Private equity firms are buying up hospitals across the United States. Today, private equity owns roughly one in eight hospitals. Sara Heath reports for Healthcare Dive on this growing trend, which is likely to spell higher costs with poorer quality for more Americans. As I’ve reported, several states have enacted laws to restrict private equity ownership of health care entities.
Private equity now controls 561 of a total of 4,714 US hospitals. That’s an increase of 73 hospitals in the last year and half, which is worrisome news. Private equity firms are in the business of squeezing money out of the businesses they buy, increasing revenue and/or cutting costs, and then reselling the businesses in a matter of a few years at a significant profit.
To cut hospital costs, private equity is likely to reduce the number of health care providers on staff–e.g., fewer nurses and ER docs. To increase revenue, it might sell off land or hospital divisions that are losing money. It might also require physicians to spend less time with each patient in order to see more patients.
With some exceptions, the data show that private-equity backed hospitals are more expensive and deliver poorer health care outcomes than hospitals that are not private-equity backed. For example, one study found that patients in private-equity backed hospitals were more likely to acquire infections and also more likely to fall.
Private-equity owned hospitals are also more likely to cause hospital bankruptcies and hospital closings. Steward Health Care and Prospect Medical Holdings both fell into bankruptcy after being bought by private equity.
The data is thin on private-equity owned hospitals when it comes to quality of care. But, if you look at the Medicare star ratings–which admittedly are of limited value–private-equity owned hospitals tended to score fewer than four or five stars, while hospitals not backed by private equity tended to score four and five stars.
Private equity firms appear to most value hospitals with rehab and long-term acute care centers. You have to wonder whether they see bigger cost savings and profit opportunities in these facilities than in hospitals that do not have these centers. If so, are they cutting the amount of rehab and long-term support services that people receive inappropriately?
Nearly one in four private-equity owned hospitals are joint ventures with nonprofit health systems. This is concerning because the staffing rules that protect patients in nonprofit hospitals are different from those in for-profit hospitals. Private-equity backed nonprofit hospitals could be able to cut staffing at the expense of patient care.
Here’s more from Just Care:
- Avoid private equity-owned hospitals
- Private equity is destroying ER care
- Private equity buying up orthopedics practices
- Patient safety at risk in private-equity controlled emergency rooms
- Oregon moves toward restricting private equity from owning physician practices
