Hospitals and private equity: Scathing Senate report shows concerns cross party lines

While bipartisan agreement is increasingly rare in Washington, Republicans and Democrats have shared similar concerns about private equity ownership of hospitals and health systems.

The Senate Budget Committee issued a blistering bipartisan report criticizing private equity ownership of hospitals. U.S. Sen. Sheldon Whitehouse, D-Rhode Island, left, and U.S. Sen. Chuck Grassley, R-Iowa, say private equity firms are focusing on profits at the expense of patients.

The Senate Budget Committee issued a scathing 171-page report last week concluding that private equity investments in hospitals pay off for investors, but patients aren’t faring well. The report’s title sums up the sentiment and conclusions: “Profits over patients.”

The report points to private equity control focusing more on maximizing their profits at the expense of hospital operations and patient care. The report points to two large private equity players, Apollo Global Management and Leonard Green & Partners, and hospital systems they acquired.

Sen. Sheldon Whitehouse, a Democrat from Rhode Island, likened private equity ownership of hospitals to a disease.

“Private equity has infected our health care system, putting patients, communities, and providers at risk,” Whitehouse said in a statement.

Sen. Chuck Grassley, an Iowa Republican, said he hoped the report triggers reforms.

“A dependable health care system is essential to the vitality of a community. As always, sunshine is the best disinfectant,” Grassley said in a statement. “This report is a step toward ensuring accountability, so that hospitals’ financial structures can best serve patients’ medical needs.”

The bipartisan Senate report garnered national media attention.

Days after the release of the Senate report, JAMA published a study which also linked private equity ownership to problems with patient care.

The Senate report

Apollo owns 97% of Lifepoint Health, a for-profit system based in Brentwood, Tenn. Lifepoint operates 60 community hospital campuses, mostly rural hospitals, in 31 states.

The Senate report says Lifepoint’s ownership of Ottumwa Regional Health Center in Iowa (Grassley’s home state) has resulted in inadequate staffing, declines in the quality of patient care, and the hospital’s finances worsening. The hospital’s ownership has also fallen short of commitments in capital expenditures and recruiting doctors, according to the report.

In a statement accompanying the report, Grassley said, “The Ottumwa community has personally felt the impact of private equity on its health care system.

“Under private equity ownership, wait times at Ottumwa Regional Health Center have gone up as patient experience has gone down. The diminishing quality of care, service availability and care capacity at the hospital is forcing Ottumwa residents to travel significant distances in order to receive appropriate treatment. Iowans deserve better,” Grassley said.

Apollo owns more than 200 hospitals across America and is the nation’s largest private equity owner of hospitals. The company owns 97% of Lifepoint, according to the Senate report.

The report also faults Apollo for collecting $9.2 million in fees annually from Lifepoint.

“Apollo has made millions in profits as a result of its investment into Lifepoint Health and ORHC’s previous private equity owners, even as the hospital’s operations have suffered,” the report stated.

The Senate report also cites failings of Leonard Green and its ownership of Prospect Medical Holdings, a for-profit company which operates hospitals in Connecticut, Rhode Island, Pennsylvania and California. Leonard Green owned the bulk of Prospect Medical Holdings from 2010 through 2021.

“LPG and PMH’s primary focus was on financial goals rather than on quality of care at their hospitals, leading to multiple health and safety violations as well as understaffing and the closure of several hospitals,” the report stated.

The report notes that eight of Prospect’s hospitals closed, during or after Leonard Green’s ownership.

Even with those failings, Leonard Green took home $424 million of the $645 million that Prospect paid out in dividends, leaving Prospect “in severe financial distress.” Prospect filed for bankruptcy over the weekend, listing debts of more than $400 million, CBS News reports.

Whitehouse assailed Leonard Green for cost-cutting and said the firm wasn’t focused on improving patient care.

“Private equity investors have pocketed millions while driving hospitals into the ground and then selling them off, leaving towns and communities to pick up the pieces,” Whitehouse said in a statement accompanying the report.

An Apollo spokesperson said in an email to Chief Healthcare Executive® that the report overlooks important facts, including its substantial investment in Lifepoint and its commitment to keep the system’s hospitals open.

“Apollo Funds have invested billions of dollars in Lifepoint and its predecessor companies, which has been used to improve facilities, expand local healthcare services, recruit care providers, build new centers of care and upgrade technology across Lifepoint’s network. Apollo Funds continue to support Lifepoint management’s emphasis on continuous improvements in quality of care, including at ORHC,” the Apollo spokesman said.

The Apollo spokesperson also noted that The Leapfrog Group and CMS Star Ratings point to gains in the quality of care at Lifepoint hospitals.

“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,” the spokesman said.

Prospect Medical Holdings told NBC News that it was disappointed in the Senate report, which the company said it was still reviewing.

“Prospect invested more than $750 million in its hospitals and provided more than $900 million in charity and uncompensated care to patients,” the system told NBC News. “That is the exact opposite of putting profits above patients.”

A request for comment from Leonard Green was not returned.

‘Bad news for patients’

Lawmakers in Massachusetts, including Sen. Elizabeth Warren, have lambasted private equity ownership of hospitals, citing the problems of hospitals owned by Steward Health Care.

Warren and other Massachusetts lawmakers noted a private equity firm, Cerberus Capital Management, owned several Massachusetts hospitals and sold their properties to Medical Properties Trust. Steward, which was formed by Cerberus, ended up paying millions in lease payments annually to Medical Properties Trust, and lawmakers said those lease payments worsened Steward’s financial woes.

Steward declared bankruptcy last year and sold most of its hospitals, but two Massachusetts hospitals closed their doors when Steward couldn’t find buyers.

Warren and fellow U.S. Sen. Edward Markey, a Massachusetts Democrat, sponsored legislation last year that would have imposed civil and criminal penalties on private equity firms if their hospitals were siphoned of resources or engaged in activities that led to patient deaths.

In a post on X Sunday, Warren said the Senate budget committee produced a "great report" and said she's going to continue pushing her legislation.

"Private equity companies are vampires, sucking out value from our health care system and funneling it to their investors. And patients suffer," Warren wrote.

Sen. Chris Murphy, a Democrat from Connecticut, blasted private equity ownership of hospitals in remarks on the Senate floor in September.

“The role of private equity and hedge funds and big banks in health care ownership is one of the most important stories in health care,” Murphy said. “And by and large, it’s bad news for patients.”

The JAMA study

A few days after the release of the Senate report, JAMA published a study finding that hospitals owned by private equity firms fared worse than other hospitals when it comes to patient care.

Researchers examined 73 hospitals owned by private equity firms between 2008 and 2019, and compared those facilities with 293 hospitals. The researchers also studied hospitals three years before they were acquired by private equity firms, and three years afterwards.

The researchers reviewed patient responses to the Hospital Consumer Assessment of Healthcare Providers and Systems survey. Patient ratings of hospitals dropped after those facilities were acquired by private equity firms, and they fell below the patient scores of other hospitals, the study found.

“In this national study, global measures of patient care experience worsened after private equity acquisition of US hospitals,” the authors of the JAMA study wrote. “Improving patient-centered care is a major policy priority, and these findings raise concerns about the implications of private equity acquisitions on patient care experience at US hospitals.”