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For better or worse, why are hospitals such a goldmine for private equity investors?

by John R. Fischer, Senior Reporter | January 02, 2024
Business Affairs
Critics have long argued that private equity ownership leads to higher prices for patients, more debt for hospitals, and lower quality care. Now, different branches of the U.S. government are looking into these claims through separate investigations.

Earlier this month, President Joe Biden and Vice President Kamala Harris announced a cross-government public inquiry to assess care quality in hospitals and other healthcare organizations acquired by corporations, including private equity firms. The decision was prompted by a review of hospital merger studies linking consolidation to price increases that often exceed 20%, and specifically linking private equity firms to rising costs.

Meanwhile, the Senate Budget Committee has launched its own bipartisan investigation into the impact of private equity ownership on hospital finances, operations, and care quality following events at Ottumwa Regional Health Center, an Iowa hospital acquired by a private equity firm in 2010.

In October 2022, a nurse practitioner fatally overdosed there, and an investigation later found that he sexually assaulted nine female patients while they were sedated. Additionally, the hospital has experienced staffing reductions, been stripped of real estate and other assets, and left in debt, according to Senator Chuck Grassley (R.-Iowa), who launched the investigation with committee chair Senator Sheldon Whitehouse (D-RI). Grassley wrote to the hospital and private equity firms Apollo Global Management, Medical Properties Trust, and Lifepoint Health, all of which have ownership interest in Ottumwa, asking about questionable financial transactions that may have contributed to these events.

He also requested information on the control that private equity firms wield from Leonard Green & Partners and Prospect Medical Holdings, which have similar investment structures to the other three, but all failed to answer his questions completely and fully, prompting additional oversight and for the committee to expand its investigation to include companies that own or have owned hospitals in California, Pennsylvania, Rhode Island, and other states.

Higher costs for patients yes, but lower quality care and less financial stability for hospitals?
Announcing its investigation, the White House cited several studies alluding to the potential harms posed by private equity in healthcare. One, out of Columbia University Mailman School of Public Health and published in BMJ, found that costs for payers and patients increased as much as 32%. And although proponents say private equity investments provide direct downstream benefits to patients, the study did not find evidence to support that.
(1)

Brij vaid

Not for profit

January 04, 2024 10:29

Not for profit get all the benefit of govt money, when they don't spend anything on the indigent care but keep on building new buildings and losing money showing losses on the tax returns. That's is the biggest drain on the healthcare system.

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