Senate committee decries effects of private equity investment in healthcare

Private equity investment in healthcare has had negative consequences for patients and providers, according to a Senate Budget Committee report published Tuesday.

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Private equity’s role in healthcare has risen dramatically since the 2010s, found the report, which is the result of a year-long investigation into the effects of private equity ownership of healthcare institutions. The committee focused on two private equity firms — Leonard Green & Partners and Apollo Global Management — that currently or previously invested in two prominent hospital operators. 

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Throughout the investigation, that committee said that it obtained more than 1 million pages of new documents underscoring the detrimental effects of private equity ownership in healthcare.

“Private equity has infected our healthcare system, putting patients, communities and providers at risk,” Committee Chair Sen. Sheldon Whitehouse (D-RI) said. “As our investigation revealed, these financial entities are putting their own profits over patients, leading to health and safety violations, chronic understaffing and hospital closures.”  

Documents show, for example, that private equity firm Leonard Green and hospital operator Prospect Medical Holdings spent board meetings discussing profit maximization tactics “with little to no discussion of patient outcomes or quality of care at their hospitals,” Whitehouse said. 

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“And while Prospect Medical Holdings paid out $645 million in dividends and preferred stock redemption to its investors — $424 million of which went to Leonard Green shareholders — it took out hundreds of millions in loans that it eventually defaulted on,” he added.

Ranking member Sen. Chuck Grassley (R-IA) noted specifically that costs at the Ottumwa Regional Health Center in his home state “have gone up as patient experience has gone down.”

Grassley added that under private equity ownership, his constituents in Ottumwa are travelling “significant distances” to receive appropriate treatment rather than face long wait times.

“A dependable healthcare system is essential to the vitality of a community. As always, sunshine is the best disinfectant,” Grassley said. “This report is a step toward ensuring accountability, so that hospitals’ financial structures can best serve patients’ medical needs.”

Read additional coverage of private equity in healthcare here.