Hall Monitor Readers know that the Republicans in the Pennsylvania Senate have refused to support Governor Shapiro’s call to fund Public Transit. (and hopefully, our readers know that SEPTA, at least this year, doesn’t have to cut service or raise fares). That is not the only proposal the Republican Controlled Senate has refused to support. Governor Shapiro called for an end to private equity Companies (PE) controlling our health care.
In his budget speech this year:
“Let’s Reform the way private equity has infiltrated our healthcare system.
Let me explain. Private equity is motivated to make a profit and make it quickly. That doesn’t mean they’re doing something wrong or criminal. They buy up hospitals and health care facilities, line their own pockets by stripping money and resources from those facilities, and compromising care.
Then, in many cases, they skip town, leaving taxpayers holding the bag and communities without the care and services they need. I’m done letting private equity treat Pennsylvania hospitals like a piggybank they can empty out and smash on the floor. As a Commonwealth, it’s time for us to stand up for our local hospitals and nursing facilities and put in place real safeguards against private equity.
Let’s require pre-transaction notifications for all sales, mergers, and acquisitions.
Let’s also put an end to harmful leaseback arrangements – where a private equity-backed hospital or nursing home sells its land and then rents it back, often at excessively high prices that push them deeper into debt.”
The same type of PE firms that drove Hahnemann and the Delaware Valley hospitals into bankruptcy are buying up practices. A private equity firm is essentially a group of wealthy individuals pooling their money and investing it. Because they are not publicly traded companies, there are few reporting requirements. It allows for abuses. For example : A PE firm acquires a hospital or hospital system. The investors then borrow hundreds of millions of dollars using the hospital as collateral. Often, the hospital cannot pay the loan, so the PE sells the land the hospital sits on, often to itself or a company it owns. The hospital is then forced to pay rent to the PE company that bought the land.
The PE firms claim that with their business acumen, they will be able to run the hospital more efficiently. A Brown University study exposed that claim: “There’s some early research that shows when PE firms invest in nursing homes and hospitals, patient care really deteriorates in the nursing home setting. Mortality goes up by about 10% in the hospital setting. There is an increase in infections and falls and worse patient care experiences, based on how patients themselves self-report their care experience.”
While hospitals closing across the nation have drawn attention to the dangers of PE firms buying and bankrupting hospitals, there has been almost no reporting of PE firms buying up doctors’ practices. But buying they have: Over the last decade, private equity firms have spentnearly $1 trillion on close to 8,000 health care deals, snapping up practices that provide care from cradle to grave: fertility clinics, neonatal care, primary care, cardiology, hospices, and everything in between.
The result: a few years after private equity invested in a practice, charges per patient were 50% higher than before. Practices also experience high turnover of physicians and increased hiring of non-physician staff.
The state of Oregon, after watching a PE firm buy a Clinic in Corvallis, Oregon, has started fighting back. It passed a law that :
- Clarifies that licensed medical providers must always control clinical operations
- Prohibits the PE firms from having the final say over staffing levels, the time doctors can spend with patients and treatments
- It gives Doctors the right to veto PE decisions on patient care
- Stops PE from having “”ag orders”” and non-compete clauses in contracts.
Matt Stoller, a leading expert on monopoly power, wrote in his BIG news letter about the law (full disclosure, I read BIG every week) ” the lobbying in the fight was aggressive, and not because Oregon is particularly important. The true fear is that this law could create a cascading effect in other states, who are considering or starting to limit the reach of private equity and large corporations in health care. As Oregon nurses noted in lobbying for the bill, corporate control of medicine is fundamentally antagonistic to quality care, as it removes decision-making from medical professionals and patients and puts it in the hands of financiers. For instance, private equity-owned clinics charge 20% more for the same procedures. Such ownership arrangements increase costs, make patient outcomes worse, and foster physician burnout.”
The bill is not a panacea; access to quality, affordable healthcare and fair compensation for healthcare workers are complex issues. But Oregon has started to try.
In Pennsylvania, where a PE firm took millions from a hospital network and drove the hospital into bankruptcy, despite the Governor’s call to action, no bill has been passed. On May 25th, Majority Leader Pittman (R., Indiana) said “he was intrigued” by Shapiro’s comments, given “the crisis facing numerous hospitals across the commonwealth, the measure is certainly worthy of further conversations.”
Which begs the question: if there is a crisis, why isn’t there any action?
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