Hospitals owned by private equity are harming patients, reports find

Private equity firms are increasingly buying hospitals across the US, and when they do, patients suffer, according to two separate reports. Specifically, the equity firms cut corners, slash services, lay off staff, lower quality of care, take on substantial debt, and reduce charity care, leading to lower ratings and more medical errors, the reports collectively find.

Last week, the financial watchdog organization Private Equity Stakeholder Project (PESP) released a report delving into the state of two of the nation’s largest hospital systems, Lifepoint and ScionHealth—both owned by private equity firm Apollo Global Management. Through those two systems, Apollo runs 220 hospitals in 36 states, employing around 75,000 people.

The report found that some of Apollo’s hospitals were among the worst in their respective states, based on a ranking by The Lown Institute Hospital Index. The index ranks hospitals and health systems based on health equity, value, and outcomes, PESP notes. The hospitals also have dismal readmission rates and government rankings. The Center for Medicare and Medicaid Services (CMS) ranks hospitals on a one- to five-star system, with the national average of 3.2 stars overall and about 30 percent of hospitals at two stars or below. Apollo’s overall average is 2.8 stars, with nearly 40 percent of hospitals at two stars or below.

Patterns

The other report, a study published in JAMA late last month, found that the rate of serious medical errors and health complications increases among patients in the first few years after private equity firms take over. The study examined Medicare claims from 51 private equity-run hospitals and 259 matched control hospitals.

Specifically, the study, led by researchers at Harvard University, found that patients admitted to private equity-owned hospitals had a 25 percent increase in developing hospital-acquired conditions compared with patients in the control hospitals. In private equity hospitals, patients experienced a 27 percent increase in falls, a 38 percent increase in central-line bloodstream infections (despite placing 16 percent fewer central lines than control hospitals), and surgical site infections doubled.

“These findings heighten concerns about the implications of private equity on health care delivery,” the authors concluded.

It also squares with PESP’s investigation, which collected various data and media reports that could help explain how those medical errors could happen. The report found a pattern of cost-cutting and staff layoffs after private equity acquisition. In 2020, for instance, Lifepoint cut its annual salary and benefit costs by $166 million over the previous year and cut its supply costs by $54 million. Staff that remained at Apollo’s hospitals were, in some cases, underpaid, and some hospitals cut services, including obstetric, pediatric, and psychiatric care.

Another pattern was that Apollo’s hospitals were highly indebted. According to Moody’s Investor Services, Apollo’s ScionHealth has 5.8 times more debt than income to pay that debt off. Lifepoint’s debt was 7.9 times its income. Private equity firms often take on excessive debt for leveraged buyouts, but this can lead cash to be diverted to interest payments instead of operational needs, PESP reported.

Apollo also made money off the hospitals in sale-leaseback transactions, in which it sold the land under the hospitals and then leased it back. In these cases, hospitals are left paying rent on land they used to own.

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