KSFR interview: PESP on PE in NM hospitals

New Mexico ranks highest in private equity ownership of private hospitals

In a recent interview with KSFR Radio in Santa Fe, New Mexico, Eileen O’Grady, former Director of Programs at PESP, shared concerns about the growing influence of private equity firms in the healthcare sector. New Mexico now leads the nation in the percentage of hospitals owned by private equity. 

Private equity’s investment in healthcare has accelerated over the past 5 years. Today, private equity is investing in virtually every aspect of the healthcare industry. Eileen noted that currently, almost 1 in 10 hospitals across the country are owned by private equity, most of which are safety net hospitals. In New Mexico, 17 private hospitals, which are hospitals not owned or operated by a government entity, are owned by private equity, representing more than 30% of the private hospitals in the state. 

Eileen stated that the most important thing to remember is that private equity’s goal is to double or triple its investment in a relatively short period of time, typically 4 to 7 years. To do that, these firms prioritize cutting costs. In healthcare, this often manifests as cutting staff, filling beds without proper staff-to-patient ratios, skimping on staff training, and reducing services that are less profitable, as we have seen in pediatric care or OBGYN care. 

These tactics can leave hospitals financially vulnerable, potentially leading to instability, closures, or even bankruptcy. Eileen stated that this is a significant issue for states like New Mexico, which already grapple with limited access to medical professionals and adequate care, and an aging population. 

The PESP Private Equity State Risk Index uses key indicators that reflect the risks that private equity poses to workers and jobs, state healthcare systems, housing availability, and the security of state pensions in each state. New Mexico’s overall risk score is 100. PESP remains focused on educating the public and policymakers about the risks associated with the growing trend of private equity in healthcare, advocating for greater transparency and oversight.