Stat: Private equity, healthcare, and profits: It’s time to protect patients

Stat reported how it is essential to closely monitor potential fraud by private equity firms that are “further encroach[ing] upon the health care industry” so that “patients’ best interests are protected and prioritized.”

Stat, March 24, 2022: Private equity, health care, and profits: It’s time to protect patients

According to Stat, “when private equity buys a health care company, patients often pay the price. A 2021 study concluded that private equity ownership increases the short-term mortality of nursing home residents by 10%, which represents more than 20,000 lives lost during a 12-year period, likely due to lowered nursing-staff-to-resident ratios and the diversion of patient care funding to private equity owners. An investigation by USA Today and Newsy found that when private equity firms acquire an interest in dental practices treating Medicaid patients, often children, those practices tend to incentivize dentists to increase the volume of procedures, regardless of medical necessity.”

Citing the Private Equity Stakeholder Project’s report “The Kids Are Not Alright: How Private Equity Profits Off of Behavioral Health Services for Vulnerable and At-Risk Youth,” Stat shared the report’s conclusions that expansion of these companies into behavioral health services for vulnerable and at-risk youth has led to safety issues, quality of care issues, and even “horrific conditions” when short-term profits trump other considerations.

The article also observed, “Private equity investments often involve raising substantial amounts of debt financing to obtain a controlling interest in a company, secured by that company’s assets, which can leave the operating company with a significant debt burden on its cash flow that increases the risk of a future bankruptcy.

“The combination of leveraged investments in companies with the one-sided performance fee that rewards private equity firms for profitable investments but does not penalize them for unprofitable ones creates a distorted structure that incentivizes these firms to select risky investments and to operate them in a risky fashion.”