A year-long bipartisan Congressional investigation into two private equity-backed U.S. hospital systems found that patient care deteriorated at each operations as their private equity owners reaped significant payouts on their investments within the systems. The findings reinforced academic research showing how private equity healthcare investments harm patients while enriching investors.
The investigation was helmed by two senators who lead the Senate Budget Committee — Sheldon Whitehouse, a Rhode Island Democrat and Charles E. Grassley, an Iowa Republican.
The inquiry centered on private equity giant Apollo Global Management, owner of Lifepoint Healthcare, the nation’s largest operator of rural hospitals, and Leonard Green & Partners, a personal equity firm in Los Angeles that owned hospitals under the Prospect Medical Holdings umbrella from 2010 to 2021.
Over the past decade, private-equity firms like Apollo and Leonard Green have spent greater than $1 trillion buying health care businesses, including hospitals, nursing homes, physician practices and hospital staffing firms. To finance these deals, private equity owners typically burden the businesses they buy with debt, then slash company costs to extend earnings and appeal to potential buyers in subsequent years. Because private equity firms don’t make public the financial results of the businesses they own, Senate investigators aimed to evaluate how much profit the private equity firms generated from their investments within the hospitals and whether the deals harmed patients.
“As our investigation revealed, these financial entities are putting their very own profits over patients, resulting in health and safety violations, chronic understaffing, and hospital closures,” Whitehouse said in a press release. “Private equity investors have pocketed tens of millions while driving hospitals into the bottom after which selling them off, leaving towns and communities to choose up the pieces.”
Academic studies show that non-public equity firms’ involvement in healthcare is related to significant cost increases for patients and payers, reminiscent of Medicare. A lower quality of care can also be related to private equity firms’ investments in healthcare. Patients receiving care at hospitals owned by private equity firms also experienced more bloodstream and surgical site infections and fell more often, a 2023 study by academics at Harvard University and the University of Chicago found.
Adding to this research, the Senate investigation found that at any time when Prospect Medical facilities showed financial improvements over the period of personal equity ownership, quite than investing in hospital operations to profit patients, the owners induced the corporate to issue recent debt, using proceeds to pay dividends to themselves.
For instance, the investigation found that Prospect Medical Holdings paid out $645 million in dividends and preferred stock redemption to its investors — $424 million of which went to Leonard Green investors — and took out lots of of tens of millions in loans that it will definitely defaulted on.
Likewise, the Senate investigation found that Apollo Global Management underinvested in Ottumwa Regional Health Center, a Lifepoint facility in rural Iowa that the inquiry scrutinized.
At that facility, a male nurse was found to have sexually assaulted multiple incapacitated female patients before dying of a drug overdose in Oct. 2022. Senate investigators concluded that, “this event can have occurred due to unfulfilled guarantees and underinvestment, which eroded the hospital’s culture of safety.”
While the hospital declined, Apollo received tens of millions of dollars a 12 months, the report said.
“A dependable health care system is important to the vitality of a community,” Grassley said in a press release. “As all the time, sunshine is the perfect disinfectant. This report is a step toward ensuring accountability, in order that hospitals’ financial structures can best serve patients’ medical needs.”
Prospect said it was still reviewing the Senate report and was disillusioned by “its false conclusions and apparent omissions of key facts.”
“The Committee’s report seems to not acknowledge our many positive contributions to the communities we serve or to accurately reflect the deal with quality of care and patient safety at our hospitals,” Prospect added. “The Committee drew general conclusions concerning the quality of care at our hospitals without ever reviewing information from those hospitals, which is where the deal with care takes place, quite than at the company level.”
As well as, the corporate said, “Nearly all of the hospitals Prospect acquired were cash-starved, neglected, in disrepair and on the verge of closure or bankruptcy. In nearly every instance, nobody else wanted to amass them, and lots of were headed to closure. Prospect invested greater than $750 million in its hospitals and provided greater than $900 million in charity and uncompensated care to patients. That’s the exact opposite of putting profits above patients.”
A spokesman for Apollo disputed the report’s findings as well. “Apollo Funds have invested billions of dollars in Lifepoint and its predecessor firms, which has been used to improve facilities, expand local healthcare services, recruit care providers, construct recent centers of care and upgrade technology across Lifepoint’s network,” the spokesperson said. “Apollo Funds proceed to support Lifepoint management’s emphasis on continuous improvements in quality of care, including at Ottumwa Regional Health Center.”
“Because of this of those investments, quality of care at Lifepoint hospitals has improved, in response to third party rankings like Leapfrog in addition to CMS Star Rankings,” the spokesperson added. “At a time when many rural hospitals are under pressure and liable to closing, Lifepoint has not needed to close a single hospital and is committed to providing critical services in underserved areas.”
Representatives from Lifepoint Health and Leonard Green & Partners didn’t immediately reply to requests for comment.
The Senate report also shows the impact that the hospitals’ private equity owners had over the entities’ operations. A June 2022 worker satisfaction survey from Ottumwa cited within the report stated, “So far as our hospital being a part of Lifepoint, it seems like we’re a number, a budget, anything but a care giving institution.”
After Prospect installed a management audit committee of the board to oversee financial operations, board documents indicated among the committee’s members “had felt pressured to maintain certain things quiet,” the report said.
The attorney general in Latest Mexico, Raul Torrez, launched an investigation of a Lifepoint-run facility in Las Cruces, NM—Memorial Medical Center—after NBC News reported last 12 months that the power had turned away a dozen cancer patients. The previous chief executive of the power resigned shortly after the report.
Memorial’s chief financial officer said on the time that the hospital didn’t turn away patients and Lifepoint said, “lots of the assertions being made about Memorial’s practices, conduct and communications with patients are factually inaccurate.”
Neither Memorial nor Lifepoint would discover specific inaccuracies or discuss the experiences of the patients, which were shared with the hospital. Hospital officials called a few of them to apologize after they told NBC News their story.
