HOW PRIVATE EQUITY VULTURES HAVE CORRUPTED U.S. HEALTH CARE Part 2

This is the third in a series of posts on how the U.S. health care system has been privatized so profits rather than patients have become the priority. The result is a system with very high costs and poor outcomes because there’s a fundamental conflict between caring for patients and maximizing return for investors. The first post in this series presented an overview of the for-profit U.S. health care system. The second one and this one focus on the role of the extreme capitalism of private equity firms.

(Note: If you find my posts too long to read on occasion, please just skim the bolded portions. They present the key points I’m making. Thanks for reading my blog!)

In addition to buying hospitals (see this previous post), private equity (PE) firms have also been heavily involved in providing outsourced, contracted staffing for hospitals and emergency room services. Not surprisingly (given the PE business model), two large PE-owned medical staffing providers have filed for bankruptcy this year, creating health care chaos. In May, Envision Healthcare filed for bankruptcy with $7.7 billion in debt. In September, American Physician Partners (APP) filed for bankruptcy. It had 160 contracts providing emergency room, hospital, and/or intensive care staff and services to healthcare providers. Those contracts involved over 2,500 physicians plus other staff at over 100 sites in 29 states. In less than three months, it shut down those 160 contracts and let go or transitioned those thousands of health care staff. [1] The bankruptcy revealed, among other things, that between 2018 and 2023 APP had underpaid eight physicians by a total of $14 million. [2]

As part of the chaos of these two bankruptcies, many of the firms’ hospital and emergency room physicians either lost up to two months of pay for work they had performed or received it a month or two late. Lapses in essential employer-paid malpractice insurance coverage were also a major issue for physicians. For clinicians who were not U.S. citizens, which were a third of staff at some locations, their work visas are valid only with a specific employer. When their employer changed because of the bankruptcy, their visas became invalid and had to be transferred to a new employer, a process that takes more time than the notice some of the staff were given. One doctor noted that her emergency room practice had experienced four ownership transitions in her 13 years at the trauma center of a major hospital in Illinois.

One notable patient impact of private equity firms’ ownership of medical staffing companies is the occurrence of surprise billing. This occurs when a patient with insurance gets a surprise (often quite large) bill because they unknowingly got treatment from a medical professional who was not part of their covered network of providers. The classic case of this is a patient who goes to the emergency room in a hospital in the network covered by their health insurer. While there, the patient gets treated by a physician who is an employee of a third-party medical staffing company owned by a PE firm. This physician is outside the patient’s approved network, so he or she gets billed by the PE firm for whatever it wants to charge for the physician’s services.

PE firms and their fake grassroots advocacy groups like Doctor Patient Unity have spent millions of dollars on campaign contributions, lobbying, and advertising campaigns to block regulation of their health care practices and billing. For example, until 2019, they were successful in blocking regulation of surprise out-of-network billing of patients for PE firms’ employees. Their success was in part due to their campaign contributions of at least $32,700 and $63,600 respectively to two key members of the U.S. House, Richard Neal (D-MA) and Kevin Brady (R-TX), who were the leaders of the powerful Ways & Means Committee. When a ban on most surprise billing was finally enacted, it exempted ground ambulances and public payers.

To avoid regulation, some PE firms have focused on segments of the health care system that lack clinical standards and strong government oversight, such as nursing homes and eating disorder and autism treatment facilities. PE firms bought nursing homes early in the 2000s and then largely abandoned them after extracting all the profits they could. They typically left behind financially struggling facilities, which were, not coincidentally, where more than one-fifth of all Covid deaths occurred, affecting both patients and staff. [3]

In conclusion, private equity firms buy health care providers because they can generate big short-term profits. PE firms drastically cut costs, push to maximize revenue (sometimes illegally), and manipulate real estate and other assets to maximize their return. Patient outcomes are not a concern.

For-profit health care dangerously incentivizes denials of care and other practices not in patients’ best interests. There is a fundamental conflict between caring for patients and maximizing return for investors. [4] The private equity business model should have been regulated out of business years ago. In particular, PE firms should never have been allowed to buy pieces of the health care system.

I urge you to contact President Biden and your U.S. Representative and Senators to ask them to ban private equity firms from our healthcare system. Furthermore, ask them to regulate the PE business generally to eliminate its harmful and unproductive extreme capitalism practices.

You can email President Biden at http://www.whitehouse.gov/contact/submit-questions-and-comments or you can call the White House comment line at 202-456-1111 or the switchboard at 202-456-1414. You can find contact information for your US Representative at  http://www.house.gov/representatives/find/ and for your US Senators at http://www.senate.gov/general/contact_information/senators_cfm.cfm.

[1]      Muoio, D., 9/20/23, “Hospital, ED staffer American Physician Partners files for Chapter 11 bankruptcy,” Fierce Healthcare (https://www.fiercehealthcare.com/providers/hospital-ed-staffer-american-physician-partners-files-chapter-11-bankruptcy)

[2]      Tkacik, M., 7/29/23, “Shock treatment in the emergency room,” The American Prospect (https://prospect.org/health/2023-07-29-shock-treatment-emergency-room/)

[3]      Goozner, M., Nov./Dec. 2023, “How America bungled the pandemic,” Washington Monthly (https://washingtonmonthly.com/2023/10/29/how-america-bungled-the-pandemic/)

[4]      Tkacik, M., & Dayen, D., 7/31/23, “A sick system,” The American Prospect (https://prospect.org/health/2023-07-31-sick-system-business-health-care/)