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Hospitals owned by private equity are harming patients, reports find

Hospital ratings dive and medical errors rise when private equity firms are in charge.


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.


Specific hospitals


PESP noted some particularly disturbing examples of conditions in some of Apollo's hospitals. One hospital in North Carolina— Lifepoint’s Wilson Medical Center—drew federal and state regulatory attention for a string of worsening conditions in 2022. North Carolina Department of Justice opened an investigation noting a decrease in available hospital beds, chronic understaffing, a decrease in treatment for low-income patients, and effective denials of care to those who couldn't pay for essential treatments.


The CMS also investigated the hospital that year, highlighting that a patient died after a fall at the facility, another died after a heart monitor was disconnected, and a suicidal patient locked himself in a bathroom and threatened to overdose on medication the hospital staff should have previously confiscated.


Meanwhile, at Lifepoint’s Ottumwa Regional Health Center in southeast Iowa, a nurse practitioner was found in late 2022 to have sexually assaulted nine unconscious patients at the hospital between 2021 and 2022. Police learned of the assaults after the nurse practitioner died of an overdose at the hospital. His phone contained photos and video evidence of the assaults.


Congressional scrutiny


The case drew the attention of Sen. Chuck Grassley (R-Iowa) in early 2023, who questioned whether Apollo's financial maneuvers led to lower-quality care and conditions in which the assaults could take place.


"When I see the type of tragic lapses that occurred at Ottumwa Regional… it raises serious questions with respect to whether these hospitals have the right resources or if they are being loaded with overwhelming amounts of debt to the point where they are forced to shift money away from patient care,” Grassley said at the time. “When multiple financial transactions involving the same hospital systems occur, patients can get lost in the equation."


Apollo did not immediately respond to Ars' request for comment. In an emailed statement, Lifepoint told Modern Healthcare that PESP's report is inaccurate or lacks appropriate context, arguing that its ownership structure has helped the system "invest in our communities, services and people and advance access to quality care."


Last month, Grassley, ranking member of the Senate Budget Committee, and Chair Sheldon Whitehouse (D-Rhode Island) opened a bipartisan investigation into the impacts of private equity ownership on US hospitals.


"As private equity has moved into health care, we have become increasingly concerned about the associated negative outcomes for patients," Whitehouse said in a statement. "From facility closures to compromised care, it’s now a familiar story: private equity buys out a hospital, saddles it with debt, and then reduces operating costs by cutting services and staff—all while investors pocket millions. Before the dust settles, the private equity firm sells and leaves town, leaving communities to pick up the pieces."


Reporter: BETH MOLE

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