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Private Equity in Healthcare – PESP’s January 2025 Roundup

February 4, 2025

Each month, PESP’s Healthcare Team will be putting together a roundup that shares the latest news stories related to private equity in healthcare and highlights the work that our team has published in the last month.

In the news

Bipartisan US Senate investigation exposes harms of private equity hospital ownershipPESP

  • On January 7, the US Senate Budget Committee released the findings of a year-long investigation of private equity ownership of hospitals. The report, titled “Profits Over Patients: The Harmful Effects of Private Equity on the U.S. Health Care System,” documents a harrowing pattern of private equity firms prioritizing profits at the expense of patient care and calls for greater oversight to address those harms.
  • Case studies examine two private equity-owned hospital companies: Prospect Medical Holdings, which was owned by Leonard Green & Partners between 2010-2021, and Lifepoint Health, which has been owned by Apollo Global Management since 2018.
  • As part of the investigation the Committee reviewed over a million pages of documents related to the two companies, including emails, meeting minutes, financial statements, and loan agreements.
  • The investigation also substantially relies on research by Private Equity Stakeholder Project (PESP), including research reports on Prospect and Lifepoint as well as PESP’s Private Equity Hospital Tracker, which the report cites as one of the only publicly available sources tracking private equity hospital ownership.

Prospect Medical Holdings files for bankruptcy – Axios & Healthcare Dive

  • Prospect Medical Holdings filed for Chapter 11 bankruptcy on January 11. As reported by HealthcareDive, the bankruptcy follows “years of financial difficulties and escalating pressure from state and federal regulators over its operating practices. The health system declared $1 billion to $10 billion in both assets and liabilities and said it had more than 100,000 creditors in its initial court filing.”
  • Prospect operates 16 hospitals in California, Connecticut, Pennsylvania, and Rhode Island. Between 2010 and 2021 Prospect was owned by Los Angeles-based private equity firm Leonard Green & Partners.
  • The bankruptcy comes less than a year following Steward Health’s bankruptcy, which was formerly owned by private equity. “It’s very similar to what occurred with Steward,” Healthcare Research and Campaign Director Mary Bugbee told Axios. “There were financially extractive business practices that were used that stripped value from the hospital system and loaded it with debt, and put the system in a pretty bad place financially.”
  • “Prospect and Steward are not outliers — they are part of a trend in which over-leveraged private equity-owned healthcare companies are going under, with long lasting impacts on our nation’s healthcare infrastructure,” Bugbee told Healthcare Dive.
  • See here for PESP resources since 2020 on Prospect Medical Holdings and Leonard Green & Partners.

Massachusetts passes healthcare oversight legislation in response to Steward Health Care crisis –  PESP

  • House Bill 5159, “An Act Enhancing the Market Review Process” was signed into Massachusetts state law, increasing transparency and oversight of healthcare providers that participate in the Commonwealth’s health system – and importantly – their investors.
  • The new law also expands the amount of and types of information these entities may need to provide to regulators both routinely and upon request. It also may make it easier for the AG to pursue claims against private equity investors in False Claims Act (i.e. Medicare/Medicaid fraud) lawsuits.
  • The prohibition on sale-leasebacks of acute care hospital real estate is the first of its kind, and it is one of the few instances in which state legislators have moved to prohibit a harmful private equity business practice versus simply to increase transparency around it.
  • The bill brings additional transparency to state healthcare infrastructure, but will not stop profiteering entirely. Healthcare Research and Campaign Director Mary Bugbee was quoted in the Boston Globe: “There’s an avoidance of actually going after the business practices themselves that we know really have only an extractive role in health care,” such as debt-funded dividends paid to investors and debt-funded acquisitions of healthcare facilities.

HHS releases report on PE consolidation in healthcare marketsPESP

Growth of Private Equity and Hospital Consolidation in Primary Care and Price ImplicationsJAMA Health Forum

  • An original investigation published in JAMA Health Forum examined the trends in hospital and private equity affiliation of primary care physicians and their association with prices paid for physician services.
  • The cross-sectional study included 198,097 primary care physicians (PCPs) in 2022, nearly half which were hospital-affiliated. PE-affiliated physicians were growing and concentrated in certain regional markets.
  • The study found that, relative to independent primary care physicians, negotiated prices for office visits were 11% higher for hospital-affiliated and 8% higher for PE-affiliated primary care physicians, meaning hospital- and PE-affiliated physicians had higher prices for the same services.

Healthcare team’s latest blogs, reports, and media mentions 

Blog Posts:

 

PESP healthcare news and mentions:

  • The New Mexico Political Report cited PESP’s Private Equity Risk Index while reporting on a bill expected to be filed this session aimed at providing oversight of private equity investment in New Mexico healthcare.
  • PESP’s Director of Programs, Eileen O’Grady, was quoted in NC Health News in an article about the sale of a physical therapy provider to a private equity-backed company.
  • PESP’s Healthcare Director, Mary Bugbee, was quoted in The Boston Globe in an article about Massachusetts’ new state law taking aim at private equity in healthcare, as well as a CT NPR story looking at state and federal responses to PE in healthcare. She was also quoted in HealthcareDive and Axios coverage of Prospect Medical Holdings’ Chapter 11 bankruptcy.

 

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