice are greater than ever.
Kernodle said Tryon Medical, given its experience at Atrium, may have viewed a partnership with TPG as the “lesser of the evils.”
“Private equity probably seemed like the approach that would enable them to maintain autonomy in the way that they value,” she said.
Private equity companies with health care experience, like TPG, are generally more successful when investing in health care, Kernodle said, because they understand it operates differently than other consumer sectors.
Matthew Hanis, a Charlotte-based consultant and expert in the business of health care, said medical practices need capital for technology, for equipment and to finance acquisitions if they want to expand. Even to recruit a physician is a costly enterprise, he said.
“Private equity is one vehicle for getting capital, and it’s not necessarily a bad thing,” he said. “It tends to be extremely well-run and efficient … they’re not necessarily going to mess things up as long as the practice is running smoothly.”
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