Private Equity in Healthcare – PESP’s September 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 

Private equity drives up U.S. medical debt: report – Axios

• Axios reported on PESP’s recent medical debt report: “Private equity’s expanding role in billing, tracking and collecting payments for health care is exacerbating America’s medical debt problem, a new report from the Private Equity Stakeholder Project concludes.”
• “Why it matters: PE-owned “end-to-end” service providers squeeze consumers at both ends, pushing medical credit cards and installment payment plans while aggressively pursuing debt collection.”
• The private equity’s leading industry trade group picked up the report: No, Private Equity is Not Driving Medical Debt: Refuting Another Half-Baked Activist “Study”

Why we should be wary of private equity’s presence in healthcare – HealthCare Business News

• PESP Healthcare Director Mary Bugbee writes, “Private equity’s track record in healthcare is troubling, and healthcare executives, regulators, and other stakeholders should remain wary of private equity’s investments in healthcare companies.”
• See also: Doctors Organize to Push Back Against Private-Equity Takeovers – WSJ
• Labor’s perspective: AFL-CIO, Letter Opposing Consolidation and the Growing Role of Private Equity in Health Care

Examining the Bankruptcy of Steward Health Care: How Management Decisions Have Impacted Patient Care – U.S. Senate Committee on Health, Education, Labor and Pensions

• Ongoing coverage: Steward Health Care Crisis – Boston Globe
  • Timeline: Steward Health Care kept expanding, even as the situation at hospitals turned dire
  • Steward CEO could face prison time after rare Senate vote to punish him for flouting subpoena
  • Steward CEO Ralph de la Torre sues Senate committee following contempt of Congress charge
• PESP writeup: Senate HELP Committee holds hearing on Steward’s bankruptcy
• See also: PESP testimony to Senate HELP Committee regarding Steward Health Care bankruptcy
• Looking back: How a Private-Equity Payday Drained a Hospital Chain of Cash – WSJ
  • WSJ reported in September: “In 2016, Steward Health Care System paid out a $790 million dividend—the lion’s share going to the hospital chain’s private-equity owner, Cerberus Capital Management.”
  • “The dividend payment reduced Steward’s equity. At the start of 2016, Steward’s assets exceeded its liabilities by $131 million. At the end of 2016, its liabilities exceeded its assets by $910 million. Four years later, that deficit had grown to $1.5 billion, after the $408 million loss in 2020.”

Newsom Vetoes California Bill Against Private Equity Firms’ Health Care Takeovers – KQED

• KQED reports: “The proposed legislation would have empowered the state’s attorney general to review and veto deals garnered by private equity firms deemed bad for consumers and patients. It covered transactions involving public hospitals, health systems, physician groups and long-term care facilities operating in California.”
• “Private equity firms spend about $20 billion a year on health care transactions in California alone and $83 billion nationally. Physician practices are particularly appealing targets, with the number of transactions increasing sixfold over the past decade. While financial firms promise operational efficiency and management expertise, critics said the need for rapid returns — typically within three to seven years — could lead to aggressive cost-cutting measures.”

Foreign-Born Nurses Who Quit Their U.S. Jobs Face A Legal Nightmare – HuffPost

• HuffPost reports: “Renny is one of many foreign nurses who come to the U.S. and soon feel stuck in their jobs, thanks to what critics call “stay-or-pay” contracts.”
• “The agreements require workers to put in a minimum number of hours before leaving, or else they’ll have to pay back thousands of dollars the staffing firm says they owe for licensing, travel, housing and other expenses. The MedPro contracts viewed by HuffPost also include a mandatory arbitration clause.”
• MedPro is owned by Harren Equity Partners
• See also, from PESP: Profiting in Crisis: Exploring Private Equity’s Investments in Travel Nursing Admidst a Critical Nursing Shortage and a Pandemic

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

Blog Posts:

• Private Equity Health Care Acquisitions – August 2024
• Debt-funded dividend paid to Help at Home owners one year after state closure

 Other Mentions:

• PESP Healthcare Director Mary Bugbee spoke to the Guardian about booming private equity ownership of U.S. hospice centers: “Especially in the US, we have an ageing population with a chronic disease burden,” said Mary Bugbee, research and campaign director at the Stakeholder Project, which has also been critical of private equity’s actions in healthcare. “There’s a lot of demand and a lot of opportunities to make money.”
• The Lancet Infectious Diseases cited PESP’s May 2024 blog post on how private equity is acquiring hospitals in low- and middle-income countries with the help of development finance institutions