Private Equity — Bad Once Again

Next time you have to decide what hospital to go to, check on whether it's owned by a private equity firm or not. 

The results of a new study (published in JAMA earlier this week) were not positive for those hospitals. Within three years of acquisition, they had:

• 25% more surgical infections and bedsores among Medicare patients compared with comparable hospitals*
• A 38% increase in central line infections (even though they placed 16% fewer central lines)
  
• A 27% increase in patient falls

The lead author is quoted in a New York Times article about the study as saying she's not surprised to generally find an effect of the ownership, but "I will say we were surprised at how strong it was."

These types of complications and errors have been declining, according to the Times, so these increases within a relatively new and increasingly common economic model for hospitals seems extra disturbing.

Oh — and an article from Harvard Medical School mentions that while you're having a worse medical experience at a private equity hospital, you're also being charged more. That has been found in previous studies.

Private equity generally works by pooling investors' funds, then buying an asset (like a hospital) with a relatively small down payment and a large amount of debt, often planning to sell the asset's most profitable operations fairly quickly, lay off as many employees as possible, or otherwise maximize income to the new owners (maybe by raising prices) before reselling the remaining hulk.

No one really knows how widespread private equity acquisitions of our health care infrastructure are because many of the transactions are not public, particularly of medical practices and clinics. Only acquisitions of $111.4 million have to be reported. So it's likely most of the hospital acquisitions can be identified, though the names of companies may make it less than obvious.

I loved (not) this corporate-speak quote from the CEO of the American Investment Council, which is the trade group for private equity, quoted in the Times story:

"The private equity industry plays an essential role in providing local hospitals with the capital they need to improve patient care, expand access and drive innovation."

We can see that private equity doesn't improve patient care; in fact, it's the opposite. It seems unlikely that it expands access, either, especially over time as it hollows out hospitals the way it has hollowed out retailers and newspapers. 

And anyone who uses the verb "drive" related to the word "innovation" should never be taken seriously.

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*In the study, researchers looked at Medicare hospitalizations between 2009 and 2019. There were 600,000+ hospitalizations at 51 private equity hospitals and 4 million+ at 259 similar hospitals that had not been acquired by private equity at the start of the time period. Some of the hospitals were acquired during the 10 year period.