Drs. Bob McNamara and James Keaney, former longtime emergency-room physicians, were early critics of private equity in healthcare who now say such ownership in accounting could shake trust in an industry that investors depend on for trustworthy financial information about companies, The Wall Street Journal recently reported.
“If accounting holds itself out as an ethical profession, which puts the client first, they should have never let private equity in because that’s what we did and it hurt the patients,” says McNamara, a professor and chair of emergency medicine at Temple University.
Since 2021, about two dozen of the 100 biggest U.S. accounting firms either have sold an ownership stake to private-equity investors or been acquired by a firm that's done so, says the WSJ. Concerns have been raised about the potential threat to the independence of auditors, who are intended to be objective assessors of financial information. And accountants worry that the typical three- to five-year investment window is detrimental to CPA firms’ long-term plans for maintaining service quality and could spur them to accept higher-risk clients.
Private-equity firms say they provide needed capital that enables accounting firms to boost hiring and improve their services. They say their investment in healthcare has helped hospitals and other medical practices, some of which were in dire financial straits, to continue providing care to patients, especially in regions where medical options are limited. Private-equity sponsors of accounting firms say cost-cutting isn’t part of their mission.
Longtime readers of this blog may recall the extensive KFF series "Patients for profit: How private equity hijacked health care.” The summary of that series of articles says: “Private equity investors are rapidly scooping up thousands of health care businesses, taking over emergency rooms or entire hospitals, and becoming major players in physician practices and patient care, from cradle to grave. But these acquisitions are often invisible to federal regulators. And their profit motives raise concerns about rising prices and the quality of treatment.”