In a recent news article, “The emergency in emergency medicine,” two ER docs, Eric Snoey and Mark Morocco, lament the current state of hospital emergency rooms, which are overflowing, causing new patients, even some arriving by ambulance, to be seen, examined and treated in the lobby. While there are multiple factors contributing to this sad state of affairs, the authors, both seasoned physicians who train new ER docs, focus on “a collapsing system of rehab, skilled nursing or home health options” which cause “a third or more of the patients in a hospital to be on hold pending an appropriate discharge destination.” With ward beds thus full, no new patients can be admitted.(1)
What is causing the collapse of these “discharge destinations?” I believe one answer can be found in another recent news article, “Private equity snapping up disability services,” by Anna Claire Vollers, which describes how private equity firms have been acquiring group homes, skilled nursing facilities, and home health care agencies, consolidating them and selling off assets, as well as cutting staff. There have been more than 1,000 such acquisitions from 2013 – 2023.(2)
Vollers points out that nearly all of the revenue from these facilities comes from Medicaid and Medicare. In a nutshell, the private equity firms are taking money from the government, and turning it into profit for their shareholders.Who loses in this transfer of wealth? The disabled, sick and elderly patients in these facilities – as well as the ones who are waiting in the hospitals, and the rest of us who have to settle for “lobby medicine.”
Over the last decade, private equity firms have been buying up medical practices and hospital chains as well, with the same goal of turning a quick profit for their investors by taking Medicaid and Medicare funds, and selling off assets like real estate. Not only is this bad news for both patients and staff of these facilities, it has also led to the bankruptcies of two formerly private equity-backed hospital chains, whose failures caused medical facilities nationwide to close.(3)
This is the true emergency in our healthcare system, yet many people seem to be completely unaware. Everyone complains when we read about banks, oil companies, or local utilities “putting profits before people,” because common sense and our moral compass tell us this is wrong. But the takeover of our healthcare system by private equity funds, whose mission is to maximize profits for their investors, seems to me to be completely incompatible with the goals of healthcare, starting with the Hippocratic oath, to “first do no harm.”
The American Medical Association voted last year to support state-level bans on “corporate medicine.” A study published in the Journal of the American Medical Association (JAMA) in March 2024 (4) found that over 60% of surveyed physicians held a negative view of private equity involvment in healthcare, with only 10% holding a positive view. The areas viewed most negatively were physician well-being, healthcare costs, and health equity.
Even the private equity sector itself has begun to question whether healthcare represents a good investment, especially in light of recent scrutiny by the Federal Trade Commission. A article published in 2024 on an industry news site reported that FTC chair Lina Khan expressed concern about “extractive” PE practices such as “flip and strip” ownership, and strategies that serve to consolidate power and undermine competition. The article poses the question, “is the growth of private equity investment in US healthcare perpetuating health inequity?”(5)
In this article, there are various points of view offered, as well as an historical perspective and some interesting charts. One data point that jumped out at me: 25% of emergency departments in the US are staffed by PE-backed contract management groups. That made me go back and take a look at where the authors of that first article work (one is at Highland, a county hospital in Oakland, and the other at UCLA’s Medical Center).
To quote Lina Khan again, from the same article, there is increasing concern “that growing financialization in the healthcare industry can force medical professionals to subordinate their medical judgment to corporate decision-makers’ profit motives at the expense of patient health.”
On the other hand, according to this article, there are private equity firms that have built mutually beneficial partnerships with healthcare systems and physicians over several decades, funding better healthcare delivery through new technologies, improving efficiency, and allowing hospitals and medical clinics to expand their services in rural areas. (Healthcare innovation and patient access to healthcare were noted as positives in the JAMA survey.)
The US healthcare system hasn’t been functioning efficiently or effectively for many years, so I can see where PE investment may have been welcomed, and may have benefitted patients as well as their providers in some instances. And like in every industry, there are good guys and bad guys. But there’s simply no denying the incompatible goals of PE funds and good patient care.
What can we, as healthcare consumers, do here? First, we can inquire or investigate to find out who owns the medical practices, hospitals, or other healthcare organizations we use. When we have a choice, we can elect to receive our healthcare from non-PE owned establishments. Second, we can urge our Senators and Congressional representatives, at both the federal and state level, to support legislation that at least seeks to curb or monitor PE investment in our healthcare, if not block it altogether.
Oregon lawmakers recently approved a bill that will block private equity firms from establishing a controlling interest in medical practices. The legislation “is based on a simple principle: that medical decisions should be made by medical professionals” and not financial investors (3). Four states, Massachusetts, New Mexico, Indiana and Washington, have passed laws strengthening state oversight of corporate medical takeovers, with other states considering such measures. But here in California, our Governor vetoed a similar bill last year. (6)
Notes:
4. Zhu JM, Zeveney A, Read S, Crowley R. Physician Perspectives on Private Equity Investment in Health Care. JAMA Intern Med. 2024;184(5):579–580. doi:10.1001/jamainternmed.2024.0062 Link
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