Examining the impact of hospital closures in Pennsylvania

On March 10, Pennsylvania Senate Democratic Policy Committee Chair Nick Miller convened a hearing at Neumann University to examine the consequences of hospital closures across Pennsylvania. The hearing, titled Healthcare Accessibility and Hospital Closure Impacts, brought together lawmakers, healthcare professionals, and policy advocates to discuss the growing crisis of hospital shutdowns and their effects on public health, economic stability, and community services. Among the key voices at the hearing was Mary Bugbee, Healthcare Research and Campaign Director at the Private Equity Stakeholder Project (PESP), who provided testimony on the negative impacts of private equity in Pennsylvania’s healthcare system.

The urgency of addressing hospital closures

Senator Miller underscored the hearing’s importance, particularly in light of the potential closure of Crozer Health, which would create a significant gap in healthcare access for local residents. “We must work together and explore the most effective ways to meet our healthcare needs, ensuring that all residents in the commonwealth are able to receive localized care from the communities that they live in,” said Miller.

Other lawmakers echoed these concerns. Senator John Kane specifically pointed to Prospect Medical Holdings, the former private equity-owned parent company of Crozer Health, as a major contributor to the crisis. “The predatory practices of Prospect Medical and private equity firms like it in healthcare have put both essential medical services and healthcare jobs at risk in our community,” Kane stated. He reaffirmed his commitment to legislative action to ban private equity firms from purchasing hospitals in Pennsylvania.

Senator Anthony Williams framed the potential closure of Crozer Chester Medical Center as a disaster for Delaware County, emphasizing that it would lead to a “dangerous healthcare desert” that jeopardizes both patients and healthcare workers. Meanwhile, Senator Amanda Cappelletti highlighted how corporate mismanagement and financial exploitation have forced many hospitals into closure, reducing access to life-saving care and increasing financial burdens on communities.

Mary Bugbee’s testimony: The private equity problem

Representing PESP, Mary Bugbee provided a detailed account of how private equity’s profit-seeking business model has played a central role in destabilizing Pennsylvania’s hospitals. Bugbee noted that private equity has invested over $1 trillion in U.S. healthcare over the past decade, with significant consequences for patients and healthcare workers.

According to Bugbee’s testimony, Pennsylvania has already experienced the closure of multiple private equity-owned hospitals, including Hahnemann University Hospital in 2019 and Delaware County Memorial Hospital in 2022. PESP’s research has identified at least 13 hospitals in Pennsylvania currently under private equity ownership, with even more that continue to struggle under the financial burdens imposed by previous private equity control.

She also pointed out how hospitals are not the only area where private equity is investing in the Pennsylvania health system. A recent report from PESP found that there were over 900 private equity-owned healthcare providers in Philadelphia and the surrounding region, including physical therapy, outpatient specialty care, and dental care. This number is likely an undercount.

Bugbee outlined several financial tactics characteristic of private equity firms that have directly contributed to hospital closures:

• High Leverage: Private equity firms often load hospitals with excessive debt through leveraged buyouts, diverting funds away from patient care to cover interest payments and investor dividends.
• Sale-Leaseback of Real Estate: These transactions provide quick cash to private equity firms but leave hospitals burdened with expensive lease obligations, making them financially vulnerable.
• Debt-Funded Dividends: Some firms extract money from hospitals through dividend recapitalizations, leaving healthcare facilities saddled with unsustainable debt while investors profit from dividend payments.

“The private equity business model amplifies the profit-seeking behaviors that put patients and healthcare workers at risk,” Bugbee stated. She highlighted that in 2024 alone, 21% of healthcare bankruptcies involved private equity-owned companies, with 7 out of the 8 largest bankruptcies directly linked to private equity mismanagement.

“Investment is a misnomer because a lot of what we’re seeing is extraction. It’s not truly investment,” she said.

Policy solutions and next steps

Panelists and lawmakers agreed that urgent policy interventions are needed to prevent further hospital closures and protect healthcare accessibility in Pennsylvania. Among the proposed solutions:

• Stronger regulatory oversight to prevent private equity firms from exploiting healthcare facilities for short-term gains.
• Increased financial transparency for private equity-owned hospitals to ensure accountability.
• Legislation to ban private equity acquisitions of hospitals, as proposed by Senator Kane.

Executive Deputy Secretary of the Pennsylvania Department of Health, Kristen Rodack, reinforced that hospitals should not be treated as financial assets to be bought and sold. “These providers cannot be a pawn in a for-profit buy, sell, lease system as we’re seeing – the ramifications are too serious on real people’s lives and livelihoods,” she said.

A call to action

The hearing shed light on the devastating impact of private equity’s impacts in Pennsylvania’s healthcare system. As hospitals close and access to care dwindles, state legislators are facing increasing pressure to enact reforms that will safeguard communities from further harm.

PESP will continue to advocate for policy solutions that hold private equity firms accountable and prioritize the health and well-being of Pennsylvanians over corporate profits.