After private equity takes over hospitals, they are less adept of providing care
A study found that hospitals acquired by private equity firms experience a 15% decline in capital assets, increasing patient risks and prompting states to scrutinize such transactions amid concerns over care quality.
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A recent study published in the Journal of the American Medical Association reveals that hospitals acquired by private equity firms experience significant asset depletion, negatively impacting patient care. Researchers from the University of California at San Francisco, Harvard Medical School, and Hunter College analyzed 156 hospitals purchased by private equity between 2010 and 2019, comparing them to 1,560 similar hospitals that remained independent. The findings indicate that total capital assets at private equity-acquired hospitals declined by an average of 15% within two years, while assets at non-acquired hospitals increased by 9%, resulting in a net loss of approximately $28 million per hospital. This asset stripping includes the sale of land, equipment, and technology, which are essential for patient care. The study highlights a concerning trend where private equity acquisitions lead to increased patient risks, such as higher rates of falls and infections. The report comes amid the bankruptcy of Steward Health Care, a private equity-owned hospital chain, prompting investigations into the impact of such ownership on healthcare quality. In response to these issues, several states are increasing scrutiny of private equity transactions in healthcare to mitigate potential harm to patients.
- Private equity acquisitions of hospitals lead to significant asset depletion.
- Hospitals acquired by private equity saw a 15% decline in capital assets on average.
- Increased patient risks, including higher rates of falls and infections, follow private equity takeovers.
- States are beginning to scrutinize private equity transactions in healthcare to protect patients.
- The bankruptcy of Steward Health Care highlights the potential negative consequences of private equity ownership.
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18 comments1. Adverse Selection loop: Individuals in poor health are more likely to purchase health insurance, leading to higher payouts for insurance companies. Premiums may rise, discouraging healthier people from buying insurance, and so on.
2. Moral Hazard: Insured use more healthcare services than necessary or neglect preventive measures, when insurance will cover the costs. This leads to inefficient resource and costs.
3. Information Asymmetry: Patients lack information to make informed choices.
4. Monopoly Control and Entry Barriers lead to higher prices and limited choices for consumers
5. Interdependent Demand and Supply: supply and demand are not determined independently. Often more demand -> less supply.
6. Externalities, such as the spread of communicable diseases, can't be efficiently addressed by the market.
7. Public goods: non-excludable and non-rivalrous, are underprovided by the market
Another problem is the large hospital conglomerates that end up owning all local hospitals in some areas. Large corporate structures always end up disconnected from reality and optimizing for the wrong things.
Here's the actual study.
https://jamanetwork.com/journals/jama/fullarticle/2821826?gu...
Hospital Assets Before and After Private Equity Acquisition
Private equity acquisitions appear to have depleted, rather than augmented, hospital assets. Although funds from asset drawdowns might be redeployed to enhance care or efficiency, previous studies suggest such effects may not occur. Financial outcome of private equity hospital acquisitions and effects on patient care require further study.Like Toys'R'Us, Sears, Gymboree, Payless, Claire's, Radioshack, Sports Authority, Brookstone, all of them filed for bankruptcy, some closed for good. Now maybe they would have anyway, but it's hard to say.
But I guess they get money out of them. If you pile on debt and pay yourself, and then the company goes bankrupt, well you got paid, that's what matters to PE investors, right?
Not how good the care is at hospitals.
Consequently, it changed policy, raided the equipment to take expensive equipment to other hospitals, ran it into the ground, and then closed it permanently on the grounds that it was too expensive to operate.
The hospital sat derelict for probably more than 6 years as the city fought with the owner to try to get a hospital + emergency room back to no avail.
It was then promptly razed to the ground, and now the highly valuable real estate is currently sitting there growing weeds, as the owners contemplate what to do next. We believe they will build luxury senior housing there, but nobody knows.
The closest ER to my house used to be less than 5 miles away. Now it is more than 15 miles to the north, and it is shared by a much larger area. The nearest ER in any other direction is 30+ miles away.
It destroyed the hospital, and our local medical community in the process.
So yeah, at least in my case (and I suspect I'm not alone), private equity was completely destructive to our hospital.
It lays out how the PE firms' MO is to destroy companies while extracting every ounce of value from them leaving a husk that quickly falls apart. There are several different strategies used by PE firms such as selling off property and renting them back to the companies they own, forcing companies to take on debt to pay the PE firms, and strategically breaking the law because the PE firms are not liable for the broken laws. It also covers how PE firms buy up all companies in a particular region and sector so that competition is not possible and consumers have no choice but to use the PE owned providers.
It shows that the impacts PE has on hospitals such as those in this study are not side effects but are the known and intended goals of PE firms as they extract the value from the company.
These firms need to be regulated out of existence but unfortunately the book also covers how many high profile government movers and shakers are tied up with private equity. For instance former secretary of the treasury Geithner now runs a PE firm and former president Trump is good friends with a PE exec (CEO of Blackstone).
0: https://www.hachettebookgroup.com/titles/brendan-ballou/plun...
Private equity is the customer. Once private equity takes over, you are the product, even if what you are getting isn't free.
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Emergency rooms in the US face a crisis due to the pandemic, respiratory illnesses, aging population, and infrastructure issues. "Boarding" exacerbates problems, leading to unsafe conditions and patient deaths. Regulatory intervention is urged for solutions.
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Climate change poses a growing threat to hospitals globally, with a 41% increase in damage risk from 1990 to 2020. Recent incidents, like US hospital closures due to extreme weather, highlight the trend. Thousands of healthcare facilities worldwide face challenges, especially in low-lying coastal regions. Flooding, fires, and cyclones impact hospitals, with projections suggesting one in 12 hospitals may shut down by the century's end. Extreme heatwaves strain healthcare systems. Climate-resilient measures, like those in Vietnam, are crucial for hospital resilience.
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