A bipartisan Senate report has found private equity (PE) ownership of hospitals has led to detrimental effects, including reduced quality of care, understaffing, and increased healthcare costs. The investigation, spearheaded by Senate Budget Committee Chairman Sheldon Whitehouse (D-R.I.) and Ranking Member Charles Grassley (R-Iowa), underscores how profit motives have overshadowed patient care and hospital stability.

Key Findings of the Investigation

The report, titled “Profits Over Patients: The Harmful Effects of Private Equity on the U.S. Health Care System”, focuses on two PE-owned hospital systems: Ottumwa Regional Health Center (ORHC) in Iowa and its parent company, Lifepoint Health in Tennessee. Lifepoint Health® is primarily owned by Apollo Global Management, Inc., the largest PE owner of hospitals in the U.S., overseeing 220 facilities nationwide.

Quality of Care Compromised

The Senate’s findings paint a grim picture of hospitals under PE control:

• Lack of Focus on Patient Outcomes: Documents reveal that leadership discussions at Leonard Green & Partners (LGP) and Prospect Medical Holdings, Inc. (PMH) were centered on financial targets, neglecting quality of care.
• Safety Violations: PE-owned facilities experienced severe health and safety violations, leading to diminished patient trust.
• Hospital Closures: PMH shut down eight hospitals, primarily during LGP’s ownership, due to financial distress and inadequate maintenance.

Financial Exploitation

The report highlights exploitative financial practices:

• PMH paid $424 million in dividends and stock redemptions to LGP, draining its resources and driving it into debt.
• ORHC, owned by Apollo, failed to meet legally binding commitments, including promises related to physician recruitment and capital expenditures.

Broader Implications of PE in Healthcare

PE ownership in healthcare has skyrocketed, with managed assets growing from under $1 trillion in 2004 to over $13 trillion today. In 2021 alone, PE firms made 515 healthcare-related deals valued at $151 billion. However, studies show that hospitals acquired by PE firms often see a decline in care quality, increased patient transfers, and higher costs within the first three years of ownership.

On the Record

“Recent peer-reviewed studies have generally found negative consequences for general acute care hospitals during the first three years of PE ownership,” the report states.

Why It Matters

This Senate report sheds light on the growing influence of private equity in healthcare and its adverse impact on patient care. Policymakers may use these findings to push for greater oversight and accountability in healthcare investments to prioritize patient welfare over profits.

The Health Colossus Insight:
The role of private equity in healthcare demands scrutiny to balance financial innovation with ethical patient care practices. Follow The Health Colossus for updates on the intersection of finance and healthcare reform.