Over the last decade, the private equity industry has been on a massive shopping spree, taking over toy stores, restaurant chains, clothing stores, you-name-it — and too often leaving the businesses a shadow of their former selves, even bankrupt. The pandemic only jet-fueled the momentum: 2022 was the biggest year in the industry’s history, followed by a record-breaking 2021. According to industry tracker PitchBook, in 2021 alone these firms invested $206 billion into over 1,400 health care acquisitions.
With private equity’s aggressive entry into medicine, this is no longer about squeezing profits from shoe stores. This is about human life.
Firms that much of the public has never heard of, with names like KKR, Shore Capital Partners, and TPG, have set their sights on a broad range of healthcare businesses, from orthopedic practices to hospices to addiction treatment centers. They’re gobbling up emergency rooms, ambulatory surgical centers, even entire hospitals. Physician owners of private medical practices find themselves wooed by sweet-sounding deals when private equity comes calling, and those worn out by the financial challenges of owning a practice, or reaching retirement age, or just plain greedy find them hard to resist.
Private equity firms argue that they bring value to health care through better management techniques and investment in newer technologies. But critics say their presence is nothing more than money-driven medicine on steroids, pointing out that the private equity business model is particularly ill-suited for health care, when human lives hang on the balance sheet. In order to squeeze greater profits from businesses, say the critics, private equity firms cut corners in dangerous ways, like reducing staff or replacing physicians with less qualified personnel.
Critics also charge that federal regulators are practically blind to what is happening. Because many state laws restrict the corporate practice of medicine, private equity firms have become clever in how they structure takeovers so that the firm does not acquire a practice or facility outright, but instead buys a majority interest, often flying below the radar of regulators.
The stakes are high, and studies on the impact of private equity on health care are far from comforting. Research published in the JAMA Health Forum shows that private equity acquisitions of medical practices result in more lengthy and costly care for patients as well as reduced access to services. A 2021 working paper from the National Bureau of Economic Research found that entering a nursing home owned by private equity increases your chances of dying by 10%.
Every day, the private equity takeover of medicine impacts more people – more doctors, nurses, and medical staff. More human beings who depend on them for health and life. One thing seems clear: private equity executives with MBAs may know little about medicine, but they are determined to profit from your body, cradle to grave – literally: they’re even getting into funeral homes.
So, is anybody fighting back? The answer is yes: increasingly, doctors themselves are challenging an industry they say has forced them to violate their ethics.
When the pandemic struck, Dr. Ming Lin was on the front lines as an emergency physician at PeaceHealth St. Joseph Medical Center in Bellingham, Washington. But when he spoke out about the need for Covid safety measures like masking, improving ventilation, and limiting visitors, he was fired from a position he had held for 17 years. TeamHealth, a corporation which contracts with hospitals to staff emergency rooms (and is owned by the Blackstone Group, a private equity firm), offered to find Lin a new position in another state, or lower-paid, part-time work, but Lin found these conditions unacceptable for him and his family. He initiated a lawsuit in 2020 for wrongful termination against PeaceHealth and TeamHealth. The case is still pending. (...)
Lynn Parramore: How did you become concerned about private equity in health care?
Ming Lin: I noticed the problem of private equity growing gradually over the last 10 to 15 years. It all started slowly. I’d say to myself, “Oh, we can’t admit this patient because the hospital says it’s not financially viable.” Or maybe we would be told to find a way to get rid of a patient.
In the past, doctors would have been making the decisions about who should and shouldn’t be admitted. But when a private equity company has a contract with the hospital, they will make the rules and you either follow them or you’ll be terminated. It forces doctors into a position where you have to tell the patient, well, sorry, your hospitalization may not be paid for, it may cost you a lot of money. I’ve seen that private equity and corporate-driven medicine is not just dangerous, it’s costly to patients who are confronted with things like surprise billing. Private equity-controlled practices are also known to sue patients. And if the hospital or practice you work for is under the control of a private equity company, you can’t speak out about these dilemmas. (...)
LP: Why did you go into medicine in the first place? Why did you want to become a doctor?
ML: I went into medicine because I enjoy helping people. I enjoy helping to solve their problems. I particularly liked emergency medicine because they treat everybody the same. When financial considerations come into the emergency room, it makes it very difficult for me to treat everybody the same.
LP: So you feel you’re being asked to go against your value system, your medical ethics?
ML: Yes, it’s a real moral dilemma for a lot of people, including myself. I’ve had to tell patients I feel should be admitted that their hospitalization may cost 10k as their insurance may not authorize their stay. Or I’ve been asked to let mentally unstable, suicidal patients leave because we were not authorized to detain them for a more thorough evaluation. Over the years I have had more and more patients tell me about the exorbitant bills they have received on visits to the emergency room – we’re talking several thousand dollars for the application of some glue to a half inch wound.
Disturbingly, this exorbitant billing was done unbeknown to me. Unlike hospitals and insurance companies, private equity companies can hide behind the physician and not absorb any of the outcry over such fraudulent profiteering.
LP: Would you say there is an atmosphere of fear among physicians who are afraid to speak out?
ML: Absolutely. There are so many physicians who are afraid to speak out. In many cases, when they do they feel they have to do so anonymously.
by Lynn Parramore, Naked Capitalism/Institute for New Economic Thinking | Read more:
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[ed. See also: Private Equity is Out of Control and Looting America. This Prosecutor Says We Can Fix It. (INET); and, The Moral Crisis of America’s Doctors (NYT).]
[ed. See also: Private Equity is Out of Control and Looting America. This Prosecutor Says We Can Fix It. (INET); and, The Moral Crisis of America’s Doctors (NYT).]
