Modern Healthcare: Studies show less staffing, more surprise bills after private equity takeovers

Modern Healthcare investigated private equity’s growing presence in the healthcare sector, uncovering several examples of private equity firms “eliminating less profitable service lines after buying providers.”

Modern Healthcare, November 16, 2021: Studies show less staffing, more surprise bills after private equity takeovers

Examples include:

• Private equity has paid tens of millions of dollars to settle allegations that it fraudulently oversold products or services, including to the government.

• Getting care from a private equity-owned nursing home meant Medicare patients were 10% more likely to die in the first three months.

• Average staffing levels decreased and use of antipsychotic drugs (which has been shown to increase mortality among geriatric patients) increased.

• Taxpayers paid 11% more for their care compared with facilities that weren’t owned by private equity firms.

• Nursing home chain Golden Living made cuts to staffing after its 2006 acquisition by private equity firm Fillmore Capital Partners.

• Pennsylvania’s attorney general sued Golden Living in 2015 alleging the company used deceptive conduct to lure seniors to its facilities and then provided substandard care.

• Private equity-owned hospitals charged more than their non-private equity-owned peers relative to their costs and had lower staffing ratios.

• Out-of-network rates spiked more than 80 percentage points after EmCare, part of Envision Healthcare, took over the management of emergency services at hospitals with previously low out-of-network rates.

Private Equity Stakeholder Project Healthcare Research coordinator Eileen O’Grady told Modern Healthcare that there is only so much savings that can be squeezed from creating efficiencies and boosting compliance, and it’s typically not enough to generate the kind of returns private equity firms are seeking.

“There are very few levers in nursing homes that private equity firms have to achieve returns just given the structure of these services and the payment structures of Medicare,” O’Grady said. “Most of what they can do is cut expenses. And the No. 1 expense at nursing homes is staff.”

Modern Healthcare reported that these findings show “it’s not just private equity’s increased presence in healthcare that’s drawing the Justice Department’s attention. Rather, the tactics firms have been shown to use—cutting staff, for example—could lead to fraudulent activity.”

O’Grady said, “I think the DOJ beginning to look at the relationships between private equity’s business model and fraudulent activity makes a lot of sense.”

See related reports written by O’Grady:

Money for Nothing: How Private Equity has Defrauded Medicare, Medicaid, and Other Government Health Programs, and How that Might Change

Dividend Recapitalizations in Health Care: How Private Equity Raids Critical Health Care Infrastructure for Short Term Profit

Pulling Back the Veil on Today’s Private Equity Ownership of Nursing Homes