With healthcare at the forefront of society’s mind after the taxing COVID-19 pandemic, hospitals have been under the eye of scrutiny like never before. Profit, a motive contrary to those of healthcare professionals and individuals, reveals why hospitals have also landed on the radar of many private equity firms.
According to the Private Equity Stakeholder Project (PESP), 8% of the hospitals in the U.S. are currently owned by private equity firms [1]. Private equity firms argue that they purchase hospitals in an attempt to bring in management assistance and reinstate success, but with extreme budget cuts and layoffs, patients are suffering. With fierce pressures to succeed in the short run, decisions are made to favor profit over patients.
“Over the last two decades, private equity firms have become major players in health care, purchasing not just hospitals but also a growing number of nursing homes, physician practices and home health care companies” according to the New York Times [2]. Since the COVID-19 Pandemic, Private Equity interest in hospitals has increased, completing 86 deals in the fourth quarter of 2020, which is more than any fourth quarter over the past 20 years [3]. Many hospitals have been struck with hardships and significant profit losses, leading to much-needed intervention. Rural and vulnerable hospitals have taken the blow significantly hard, leading many to turn to private equity firms for help.
Despite ongoing practices, private equity investors have not quite yet been able to perfect patient care. “A 25.4% increase in hospital-acquired conditions” have been reported in private equity-owned hospitals according to a recent JAMA study [4]. These conditions are entirely avoidable and result in more complications and longer stays. At similar hospitals, reports show higher patient satisfaction in comparison to those owned by private equity firms.
Not all hope is lost for hospitals owned by private equity firms, though. Research shows patients experiencing these hospital-acquired illnesses were discharged within 30 days of treatment, and the hospitals maintain similar mortality rates. Further, with strict Medicare practices that enforce the reductions of hospital-acquired illnesses, “Rates of these complications have generally been declining for about 15 years [5].”
Of course, the question remains of what to do when it comes to the regulation of private equity investments in hospitals. Should private equity firms be left free to thrive and generate swift revenue leaving patients at risk, or do we need to fend for healthcare ethics? Well, the solution is not as tangible as it may seem. The blunt reality is that without the help of these firms, many hospitals would be left caring for fewer patients than under the reign of the profit machines. For example, in Massachusetts, Steward Hospitals are desperately searching for assistance while swimming in piles of bills worth $50 million - and that figure only covers the debt of their past-due rent [6].
With private equity-owned healthcare organizations lacking public transparency, it has been up to policymakers to swoop in and address the question of how to handle these operations. Many states want to pass legislation requiring a greater look into which ones are privately owned. California has introduced a bill that enforces “private equity firms to obtain consent from the California Attorney General before acquiring a health system [7].” The bill was set to be heard at the earliest, March 18, 2024, and its status is still unknown. Despite the uncertain legacy of said bill, it is a step in the right direction toward the regulation of the higher-up, supreme managers.
In addition to policy efforts to suppress the problem, Senator Ed Markey has proposed an additional solution besides private equity acquisition in Massachusetts. Mass General Brigham is the largest hospital group in the state, existing at double the size “of the state’s next biggest hospital group, Beth Israel Lahey Health [8].” Though the group still has its struggles, should MGB and Steward realize the importance of a patient-first approach, the merger is one that will benefit the state as a whole. This approach is one that is favored over private equity purchases by Senators Markey and Warren and is a method to be considered for smaller, struggling hospital groups in states where dominant and well-funded groups exist. MGB is also a non-profit hospital, which does away with concerns of a profit-hungry approach to patient care.
Like many of the problems that exist in the post-pandemic world, there is not one clear solution that pulls ahead of another. Rather, there are many options at hand. Through the collaboration of policymakers, investors, and doctors, there is a way to establish a resurgence in the longevity and success of patient care within hospitals. In doing so, not only will hospitals be reprieve from struggling to make ends meet, but higher-ups in both the government and private equity work will satisfy the healthcare needs that span from rural to urban areas, and everywhere in between across the U.S.
All content is the intellectual property of the Virginia Undergraduate Business Review.
REFERENCES
[1] PESP. (2024, January). PESP Private Equity Hospital tracker. Private Equity Stakeholder Project (PESP). https://pestakeholder.org/private-equity-hospital-tracker/
[2] Abelson, R., & Sanger-katz, M. (2023, December 26). Serious medical errors rose after private equity firms bought hospitals. The New York Times. https://www.nytimes.com/2023/12/26/upshot/hospitals-medical-errors.html
[3] Joseph Bruch, B. (2021, March 1). Covid-19 and private equity investment in health care delivery. JAMA Health Forum. https://jamanetwork.com/journals/jama-health-forum/fullarticle/2777170
[4] Joseph Bruch, B. (2021, March 1). Covid-19 and private equity investment in health care delivery. JAMA Health Forum. https://jamanetwork.com/journals/jama-health-forum/fullarticle/2777170
[5] Abelson, R., & Sanger-katz, M. (2023, December 26). Serious medical errors rose after private equity firms bought hospitals. The New York Times.
[6] Eagan, J. (2024, March 27). Here’s what a Steward Physician sell off could mean for patients. WCVB. https://www.wcvb.com/article/mass-sens-warren-markey-push-back-against-steward-united-proposal/60315986
[7] Joseph Bruch, B. (2021, March 1). Covid-19 and private equity investment in health care delivery. JAMA Health Forum. https://jamanetwork.com/journals/jama-health-forum/fullarticle/2777170
[8] Chesto, J. (2024, February 2). Could Mass General Brigham be a savior amid the Steward Health Care financial mess? - The Boston Globe. BostonGlobe.com. https://www.bostonglobe.com/2024/01/29/business/mgb-steward-healthcare/
[Image] Luzina, V. (n.d.). The Cost of Healthcare. Adobe Stock. Retrieved April 9, 2024, from https://stock.adobe.com/search?k=healthcare+money&asset_id=102186611
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