After private equity takes over hospitals, they are less able to care for patients, say top medical researchers

Physicians in three universities of University of California at San Francisco, Harvard Medical School and Hunter College of the City University of New York revealed in a new study that, after being bought by private-equity firms, the health care assets or resources of hospitals reduce and as a result, the hospitals become less capable to serve the patient needs. 
 
The research, to be published Tuesday in the Journal of the American Medical Association, refers to a pattern of asset stripping that occurs after the health-care facilities’ purchase by private-equity firms, according to the researchers, and is the first to devise a survey at a national level. 
 
“This is a very dramatic finding and should alter the ways people regard private equity in hospitals,” Said Dr. Stephanie Woolhandler Dyness, the Pace Endowed Professor of Public Health, a distinguished professor of the City University Of New York, and one of the seven authors of the study. The PE firms argue that they introduce fresh capital into hospitals. As the Mathematician went on to discover that is not exactly correct. 
 
Fixed assets considered in the research are land, buildings, major hospital equipment and information technology. The analysis of the research works showed that for two years after the acquisition by private equity, the total capital assets of private equity acquired hospitals were on average 15% lower than in other facilities; whereas assets at the other hospitals increased on average by 9%. The researchers were also able to determine that it results to 24% overall difference; or a total impact of $28 million in the total assets per hospital. 
 
Drawing a sample of 156 hospitals that were bought by private-equity firms between 2010 and 2019, the study compared them with 1,560 similar size, and located in similar communities but did not get acquired by private equity. According to the study five years after acquisition, the same pattern of decrease and escalation of the interval in assets was observed. 
 
A depleted asset base means a lower quality of care, Woolhandler said in a telephone interview with NBC News saying that equipment, buildings and technology are items required for the treatment of patients. “If you strip out all the capital from a hospital, there are real threats to the healthcare that people obtain, ” she further said. 
 
Private-equity firms’ use debt to purchase business that they expect to liquidate in the future and sell at a higher price. Scholarly research on the topic proves that management buyouts financed in this way lead to more failures than straightforward acquisitions that are not accompanied by heavy debts and the deals create frequent losses of jobs for ordinary employees. 
 
Health care was the favorite sector in buyouts in the recent years with more than $500 Billion invested by many PE companies including Apollo Global ,Blackstone Group, Carlyle and KKR. The Private Equity Growth Capital Council, the industry’s mouthpiece in the United States argued that private equity enhances health care. 
 
However, private-equity takeover leads to increased patient falls, and infections according to new literature and outcomes of residents of nursing home own by private-equity firms are 10% more likely to die than those owned by other forms of entities. 
 
Other prior research works have indicated that through PE acquisition, the patient is endangered while on the other side costs rise, according to Dr. Elizabeth Schrier, a resident physician at the University of California, San Francisco and co lead researcher of the work. 
 
The asset-stripping report on private equity owned hospitals arrives in the wake of Steward Health Care bankruptcy. * The chain was a private equity firm owned hospital that filed for bankruptcy May, leaving patients and workers stranded 31 hospital locations. The Steward crisis was pushed into the national limelight last week after the Senate’s Health, Education, Labor and Pensions committee opened an inquiry into the company. 
 
Steward until 2020 was a Cerberus Capital subsidiary which is private equity company founded and headed by Steve Feinberg. In 2010, it acquired a nonprofit chain which it refers to as Caritas Christi Health Care for approximately $250 million. These equity alliances enjoyed a $800 million profit when the firm sold it a decade later. 
 
Over the course of its operations, Steward began selling the land under all of its hospitals, which was beneficial to investors and negatively affected the company’s budget. 
 
A Cerberus spokesman stated that the company feels it is wrong and ineligible for the Steward land sale to be described as ‘looting’ the firm, in accordance with Sens Markey and Warren, both Democrats from Massachusetts. “In the period of nearly 11 years which we have been in Steward, we have witnessed efforts to transform declining community hospitals into a healthcare system that’s outstanding,” the statement continued. “Due to Cerberus’ long term investment in Steward, the operation of Steward was sustained to help many communities and employ tens of thousands of professionals and enhance the lives of millions of patients. 
 
In wake of increasing instances of private equity acquisitions of health care companies, at least 10 states are intensifying their vigilance on the transactions to avoid adverse impacts on the health consumers ranging from soaring costs to those occasioned by monopolistic tendencies. In the beginning of July, Indiana urged private-equity partnerships to file the details of proposed transactions with health care firms over $10 million with the Attorney General at least 90 days before the proposed deal is made. Although, approval of the transaction is not required, the attorney general may assess the antitrust problems related to the transaction or request additional information through a civil investigative demand. 

Other states whose laws have been passed to increase scrutiny of private equity’s health care acquisitions include, California, Connecticut, Illinois, and Nevada. 
 
It is, however, important to realise that health care is not the only sector where some shareholders from private-equity owners have been seen to impoverish companies’ assets. A cause of Red Lobster restaurant’s failure was that its private equity owner cashed in on the firm’s best locations, Best said. At the same time, Red Lobster Corporation had to fulfil rent charges of the mentioned properties, thus increasing its expenses and, in effect, compromising the company’s performance.