Patient care declined at both hospitals as their private equity owners received large returns on their investments in the systems, according to a year-long, bipartisan congressional probe of two private equity-backed hospital systems in the United States. The results supported scholarly studies that demonstrate how private equity healthcare investments benefit investors at the expense of patients.
Charles E. Grassley, a Republican from Iowa, and Sheldon Whitehouse, a Democrat from Rhode Island, who chair the Senate Budget Committee, led the probe.
The investigation focused on Leonard Green & Partners, a Los Angeles-based private equity firm that owned hospitals under the Prospect Medical Holdings umbrella from 2010 to 2021, and Apollo Global Management, a private equity behemoth that owns Lifepoint Healthcare, the biggest operator of rural hospitals in the country.
Private equity firms like Apollo and Leonard Green have invested over $1 trillion in healthcare enterprises over the last ten years, including medical practices, hospitals, nursing homes, and hospital staffing agencies. Private equity owners usually take on debt to finance these transactions, then reduce firm expenses to boost profits and attract more purchasers in later years. Senate investigators sought to determine whether the transactions hurt patients and how much profit the private equity firms made from their investments in the hospitals, since these firms do not disclose the financial performance of the businesses they hold.
According to Whitehouse’s statement, “as our investigation showed, these financial entities are prioritizing their own profits over patients, resulting in health and safety violations, chronic understaffing, and hospital closures.” Towns and communities are left to pick up the pieces after private equity investors profited millions by razing hospitals and then selling them.
Research indicates that the engagement of private equity firms in the healthcare industry is linked to notable increases in costs for both patients and payers, including Medicare. Private equity firms’ interests in healthcare are likewise linked to lower-quality care. According to a 2023 study by researchers at Harvard University and the University of Chicago, patients getting care at hospitals owned by private equity firms also fell more frequently and had higher rates of bloodstream and surgical site infections.
In support of this research, the Senate investigation discovered that whenever Prospect Medical facilities demonstrated financial improvements during the time of private equity ownership, the owners encouraged the company to issue new debt, using the proceeds to pay dividends to themselves, instead of investing in hospital operations to benefit patients.
For instance, the inquiry discovered that Prospect Medical Holdings took out hundreds of millions of dollars in loans that company ultimately defaulted on, and distributed $645 million in dividends and preferred stock redemptions to its investors, of which $424 million went to Leonard Green investors.
Similarly, Apollo Global Management underinvested in Ottumwa RegionalHealth Center, a Lifepoint facility in rural Iowa that was examined by the Senate probe.
Before passing away from a drug overdose in October 2022, a male nurse at the facility was discovered to have sexually attacked several female patients who were helpless. Senate investigators came to the conclusion that underinvestment and broken pledges may have contributed to this incident by weakening the hospital’s safety culture.
According to the article, Apollo got millions of dollars annually as the hospital languished.
According to Grassley’s comments, a community’s health depends on its health care system. As usual, the best disinfectant is sunshine. In order for hospitals’ financial systems to effectively meet the medical requirements of their patients, this report is a step toward assuring accountability.
Prospect stated that it was still going over the Senate report and was dissatisfied with its erroneous findings and seeming lack of important information.
According to Prospect, the Committee’s report does not adequately represent the emphasis on patient safety and quality of care at our hospitals, nor does it recognize the numerous beneficial contributions we provide to the communities we serve. Without ever examining data from our hospitals—where the emphasis is on treatment—rather than at the business level, the Committee made broad judgments regarding the standard of care provided there.
The business added that practically every hospital Prospect purchased was cash-strapped, dilapidated, in poor condition, and in danger of closing or going bankrupt. Many were on the verge of closing, and in almost all cases, no one else wanted to buy them. Prospect made over $750 million in hospital investments and over $900 million in charitable and unpaid patient care. Putting profits before of patients is the exact reverse of that.
An Apollo representative also denied the report’s conclusions. According to the spokesperson, Apollo Funds has invested billions of dollars in Lifepoint and its predecessor firms. These investments have been utilized to enhance technology throughout Lifepoint’s network, recruit care professionals, develop new centers of care, extend local healthcare services, and improve buildings. Lifepoint management’s focus on ongoing enhancements to the quality of treatment, notably at Ottumwa Regional Health Center, is still supported by Apollo Funds.
According to third-party assessments such as CMS Star assessments and Leapfrog, the quality of care at Lifepoint hospitals has increased as a result of these expenditures, the spokesperson continued. Lifepoint is dedicated to delivering vital services in disadvantaged areas and has not had to close a single hospital during a period when many rural hospitals are under strain and in danger of closing.
Requests for comment were not immediately answered by Leonard Green & Partners and Lifepoint Health representatives.
The influence that the hospitals’ private equity owners had on the organization’s operations is also demonstrated in the Senate report. “As far as our hospital being part of Lifepoint, it feels like we are a number, a budget, anything but a care giving institution,” according to an Ottumwa employee satisfaction survey from June 2022 that was referenced in the study.
According to the study, some members of the board felt under pressure to keep some things hidden after Prospect established a management audit committee to supervise financial operations.
After NBC News revealed last year that a Lifepoint-run clinic in Las Cruces, NM Memorial Medical Center had turned away a dozen cancer patients, New Mexico Attorney General Raul Torrez opened an investigation into the institution. Shortly after the report was released, the facility’s former CEO resigned.
Many of the claims being made regarding Memorial’s procedures, behavior, and interactions with patients are factually incorrect, according to Lifepoint, while Memorial’s chief financial officer stated at the time that the hospital did not turn away patients.
The hospital was informed of the patients’ experiences, but neither Memorial nor Lifepoint would point out particular errors or talk about them. Some of them told NBC News their experience, and hospital authorities called them to apologize.
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