This week two bipartisan members of the Senate Budget Committee launched an investigation into the infamously secretive world of private equity and its impact on healthcare.
Sheldon Whitehouse (D-Rhode Island) and Chuck Grassley (R-Iowa) initiated the probe to get answers about “questionable financial transactions” that could be hurting care quality for patients at hospitals owned by private equity firms. The types of transactions the senators seek to scrutinize include excessive debt caused by leveraged buyouts, asset stripping and cost-cutting measures.
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Private equity investors have spent $1 trillion on healthcare acquisitions in the past decade. A recent report from the American Hospital Association shows that private equity firms account for 56% of all physician practice acquisitions since 2019. Another recent report, from Bain & Company, found that private equity firms currently own at least 130 hospitals in the country’s rural areas.
On Wednesday, the senators sent letters to private equity firms Leonard Green & Partners and Apollo Global Management, as well as a real estate investment trust named Medical Properties Trust. They also sent letters to three provider organizations that operate private equity-owned hospitals — Los Angeles-based Prospect Medical Holdings, Tennessee-based Lifepoint Health and Iowa-based Ottumwa Regional Health Center.
The letters cited various studies showing that private equity firms prioritize profit over provider retention and patient safety. One study, released by Columbia researchers in July, found that private equity investment in hospitals was associated with cost increases as high as 32% for patients and payers, as well as a higher incidence of patient adverse events.
“As private equity has moved into healthcare, we have become increasingly concerned about the associated negative outcomes for patients,” Sen. 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.”
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In the letters, the senators requested information and documents to uncover the effect private equity ownership has on hospitals, including financial reports, business contracts and staffing documentation.
MedCity News sought comments from all six of the organizations targeted in the senators’ investigation, but none responded by deadline.
The investigation was spurred in part by a particularly galling incident at Ottumwa Regional Health Center, a LifePoint Health hospital in southeast Iowa. The formerly nonprofit hospital has been owned by private equity firms since 2010.
In March, Sen. Grassley wrote to four companies with ownership interests in Ottumwa Regional Health Center after media reports revealed Devin Caraccio, a nurse practitioner at the facility, had sexually assaulted at least nine sedated patients in 2021 and 2022.
Caraccio died at the hospital following a fatal overdose in October 2022. The assaults were discovered after his death, when law enforcement officials seized his phone and found graphic videos and images depicting the acts.
“When I see the type of tragic lapses that occurred at Ottumwa Regional — the sexual assault of nine female patients by a now deceased nurse practitioner who overdosed and died at the facility — 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. When multiple financial transactions involving the same hospital systems occur, patients can get lost in the equation,” Sen. Grassley wrote in the letter.
Sen. Grassley asked for information regarding Ottumwa Regional’s finances to determine to what extent the “related-party transactions” may have led to the disturbing events. He said the companies failed to provide satisfactory responses to his questions.
Now that Sen. Whitehouse has joined the probe, the scope has expanded to include private equity deals impacting hospitals in California, Pennsylvania and Rhode Island.
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