Private equity's purchases have included rural hospitals, physicians' practices, nursing homes and hospice centers, air ambulance companies and health care billing management and debt collection systems. Partly as a result of private equity purchases, many formerly doctor-owned practices no longer are. The American Medical Association recently reported that was the first year in which more physicians were employees — In , In some parts of the health care industry, private equity firms dominate.
For example, TeamHealth, owned by Blackstone, and Envision Healthcare, owned by KKR, provide staffing for about a third of the country's emergency rooms. This has been a seismic shift. During the s, most hospitals were owned either by nonprofit entities with religious affiliations or by states and cities, with ties to medical schools.
For-profit hospitals existed, but it wasn't until recently that they became nearly ubiquitous. For the past 20 years, private equity has been a source of immense wealth for the executives overseeing the entities.
Most of those who head major private equity firms are reported to be billionaires, like the two men atop Blackstone: Stephen Schwarzman, a close adviser to President Donald Trump, and Hamilton "Tony" James, a major donor to Democrats. The impact private equity has had on employees and customers of the companies it has taken over, however, isn't always beneficial.
To finance the purchases, private equity owners typically load the companies they buy with debt. Then they slash the companies' costs to increase earnings and appeal to potential buyers down the road. In the business of health care, the drive for profits can run counter to the goal of helping patients and protecting workers, critics say.
Research shows, for example, that when private equity firms acquire nursing homes, the quality of care declines markedly. And when COVID hit, hospitals associated with private equity firms were early to cut practitioners' pay and benefits because the operations could no longer generate profits on elective surgical procedures postponed during the pandemic.
The heavy debt loads typically associated with private equity-owned businesses hinder their ability to withstand profit downturns. Finally, some medical professionals say, private equity's growing involvement in health care in recent years has contributed to shortages of ventilators, masks and other equipment needed to combat COVID, because keeping such goods on hand costs money. And to private equity, that's like putting dollar bills on a shelf. Private equity firms have jumped into health care with both feet.
Warburg Pincus, overseen by former Treasury Secretary Timothy Geithner, owns Modernizing Medicine, an information technology company that helps health care providers ramp up profits through medical billing and, to a lesser degree, debt collections. The Carlyle Group owns MedRisk, a leading provider of physical therapy cost-containment systems for U.
Private equity's laser focus on cost cutting and operational efficiencies can benefit consumers, economists say, if lower costs are passed on to end users. Problems arise, however, when the push for profits reduces quality.
That can be especially harmful in health care, in which patients' lives are on the line and it is difficult for consumers to comparison shop by analyzing quality of care.
Full coverage of the coronavirus outbreak. Mark Reiter is residency program director of emergency medicine for the University of Tennessee and past president of American Academy of Emergency Medicine, an advocacy group for practitioners. Representatives of every firm identified in this article declined to respond to broad criticisms of private equity in the health care arena. As for PeaceHealth St. Joseph Medical Center, spokeswoman Bev Mayhew said it removed Ming Lin from the emergency department rotation because "his actions were disruptive, compromised collaboration in the midst of a crisis and contributed to the creation of fear and anxiety among staff and the community.
A TeamHealth spokesman said it continues to employ Lin and had offered to place him "in another contracted hospital anywhere in the country. Private equity firms have targeted health care investments for an array of reasons, most having to do with their potential profits. First, health care drives a huge part of the nation's economic output — almost 20 percent of gross domestic product.
In addition, health care is a fragmented business with many small operators like physicians; private investors often find outsize gains in industries in which they can create economies of scale through consolidation. Ever on the hunt for efficiencies, private equity has brought changes to traditional health care practices, experts say.
One example: the use of so-called physician extenders, like nurse practitioners, to see patients instead of actual doctors. Compliance-grade data based on 20 years of research, quality assurance, and 1st-party sourcing, processed and verified through our proprietary algorithms and clinical feedback loop. Healthcare provider and facility data, managed data services, and platforms helping organizations drive better outcomes and greater efficiency.
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