Private Equity in Healthcare – PESP’s May 2024 Roundup

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

Steward Health Care bankruptcy puts Cerberus Capital and MPT in the spotlight

• Steward Health Care, which was owned by Cerberus Capital Management between 2010-2021, filed for bankruptcy with $9 billion in debt.
• In “The Private-Equity Deal That Flattened a Hospital Chain and Its Landlord,” Jonathan Weil of the WSJ writes that Cerberus’ exit culminated in “one of the biggest hospital bankruptcies in U.S. history. It battered the landlord, Medical Properties Trust, which is one of Steward’s biggest creditors and has been selling off assets before big debt payments came due.”
• In “One of the Biggest Hospital Failures in Decades Raises Concerns for Patient Care,” WSJ highlights the role regulators may play in the bankruptcy proceedings: “Regulators weigh in on bankruptcies directly, in court filings, but also seek to use their own authority to make demands on restructuring plans for distressed hospitals, including blocking a sale or putting conditions on buyers.”
• In “A Hospital Heist Seeks Protection in the Ponzi-Friendliest Court in America,” Moe Tkacik of American Prospect describes the “notoriously ‘debtor-friendly’ Southern District of Texas bankruptcy court,” which is overseeing the Steward case.
  • The Houston-based “complex case panel” in Texas’s Southern District has also seen the bankruptcies of private equity-owned Pipeline Health and Corizon/YesCare.

States strengthen defense against private equity healthcare deals – Modern Healthcare

• Modern Healthcare reports on the growing number of sates considering legislation that reins in private equity in healthcare, including Massachusetts, Rhode Island, California, and Indiana.
• “Over the past two years, more than a dozen states have passed laws bolstering healthcare merger and acquisition notification and financial disclosure requirements, in some cases requiring clearance from state attorneys general when corporate investors are involved. New legislation is poised to further limit healthcare mergers and acquisitions, particularly smaller deals that fall outside of the Federal Trade Commission’s review process.”

New study examines scope of private equity investment in behavioral health

• A new study published in JAMA Psychiatry examines the breadth and geographic presence of private equity in mental health and addiction treatment.
• The study found “642 mental health clinics and 1,152 clinics treating substance use disorders that had undergone private equity acquisition over that period, as of last year, constituting 6.2% of all mental health facilities and 7.1% of addiction treatment facilities nationwide. In Colorado, Texas and North Carolina, the proportion of private equity-owned practices accounted for roughly a quarter of all facilities providing mental health treatment.”
• The study’s lead author Jane Zhu, M.D. said in an interview: “Private equity ownership of outpatient behavioral health clinics is very, very high in some states. Given those high rates of penetration, it points to behavioral health as an area that needs attention from policymakers.”

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

Blog Posts:

• Private equity healthcare acquisitions – April 2024
• Private equity’s hospitals in low- and middle-income countries
• Private equity-owned hospice company agrees to pay $4.2 million settlement

Other Media Mentions:

• Senior Coordinator Mary Bugbee was interviewed about the Steward Health Care bankruptcy by CBS Mornings and Boston 25 News. The Enterprise cited PESP’s acquisitions data in its coverage of Steward Healthcare.
• STAT News cited PESP in its reporting on private equity ownership of wheelchair suppliers.
• PESP’s research on healthcare bankruptcies was cited by Fortune, Consumers for Quality Care, and Health Leaders (here and here).
• Axios cited PESP’s 2022 report on home health and hospice.
• Becker’s ASC Review’s 10 things to know about private equity in healthcare cited PESP’s healthcare bankruptcy and acquisitions data.