A year-long bipartisan congressional investigation into two U.S. hospital systems backed by private equity found that patient care deteriorated at both operations as their private equity owners reaped large payouts for their investments in the systems. The findings reinforced academic research showing how private equity investments in healthcare harm patients and enrich investors.
The investigation was led by two senators who head the Senate Budget Committee: Sheldon Whitehouse, a Democrat from Rhode Island, and Charles E. Grassley, a Republican from Iowa.
The investigation focused on the private equity giant apollo global management, owner of Lifepoint Healthcare, the nation's largest rural hospital operator, and Leonard Green & Partners, a private 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 such as Apollo and Leonard Green have spent more than $1 trillion buying healthcare companies, including hospitals, nursing homes, physician offices and hospital staffing companies. To finance these deals, private equity owners typically load the companies they buy with debt and then cut the companies' costs to boost profits and attract potential buyers in subsequent years. Because private equity firms do not make public the financial results of the companies they own, Senate investigators sought to assess how much profit the private equity firms generated from their investments in the hospitals and whether the deals harmed patients.
“As our investigation revealed, these financial entities are putting their own profits above patients, leading to health and safety violations, chronic staffing shortages, and hospital closures,” Whitehouse said in a statement. “Private equity investors have pocketed millions while tearing down hospitals and then selling them, leaving cities and communities to pick up the pieces.”
Academic studies show that private equity firms' involvement in healthcare is associated with significant cost increases for patients and payers, such as Medicare. Lower quality of care is also associated with private equity firms' investments in healthcare. Patients receiving care at hospitals owned by private equity companies also experienced more bloodstream and surgical site infections and fell more frequently, a 2023 study by academics at Harvard University and the University of Chicago found.
In addition to this investigation, the Senate investigation found that whenever Prospect Medical facilities showed financial improvements during the period of private equity ownership, instead of investing in hospital operations to benefit patients, the owners induced the company to issue new debt, using the profits to pay dividends. to themselves.
For example, the investigation found that Prospect Medical Holdings paid $645 million in dividends and preferred stock redemptions to its investors (of which $424 million went to Leonard Green investors) and took out hundreds of millions in loans that ultimately did not comply.
Additionally, the Senate investigation found that Apollo Global Management did not invest enough in Ottumwa Regional. Health Center, a Lifepoint facility in rural Iowa that examined the research.
At that facility, a nurse was found to have sexually assaulted several incapacitated patients before dying of a drug overdose in October 2022. Senate investigators concluded that “this event may have occurred due to broken promises and insufficient investment, that eroded the hospital's reputation. safety culture.”
As the hospital declined, Apollo received millions of dollars a year, according to the report.
“A reliable health care system is essential to the vitality of a community,” Grassley said in a statement. “As always, sunlight is the best disinfectant. This report is a step toward ensuring accountability so that hospitals' financial structures can better serve the medical needs of patients.”
Prospect said it was still reviewing the Senate report and was disappointed by “its false conclusions and apparent omissions of key facts.”
“The Committee's report appears to neither recognize our many positive contributions to the communities we serve nor accurately reflect the focus on quality of care and patient safety in our hospitals,” Prospect added. “The Committee drew broad conclusions about the quality of care at our hospitals without even reviewing the data from those hospitals, which is where the focus is, rather than at the corporate level.”
Additionally, the company said, “Almost all of the hospitals that Prospect acquired were cash-strapped, abandoned, in disrepair, and on the brink of closure or bankruptcy. In almost all cases, no one else wanted to acquire them, and many were headed for” Prospect invested more than $750 million in its hospitals and provided more than $900 million in charitable and uncompensated care to patients. “That's the exact opposite of putting profits before patients.”
An Apollo spokesperson also disputed the report's conclusions. “The Apollo Funds have invested billions of dollars in Lifepoint and its predecessor companies, which have been used to improve facilities, expand local health services, recruit care providers, build new care centers and upgrade technology throughout Lifepoint network,” the spokesperson said. “Apollo funds continue to support Lifepoint management's emphasis on continued improvements in the quality of care, including at Ottumwa Regional Health Center.”
“As a result of these investments, the quality of care at Lifepoint hospitals has improved, according to third-party ratings such as Leapfrog and CMS Star Ratings,” the spokesperson added. “At a time when many rural hospitals are under pressure and at risk of closing, Lifepoint has not had to close a single hospital and is committed to providing critical services in underserved areas.”
Representatives for Lifepoint Health and Leonard Green & Partners did not immediately respond to requests for comment.
The Senate report also shows the impact that the hospitals' private equity owners had on the entities' operations. A June 2022 Ottumwa employee satisfaction survey cited in the report said, “As far as our hospital being part of Lifepoint, it appears we are a number, a budget, anything but a care institution.”
After Prospect installed a board management audit committee to oversee financial operations, board documents indicated that some of the committee members “had felt pressure to keep certain things secret,” according to the report.
New Mexico Attorney General Raul Torrez launched an investigation of a Lifepoint-run facility in Las Cruces, New Mexico (Memorial Medical Center), after NBC News reported last year that the facility had turned away a dozen patients. with cancer. The facility's former executive director resigned shortly after the report.
Memorial's chief financial officer said at the time that the hospital was not turning away patients, and Lifepoint said that “many of the claims made about Memorial's practices, conduct and communications with patients are factually inaccurate.”
Neither Memorial nor Lifepoint identified specific inaccuracies or discussed patients' experiences, which were shared with the hospital. Hospital officials called some of them to apologize after they told their story to NBC News.
