Home Health Probe Into Private Equity in Healthcare Launched

Probe Into Private Equity in Healthcare Launched

by News7

Government officials announced a joint investigation into the role of private equity and “corporate profiteering” in healthcare during an online workshop hosted by the Federal Trade Commission (FTC) on Tuesday.

The goal of the public inquiry is to collect information to guide agencies’ understanding of the impact of private equity acquisitions in healthcare so they can better leverage enforcement tools to address issues, said FTC Chair Lina Khan.

“Given recent trends, we are concerned that transactions may generate profits for those firms at the expense of patients’ health, workers’ safety, and affordable health care for patients and taxpayers,” wrote the Department of Justice, Department of Health and Human Services, and FTC in their joint request for information.

Private equity often operates on a model of taking a large stake in a platform company, investing in boosting its footprint and revenue, cutting costs, and ultimately selling the company to generate returns for investors. These firms can have money come from a range of sources.

While some private equity firms may be committed to improving operations, others have taken a different tack, Khan said.

A Trail of Debt for Purchased Organizations

Economist Eileen Appelbaum, PhD, co-director of the Center for Economic and Policy Research in Washington D.C., who has studied private equity in healthcare for over a decade, described core practices used by these firms.

When a private equity firm buys a healthcare company, it typically plans to sell the company in 3 to 5 years, she said.

These firms buy an organization using “a little bit of money” and “a lot of debt,” she noted. Once the private equity firm owns the hospital or nursing home, they load that debt onto the purchase and it becomes the responsibility of that facility. The firm has no responsibility to repay the debt, Appelbaum explained.

“And that debt is what drives a lot of the poor quality care in private equity-owned facilities,” evidenced by staffing reductions, less time with patients, and less attention to safety, she said, noting that while most corporations are careful not to take any action that could lead a company to bankruptcy, these firms have no such fear.

A private equity firm “has no sense of loyalty to the business that it owns,” Appelbaum stressed.

Other common practices include selling off real estate owned by the purchased hospital or nursing home and keeping the proceeds. Private equity firms have also forced purchased facilities to take on debt so the firm can pay dividends, a process known as dividend recapitalization. Some facilities also pay monitoring fees to their private equity owners.

In theory, these actions are meant to help the company succeed but in reality, critics view them as “money for nothing,” Appelbaum said.

“There is no medical logic to their behavior,” Appelbaum argued. Their entire goal is to grow their size, their revenue, and be able to sell for a higher price, she said.

“Breaking up these kinds of anti-competitive monopolization of local healthcare markets is really, really important,” Appelbaum added.

Possible Patient Harm

Speakers alluded to the various ways that private equity has been associated with patient harm. One study, cited by Khan, found that private equity-owned nursing homes were associated with 20,000 additional deaths over a 12-year period.

Another study found admission to a private equity hospital was linked with 25% greater risk of hospital-acquired conditions, including falls, central line-associated bloodstream infections, and surgical site infections.

Clinicians also shared first-hand experiences of how private equity takeovers affected patient care.

Jonathon Jones, MD, president of the American Academy of Emergency Medicine, described working in a community hospital when department staffing transitioned to a private equity-controlled group. Staffing levels were cut, and instead of having eight to ten patients at a time, Jones was responsible for 18. “When we said this was unsafe, they said ‘too bad,'” he said.

Soon the private equity-controlled contractor, in conjunction with the hospital, began demanding that staff accept as many transferred patients as possible, regardless of the number of beds available, he said.

One night, a patient who had a stroke was transferred to Jones’ hospital over his objections. There was no neurologist on call and none would be there until the next day. The patient spent the night on a stretcher in the hallway, Jones said. “I cared for him as best as I could, but he effectively received no treatment for his stroke,” Jones said, adding that if the patient had gone to one of several nearby hospitals, he could have received timely evaluation and treatment.

Jones said he will never know whether the patient experienced “irreversible harm” and that he was “disgusted” and “disappointed … I was ashamed that I even participated in this case.” He left that hospital, choosing to work at a small, rural hospital where he is encouraged to prioritize patient care, he said.

Comments on the federal query can be made at www.regulations.gov and must be submitted by May 6. These comments “will inform the agencies’ identification of enforcement priorities and future action, including new regulations, aimed at promoting and protecting competition in health care markets and ensuring appropriate access to quality, affordable health care items and services,” according to the request for information.

Shannon Firth has been reporting on health policy as MedPage Today’s Washington correspondent since 2014. She is also a member of the site’s Enterprise & Investigative Reporting team. Follow

Source : MedPageToday

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