Private equity's plot against older Americans

Over the past several decades more than 140 private equity investment firms,1 have acquired entities in major components of healthcare in the United States. Private Equity funds are specialized for profit investment vehicles that attract capital from very wealthy individuals, banks, pension funds or other organizations with large financial resources. Private Equity firms promise struggling medical groups "financial engineering" to increase profits, an access to cash, organization of back office efficiencies, and general management expertise. Since they are "private" they have great latitude in conducting business and their major strategies actually primarily involve cutting costs and patient care along with self-enriching business strategies as described below. They use their massive financial resources to acquire broad sections of most of the major components of healthcare in the United States. Their subsequent business plans are financial genius but unmitigated disasters for patients. Private Equity firms have undertaken acquisitions of financially or administratively distressed hospitals, nursing homes, physician practices especially emergency care and medical specialties, hospices, home care agencies, physical therapy and rehabilitation operations, ambulance services, and nursing registries. They promise "financial engineering" miracles to restore profitability. While some" back-office" efficiencies do generally occur most of their activities are draconian cost and care-cutting plans along with business actions such as leveraged buy-outs, paying themselves large management fees with bonuses, and using the organization's own resources to take out huge debts. Of particular importance for older Americans, Private Equity firms currently own a significant percentage of U.S. nursing homes; estimates range from 5% to 11%, and a rapidly increasing percentage of hospice and home care agencies.2 All three are important sources of seniors' care. Why should we be concerned about these issues considering all of the other current challenges to the medical system? First, simply because of Private Equities well-documented history of consistently turning a profit by reducing care, while cutting costs and raising prices. These strategies have already impaired care for the unprotected and vulnerable users of these and other care services3, 4 and threaten more harm with the passage of time. Second, while any of us may become a user of these providers; these sources of care are primarily accessed by senior Americans on Medicare with illnesses that require affordable, timely, safe, high-quality expert help, and support from these three professional entities and disciplines. Finally, Private Equity activities divert tax payer and Medicare dollars into their profits instead of improving care. To understand the basis of these major threats it must be appreciated that Private Equity has as its routinely achieved overriding principle goal and priority, that all of their healthcare business acquisitions must generally provide a 20% annual return to their new owners and investors. Patients and their illnesses are simply commodities to be managed as efficiently and as least expensively as possible. The provision of quality care is no longer looked upon as a societal good or important goal.1, 2 Cost cutting is the order of the day, improved health outcomes are not a concern of private equity owners.3 Private equity is notoriously adept at working the system to their advantage. Examples of specific money-saving strategies and tactics include3-6; reducing the number of patient visits by hospice and home care workers, reducing the number of employees in hospitals and nursing homes, while increasing productivity quotas for those who remain. Hiring less skilled care providers is also a common private equity staffing move.3 Routine denials for diagnostic or therapeutic interventions at the front end of care are practiced for cost-cutting purposes. Multiple peer-reviewed studies demonstrate that even as these destructive moves are taking place prices are raised,2, 3 especially when local market dominance is achieved. As a result of these "business" decisions multiple peer-reviewed research studies demonstrate significant declines in the levels of patient care, too often with increases in morbidity and mortality.3-6 At the same time, the Private Equity group is using the above financial strategies plus lucrative leasebacks, and uncalled for bonuses and management fees and favorable Mergers and Acquisitions. A final strategy is a sale to another Private Equity entity, usually after five years. All these strategies and tactics work effectively to enhance their profit margins.1 A related issue of special interest to physicians and other health professionals is what happens to Private Equity employees if and when their owner folds and declares bankruptcy? Not a theoretical question since the two biggest PE physician employers, who cover forty percent of employed physicians7; Envision Health Care with 7.7 billion dollars in debt, and Team Health with 5 billion dollars in debt have recently filed for bankruptcy re-organization relief.8 Further, American Physician Partners (APP), which previously provided E. R. staffing for 150 U.S. hospitals, had "only"472 million in debt but could not find a buyer so simply went out of business as of August 1, 2023, by declaring liquidation bankruptcy.8 This left 2500 physicians and other providers without several months of back pay and even worse, no malpractice tail coverage! The solutions to control this rapidly growing healthcare disaster will require serious federal and local government and health department oversight. New legislation and regulations could enforce quality and safety standards of staffing and care some of which have already been proposed,10 as well as legal interventions1, 2 to prevent PE's current multiple, outrageous, unregulated financial and care abuses, outright neglect and questionable illegal behaviors. Such changes, particularly welcome if accompanied by a complete revision of our non-system of healthcare delivery, are finally starting to be talked about in Congress2, 9, 10 and by President Biden. This would vastly improve care and could save billions of Medicare dollars annually.3 However, even when and if adopted such changes will be slow to be implemented. In the meantime, physicians as well as families, governments, patient advocacy groups, and patients should be aware of these Private Equity issues. All participants should use due diligence options to thoroughly investigate the ownership and provision of care for any of these organizations that are providing healthcare services for patients, themselves or relatives. Regular follow-up monitoring to assure that promises to government agencies, families, and health professionals are fulfilled will be crucial. James Webster is the sole author of this article. The author declares no conflicts of interest. None.