Senate Budget Committee launches investigation of PE hospital ownership

Senate Budget Committee chair, Sheldon Whitehouse (D-RI), and co-chair, Chuck Grassley (R-IA) have announced that they are launching a bipartisan investigation into the impacts of private equity ownership of hospitals.

Alongside the announcement of the investigation, the Senators sent joint letters to two private equity firms that own hospital systems: Apollo Global Management, which owns rural hospital chains Lifepoint Health and ScionHealth, and Leonard Green & Partners, which owned safety net hospital chain Prospect Medical Holdings.

“As private equity has moved into health care, we have become increasingly concerned about the associated negative outcomes for patients,” Chairman Whitehouse said in a statement announcing the investigation. “From facility closures to compromised care, it’s now a familiar story: private equity buys out a hospital, saddles it with debt, and then reduces operating costs by cutting services and staff—all while investors pocket millions. Before the dust settles, the private equity firm sells and leaves town, leaving communities to pick up the pieces.”

As part of the investigation, the Senators are asking Apollo and Leonard Green a series of questions about financial arrangements that allowed the firms to extract money from the hospital systems they own. “The American people deserve to understand the potential impact of private-equity firms in the delivery of their health care,” the letters state.

PESP has written extensively about the PE firms and hospitals at the center of the Budget Committee investigation, including publishing research that found for the first time that Leonard Green & Partners siphoned hundreds of millions of dollars from Prospect in debt-funded dividends, sold almost all the real estate, and left its hospitals across the country in dire straits.

This is not the first time members of Congress have sent letters like this. Following publication of PESP’s initial investigations into Leonard Green’s raiding of Prospect, Representatives Katie Porter (D-CA), Lloyd Doggett (D-TX), Rosa DeLauro (D-CT), Mary Gay Scanlon (D-PA), and David Cicilline (D-RI) in 2020 sent multiple letters (also here) to Leonard Green raising concerns about its ownership of Prospect, particularly about the dividends it collected from Prospect despite declining conditions at Prospect hospitals.

Leonard Green’s reply to the representatives assured them that they had nothing to worry about: “We can assure you with firm, empirical confidence that Prospect remains well-capitalized with adequate liquidity and resources for its staff to address the current COVID-19 epidemic.”

In the wake of Leonard Green’s ownership, Prospect’s hospitals are facing acute financial distress. In Pennsylvania, Prospect has laid off hundreds of workers, shuttered its Delaware County hospital, and eliminated maternity care and hospice services. Its Connecticut hospitals reportedly owe millions to vendors and contract physicians, as well as $1.67 million in back taxes and interest to the state.[1] And in November, Rhode Island Attorney General Peter Neronha filed suit against Prospect for allegedly violating a series of conditions it committed to as part of Leonard Green’s sale of the hospitals, including failing to ensure that vendors serving the hospitals are paid on a timely basis and failing to provide notice of regulatory investigations.[2]

See the Senators’ letters here:

• Grassley, Whitehouse Letter to Apollo Global Management Inc.
• Grassley, Whitehouse to Leonard Green & Partners, L.P., Prospect Medical Holdings, Inc. and Medical Properties Trust, Inc.

See selected media coverage of the Budget Committee letters and investigation:

• NBC, “Senators launch bipartisan probe of private equity’s growing role in U.S. health care”
• Bloomberg, “Private Equity Is Under a Congressional Probe Over Hospital Failures”
• CBS, “Senators probe private equity hospital deals following CBS News investigation”
• STAT, “Senate committee launches bipartisan investigation into private equity ownership of hospitals”

See more of PESP’s work on Prospect, Lifepoint, and private equity hospital ownership:

• PESP Private Equity Hospital Tracker
• How private equity raided safety net hospitals: Pipeline Health (July 2023)
• Private Equity Descends on Rural Healthcare (January 2023)
• How Private Equity Raided Safety Net Hospitals and Left Communities Holding the Bag (November 2022)
• Private Equity Firms Reap Payouts After Hospital Chain Received $1.6 Billion in CARES Act Support (September 2021)
• Broken Promises: Regulators Question Leonard Green’s Investment in Prospect Medical Holdings (July 2020)
• UPDATE: Leonard Green-led ownership collected $658 million in dividends and fees from Prospect Medical Holdings despite challenges, commitment to regulators to forgo dividends (May 2020)
• Raiding the Safety Net: Leonard Green & Partners Seeks to Walk Away from Prospect Medical Holdings after Collecting $570 Million in Fees and Dividends (February 2020)

[1] Mary Bugbee, “Prospect safety net hospitals continue to struggle under the legacy of Leonard Green’s past ownership,” Private Equity Stakeholder Project, November 8, 2023. https://pestakeholder.org/news/prospect-safety-net-hospitals-continue-to-struggle-under-the-legacy-of-leonard-greens-past-ownership/

[2] Office of Attorney General Peter Neronha, “Court unseals Attorney General’s lawsuit against owners of Fatima and Roger Williams to enforce HCA conditions,” November 17, 2023. https://riag.ri.gov/press-releases/court-unseals-attorney-generals-lawsuit-against-owners-fatima-and-roger-williams