Private equity firms put profits over patients, Senate panel says

Private equity is putting profits over patients, a Senate Budget Committee report said as the panel looked into two private equity firms’ efforts to squeeze more money out of hospitals in underserved areas.

The Senate's latest investigation unearthed thousands of documents detailing the financial maneuvers of two private equity firms: Leonard Green & Partners and Apollo Global Management.

The report stems from an inquiry by Sen. Chuck Grassley, R-Iowa, into private equity’s role in a series of patient sexual assaults by a nurse practitioner at an Iowa hospital, Ottumwa Regional Health Center. ORHC has been under PE ownership since 2010, when it was acquired by the PE-owned hospital operator RegionalCare, which was later acquired by Apollo. Global Management.

In 2022, after a nurse practitioner working at ORHC fatally overdosed on drugs acquired at the hospital, police discovered that the deceased had sexually assaulted nine incapacitated female patients over a nearly two-year period of time. Questions arose as to how such events could have occurred undetected, including the role of the hospital operator and its PE owner.

Grassley sent letters to the hospital’s operating company, Lifepoint Health; Apollo Global Management, the PE firm that manages the fund that owns Lifepoint Health; and Medical Properties Trust, the real estate investment trust that owns the hospital’s property. The investigation expanded to include Prospect Medical Holdings and Leonard Green & Partners, a PE firm that held a majority stake in the hospital for several years.

Senate panel findings

The committee’s key findings include:

• Leonard Green & Partners “wielded substantial influence” over Prospect Medical Holdings’ financial decisions in several ways, including incentivizing PMH management to satisfy LGP’s financial goals regardless of patient outcomes.
• LGP granted stock options to PMH employees based on reaching earnings goals, but did not establish similar incentives to improve patient safety and care.
• The primary focus of LGP and PMH was on financial goals instead of quality of care at their hospitals, leading to multiple health and safety violations as well as understaffing and the closure of several hospitals. Under PMH leadership, eight hospitals have closed, with 75% of those closures coming during or directly after LGP’s majority ownership.
• According to documents obtained by the budget committee, discussion among PMH and LGP leadership during Board and committee meetings centered around profits, cost cutting, acquisitions, managing labor expenses and increasing patient volume—with little to no discussion of patient outcomes or quality of care.
• During LGP’s majority ownership, several PMH hospitals suffered from the effects of labor cuts, decreased patient capacity, inadequate and unsafe building maintenance, and financial distress.
• - Despite financial and operational mismanagement of its hospitals, LGP took home $424 million of the $645 million that PMH paid out in dividends and stock redemption during LGP’s majority ownership - in addition to more than $13 million in fees – leaving PMH in severe financial distress. PMH was forced to take on hundreds of millions of dollars in debt, eventually leading it to run out of cash and default on its loans.
• - Since Ottumwa Regional Health Center was acquired by private equity, patient volume decreased. The hospital experienced long emergency department wait times, insufficient staffing, a lack of specialist physicians, poor patient experience and a poor reputation in its community.
• The hospital’s operators committed to spend a certain amount of money on capital expenditures but documents show the operators failed to satisfy that commitment.
• Charity care at the hospital declined despite the operators making a commitment to maintain the hospital’s charity care policy.
• The hospital has some of the worst patient experience ratings in the country.

Quality of care cited

The committee found that while the hospital’s quality of care and financial status declined, Apollo has received millions of dollars annually from its investment in Lifepoint Health.

“The findings of the investigation call into question the compatibility of private equity’s profit-driven model with the essential role hospitals play in public health,” the report concluded. “The consequences of this ownership model—reduced services, compromised patient care and even complete hospital closures—potentially pose a threat to the nation’s health care infrastructure, particularly in underserved and rural areas.”

The committee called for “greater oversight, transparency and reforms to ensure that PE-driven financial strategies in health care do not come at the expense of patient well-being or the sustainability of critical hospital services. The American public deserves more when it comes to health care.”

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Susan Rupe is editor in chief, magazine, for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at [email protected].