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The Senate this week continued to examine the impact of private equity on health care delivery, launching an investigation in PE emergency services management practices and hold a subcommittee field hearing on “Corporate Greed” and the Impact of PE on Patient Care.
The hearing on the ground and the request for information This comes as private equity has increased its investments in healthcare. In January, more than a quarter of rural hospitals and A total of 460 hospitals in the United States were owned by private equity firmsaccording to a tracker produced by a nonprofit monitoring organization, the Private Equity Stakeholders Project.
PE-backed physician recruiting groups run nearly a third of emergency departments across the country, according to letters sent Monday. to some of the largest private equity firms in the country by the senator. Gary Peters, D-Mich., And president of the Senate Committee on Homeland Security.
Sustained strong demand for services makes healthcare an attractive investment for private equity firms, said Eileen O'Grady, research and campaign director at the Private Equity Stakeholder Project. As the nation ages and requires more care, the possible value of health care investments will increase further, she said.
However, health systems and patients rarely – if ever – benefit from private equity deals, according to testimony from Donald Berwick, president emeritus and senior fellow at the Institute for Healthcare Improvement. Studies show falls and infections increase in hospitals following acquisitions of PE, while costs for patients and payers are increasing.
Berwick told lawmakers at the field hearing Wednesday that he couldn't think of a “single example” of where private equity investment would have improved health care delivery.
“That just doesn’t seem to be what’s happening,” he said.
Survey emergency services
The Senate inquiry questions whether private equity has degraded the quality of hospital emergency services to the point that facilities would be ill-prepared to handle unexpected high volumes of patients in the event of an emergency, such as a terrorist event or a large number of victims.
The survey requests operational and financial information from Apollo Global Management, Blackstone and KKR, as well as emergency department staffing services they own or owned, including US Acute Care Solutions, TeamHealth and Envision Healthcare. Peters is also seeking information from Apollo-owned LifePoint Health.
The survey specifically asks for details about ownership transactions, personnel decisions, and measures of quality of care and patient safety. Companies have until April 17 to respond and until May 3 to meet with the committee in person.
In the letters of inquiry, Peters expressed concern that the private equity business model — which he said “relies on highly leveraged debt, little equity and the need to obtain huge comes back in a limited time” – specifically pushes policies that degrade the quality of care.
Private equity firms acquire assets and then seek to sell them for a profit, usually within three to five years. Investors may also have direct knowledge of health care, and the funds are subject to fewer regulations than public companies, according to a CommonWealth Fund Report 2023. As a result, companies tend to have fewer patient-centered safeguards in place than traditional healthcare owners and investors.
The senator highlighted the recent series of projects supported by the EP recruitment company failures as evidence of how the model can go wrong.
Backed by KKR Envision Healthcare, for example, filed for bankruptcy in May. The company has it has since emerged from bankruptcy smaller, after selling its outpatient surgery unit to repay its debt. Recruiting firm American Physician Partners also filed for bankruptcy last summer, citing up to $1 billion in liabilities.
Peters alleged that PE-owned staffing companies engaged in “predatory” surprise billing, which is when companies charge patients high bills. after unknowingly receiving out-of-network care at in-network facilities.
While the No Surprises law, which came into force in January 2022, prohibited surprise billing, Peters warned that recruitment companies could now “consider other cost reduction efforts that more directly negatively impact patient safety and care” to generate profits.
Quality of care issues
During the field hearing, the Senate Committee on Health, Education, Labor and Pensions heard from emergency physicians, registered nurses and academics about the impact of private equity on patient care.
Much of the hearing, held in Massachusetts, centered on Dallas-based Steward Health Care.
Private equity firm Cerberus Capital Management purchased the health system, then called Caritas Christi Health Care, in 2010. Cerberus earned $800 million on its investment when it was released in 2020but the for-profit hospital chain found itself saddled with debt, experts testified.
Steward recently arrived the line of sight of regulators as it heads towards possible financial collapse. The system says it wants to restructure itself, repay its several million unpaid debts And come out of your abstention period At the end of the month.
Lawmakers examined Cerberus' role in Steward's crisis, asking experts to differentiate between the private equity firm's profits and Steward's alleged operational deficiencies.
Cerberus invested almost nothing in the quality of Steward Hospitals during its 10 years of ownership, according to testimony from Ellana Stinson, an emergency room physician who worked at Steward Hospitals and other PE-supported facilities.
Stinson alleged that Steward gutted Cerberus-owned hospitals, including removing basic medical equipment to cut costs.
“Most facilities no longer had some specialized services,” Stinson said.
Stinson said his department had “maybe five additional emergency rooms” after Steward sold its hospitals to Medical Properties Trust for $1.25 billion in 2016.
“If Cerberus didn't use this windfall to raise salaries or reinvest money in Steward's hospitals, where did it go?” asked Sen. Elizabeth Warren, D-Mass., during the field hearing. “That's a lot of money.”
Nearly $500 million of that money went to Cerberus, Private Equity Stakeholder Projects O'Grady replied.
The steward is currently continues the sale of its group of doctors to UnitedHealth's Optum Care, but experts expressed doubt that proceeds from a sale would be used for care investments.
Berwick, of the Institute for Healthcare Improvement, rejected the deal, calling it “another way (for executives) to line their pockets.”
Steward's problems are indicative of problems with private equity ownership in the industry, witnesses said.
Stinson, who also worked for PE-backed staffing firms Envision and TeamHealth, said the companies pressured doctors to correct, artificially reduce wait times and meet “increasingly high parameters.” more intimidating” which were dangerous for patients.
Hearing co-chairs Sen. Edward Markey, D-Mass., and Warren both introduced legislation they said would increase oversight of the role of public equity in health care. Warren's proposal, Wall Street Looting Law, first introduced in 2021, aims to hold private equity funds accountable for the debt of their portfolio companies. It would also prohibit dividends to investors after a company is acquired.
Markey's bill, the Health Before Wealth Law, would require greater transparency in the ownership of healthcare entities. Currently, experts say private equity ownership disclosure thresholds are too high, obscuring the role of private equity funds in the healthcare sector.