By Jondi Gumz
On June 6, California Attorney General Rob Bonta led a multistate coalition of 11 attorneys general in submitting a comment letter to the Federal Trade Commission, the U.S. Department of Justice, and the U.S. Department of Health and Human Services pointing out aggressive profiteering by private equity-owned healthcare systems, which leads to higher healthcare costs, poor healthcare quality, and less access to care for patients.
Private equity-driven consolidation in healthcare has doubled over the last two decades. Research shows that between 2010 and 2020, publicly reported transactions totaled at least $750 billion in deals nationwide to acquire hospitals, physician practices, nursing homes, hospices, and behavioral healthcare.
One local example: American Medical Response, the ambulance company, was sold by Envision Healthcare in 2018 to a KKR private equity fund for $2.4 billion.
Envision Healthcare, which staffed emergency, anesthesiolog, radiology and children’s services in 1,800 clinical departments in healthcare facilities in 45 states, was acquired by KKR for $9.9 billion in 2018 and the debt burden led Envision to file for bankruptcy five years later.
Recent documents reveal that private equity-backed physician practices now control access to over 50% of available healthcare services within specialties and metropolitan areas, according to Bonta.
According to the Lown Institute, the number of private equity buyouts of physician practices increased six-fold from 2012-2021. Private equity firms own at least 386 hospitals, comprising 30% of for-profit hospitals in the U.S.
In 2021, the American Academy of Emergency Medicine-Physician Group filed a lawsuit against Envision Healthcare after Placentia Linda Hospital contracted with Envision subsidiary Premier for emergency department staffing. The Premier contract replaced the local ER Group, which had contracted with the association for management services and dropped the association’s contract when it lost its contract.
The case is ongoing in San Francisco Superior Court, and the judge declined to dismiss the charges.
In 2023, Dr. Atul Gupta, assistant professor of health care management at The Wharton School at the University of Pennsylvania, explained three concerns with health care organizations acquired by private equity firms.
First, these firms primarily use debt to buy the physician practice or hospital, and then this debt goes on the balance sheet of the acquired company — a burden to repay, which can lead to bankruptcy.
Second, these firms make most of their profits when they sell, and they aim to sell in 5-8 years so they look for ways to cut expenses quickly, like reducing staff or selling real estate.
Third, these firms can make a big profit even if the acquired business goes bankrupt.
A 2023 study in the Journal of the American Medical Association based on Medicare claims from 4 million hospitalizations from 2009-2019, compared claims at 51 hospitals owned by private equity and 249 independent hospitals.
Adverse events increased 25% at private equity hospitals compared to control hospitals, with a 27% increase in falls, 38% increase in central line-associated bloodstream infections, and double the rate of surgical site infections. These increases came even as overall surgical volume and central line placements declined.
Dr. Ashish Jha, dean of the School of Public Health at Brown University, wrote in an op-ed in the Washington Post pointed out that private equity firms focus on efficiency, so that means fewer employees to carry out protocols designed to safeguard patient safety. “It is not a stretch to connect cuts in staffing and a reduced focus on patient safety with an increased risk of harm for patients,” he wrote.
Jha called for “robust enforcement of antitrust rules” to make market consolidation and monopoly pricing less attractive. He also called upon Medicare to provide more oversight over private equity acquisitions of health-care practices to make sure these deals don’t raise prices or affect quality of care.
In the letter, the attorneys general cite aggressive profiteering by private equity-owned healthcare systems.
“We have seen the continuous playbook from private equity groups regarding healthcare purchases: Serving corporate profiteers by maximizing their profits at the expense of access, quality, and affordability of healthcare for Americans nationwide,” said Bonta. “Instead, we need healthcare systems that protect patients and providers from corporate greed. That’s why I, alongside attorneys general across this country, am advocating for enforcement and regulatory action where federal and state governments can collaborate to foster a fair and competitive marketplace that curtails harmful transactions.”
To eliminate potential anticompetitive practices, the attorneys general advocate:
- Collecting information on organizational structure, quality of care, and enhanced payments to providers that participate in federal and state health programs and making it available to federal and state enforcers.
- Prohibiting participants in federal and state healthcare programs from using anticompetitive contracting practices such as anti-steering of providers.
In February, California Assembly Member Jim Wood, D-Healdsburg, a longtime dentist, introduced AB 3129, to give the attorney general oversight of large private equity transactions in health care.
Christina Farr of the Second Opinion blog contends the bill threatens the “captive PC” model used in California to get around the ban on corporate practice of medicine, which means that non-doctors can’t own medical practices or direct medical care.
That legislation has been dramatically amended and referred to the Judiciary Committee.
Wood is not running for re-election.
Hospital workers supported the bill but the California Hospital Association opposed it, with its lobbyist telling the Assembly Health Committee that sometimes private investment is needed to save a struggling healthcare institution.
This year, a new advocacy group, Take Medicine Back, formed. This group at www.takemedicineback.org, is collecting comments on health care consolidation to send to the Federal Trade Commission.
Bonta leads the attorneys general of Connecticut, Delaware, Illinois, Minnesota, New Jersey, Oregon, Pennsylvania, Rhode Island, Washington, and Washington D.C.
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A copy of the 30-page letter is at https://tinyurl.com/AG-health-care-profiteering.