Private equity reduces patient care while enriching investors, Senate report finds

A yearlong bipartisan congressional investigation into two private equity-backed U.S. hospital systems found that patient care deteriorated at both operations as their private equity owners reaped significant payouts on their investments in the systems. The findings reinforced academic research showing how private equity health care investments harm patients while enriching investors.

The investigation was helmed by two senators who lead the Senate Budget Committee — Sheldon Whitehouse, a Rhode Island Democrat, and Chuck Grassley, an Iowa Republican.

The inquiry centered on private equity giant Apollo Global Management, owner of Lifepoint Healthcare, the nation’s largest operator of rural hospitals, and Leonard Green & Partners, a private equity firm in Los Angeles that owned hospitals under the Prospect Medical Holdings umbrella from 2010 to 2021.

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Over the past decade, private-equity firms like Apollo and Leonard Green have spent more than $1 trillion buying health care businesses, including hospitals, nursing homes, physician practices and hospital staffing companies. To finance these deals, private equity owners typically burden the companies they buy with debt, then slash company costs to increase earnings and appeal to potential buyers in subsequent years. Because private equity firms do not make public the financial results of the companies they own, Senate investigators aimed to assess how much profit the private equity firms generated from their investments in the hospitals and whether the deals harmed patients.

“As our investigation revealed, these financial entities are putting their own profits over patients, leading to health and safety violations, chronic understaffing, and hospital closures,” Whitehouse said in a statement. “Private equity investors have pocketed millions while driving hospitals into the ground and then selling them off, leaving towns and communities to pick up the pieces.”

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Academic studies show that private equity firms’ involvement in health care is associated with significant cost increases for patients and payers, such as Medicare. A lower quality of care is also associated with private equity firms’ investments in health care. Patients receiving care at hospitals owned by private equity firms also experienced more bloodstream and surgical site infections and fell more often, a 2023 study by academics at Harvard University and the University of Chicago found.

Adding to this research, the Senate investigation found that whenever Prospect Medical facilities showed financial improvements over the period of private equity ownership, rather than investing in hospital operations to benefit patients, the owners induced the company to issue new debt, using proceeds to pay dividends to themselves.

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As Gilberto’s death painfully shows, those who run Steward Health Care did not have to put their hands on patients to do harm — they did it by starving the system of staff and resources.

At hospitals across the country owned by the nation’s largest private for-profit health system, countless surgeries have been canceled because unpaid vendors refused to deliver vital equipment. Time-sensitive medical tests, such as cancer biopsies, have been routinely delayed. Overworked staff members were regularly forced to scrounge for supplies, sometimes bringing items like toilet paper and pens from home.

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The Globe first exposed Steward’s deadly failings in January with a report on the case of Sungida Rashid, a woman who died soon after giving birth at Steward’s St. Elizabeth’s Medical Center in Brighton. Doctors there were unable to properly treat her because the hospital was out of a common medical device used to stem internal bleeding. The device was out of stock because Steward had been stiffing its vendor. And much more news about Steward has unfolded in the months since, including a bankruptcy filing, the recent deals to sell six of its hospital campuses in Massachusetts, and the closure of two others — one of them the beleaguered Carney.

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The Spotlight Team identified at least 15 instances in which Steward patients died after failing to receive professionally accepted standards of care due to equipment issues or staffing shortages. This total omits deaths due to individual lapses in judgment or medical errors in order to focus on the real, systemic Steward scandal, the one driven by radical under-investment by management in hospitals that mainly serve patients on the lower end of the economic spectrum — often those most in need of care.

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Greenbeard said:

Some bipartisan alarm bells ringing this week about the ongoing financialization of health care, in which finbros' shell games sometimes seem to be crowding out the patient care mission. Concerning stuff.

Private equity reduces patient care while enriching investors, Senate report finds

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Hari Seldon said:

Of course it does. United Health bought the very large group I use.

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Greenbeard said:

Some bipartisan alarm bells ringing this week about the ongoing financialization of health care, in which finbros' shell games sometimes seem to be crowding out the patient care mission. Concerning stuff.

Private equity reduces patient care while enriching investors, Senate report finds

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mrjurrs said:

#sad
Healthcare should be regulated as a commodity. Excess profits have no place in healthcare.

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Lisa said:

Healthcare should be operated as a not for net profit service.

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Greenbeard said:

Some bipartisan alarm bells ringing this week about the ongoing financialization of health care, in which finbros' shell games sometimes seem to be crowding out the patient care mission. Concerning stuff.

Private equity reduces patient care while enriching investors, Senate report finds

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Peacenik said:

Healthcare should not be operated for profit at all. It is a basic need of modern American citizens. Healthcare should be a right in the USA.

A system should be set up to provide healthcare at the lowest possible cost to the citizens, with the goal of providing the best possible healthcare for the citizens.

The goal of the American healthcare system should be the healthiest citizens achievable.

As soon as profit is introduced anywhere in the system, the quality of healthcare is compromised and the cost goes up.

Investment money seeks to maximize ROI. This goal is antithetical to producing the best health outcome for American citizens.

Any suppliers of medicines, machines and equipment need to be highly regulated by government to ensure there is only reasonable profits being made with no excess profits.

Insurance has no place in healthcare. The last thing the system needs is a for-profit business taking a cut of the transactions, particularly without providing any enhancement toward citizen health.

The system needs to be paid for primarily through taxation.

Similar to the Corporation for Public Broadcasting, this system could be run by an independent corporation funded by the American people.

The Corporation for Public Health.

Bring it on, already.

Or does it just make too much sense.

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Lisa said:

Healthcare should be operated as a not for net profit service.

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dockside said:

Healthcare should be single payer. Get the private money out of it.

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jaeger19 said:

You would likely be very unhappy with single payer.

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jaeger19 said:

You would likely be very unhappy with single payer.

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It’s like déjà vu all over again. A private equity firm acquires a hospital operator, piles on debt, sells off real estate, and pockets a hefty dividend before walking away. Left behind are struggling hospitals, vulnerable patients, and, eventually, bankruptcy.

This isn’t just the cautionary tale of Boston-born Steward Health Care, which was driven to financial collapse by the controversial actions of CEO Ralph de la Torre and his financial backer, Cerberus Capital Management. It’s also the strikingly similar but less familiar story of Prospect Medical Holdings, a for-profit health care company with hospitals in Rhode Island and Connecticut that was run into the ground by its executives, aided and abetted by private investment firm Leonard Green & Partners.

In a scathing critique, 11 state attorneys general last June called Prospect Medical “possibly the worst example of private equity greed: enriching investors at the expense of low-income, vulnerable patients.” It’s a damning distinction, given the audacious avarice and mismanagement at Steward chronicled by the Globe.

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Leonard Green, a Los Angeles private equity firm, acquired control of Prospect in a $363 million deal in 2010, the same year Cerberus bought the Caritas Christi hospitals from the Archdiocese of Boston to create Steward. And like Cerberus, Leonard Green and its investors did well even as Prospect lost money and sunk deeper into debt.

• According to a bipartisan Senate Budget Committee report released last week, Prospect borrowed heavily to make $424 million in payouts to its owner and more than $220 million to co-investors, including Prospect CEO Sam Lee and executive David Topper.
• Prospect sold most of its hospital buildings and real estate to Medical Properties Trust, saddling the company with high rent payments (just as Cerberus did with Steward’s hospitals).
• Leonard Green exited its Prospect investment by selling its stake to Lee and Topper for $12 million, along with the assumption of more than $1 billion in debt.

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Lisa said:

Why would we hate single payer? Is it different than waiting 8 weeks to see a psychiatrist under the current system, or waiting 3 weeks for a PET scan that I have to travel an hour to get to?

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dockside said:

Ask Canadians if they would prefer our version of health care. Or the Swedes, or the Germans, or the French. I am VERY UNHAPPY with our version. Can't imagine single payer being worse than what we have.

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