The injection of private equity into the health care industry is disastrous for patients and the communities that depend on rural hospitals.
Amidst private-equity owned nursing homes and hospitals filing for Chapter 11 bankruptcy, leading to accusations of “corporate looting,” Sharon Regional Medical Center’s battle to keep its doors open has left 850 employees, and thousands of Mercer County patients, in limbo, after a deal to a for-profit California firm collapsed.
Low reimbursement rates, rising labor costs and increasingly complex and older patient pools have forced many rural hospitals, including nonprofits, to downsize. But private equity stands out for deploying ruthless cost-cutting tricks that deliver big one-time payouts — for themselves — at the expense of a facility’s long-term finances and the community’s well-being.
One of these methods is the leaseback, in which private equity firms sell the land out from underneath their facilities for immediate payouts, and then force the facilities to rent the land they once owned. This is what pushed Sharon, like dozens of other medical centers across the country, into insolvency.
Private equity is bad for patients, too.
A study published in the Journal of the American Medical Association in December 2023 studied patient outcomes in the years following private equity acquisition, comparing them with hospitals that hadn’t been bought up. The study found that hospital-acquired conditions — or injuries and infections that occur after a patient arrives, such as dangerous MRSA cases — rose by 25% in facilities owned by private equity. That’s firm evidence of how the pursuit of profit degrades the quality of care.
Gov. Josh Shapiro said it best: “The more that private equity invests in hospitals and nursing homes, the more that patients get screwed.”
So why isn’t Pennsylvania taking back the reins? Since 2023, nearly half of all U.S. states have enacted policies requiring more oversight for private equity and health care systems. Other states’ proposed laws require private equity firms to report executive compensation, debt loads and lobbying activity to the public. Others would work to end moneymaking schemes like leasebacks.
These, it must be said, are ultimately policy bandages, which don’t resolve the deeper issue: a health care system that’s vulnerable at nearly every point to being strip-mined by private equity firms whose only measure of success is the profit returned to the fund. It’s one thing to say that health care must be delivered economically, to respect the scarcity of resources; it’s quite another for profit to entirely supersede patient care.
True reform, therefore, will require answering a more fundamental question: Does profit belong in health care at all?
— Pittsburgh Post-Gazette via TNS
