Private Equity Is Piling Into Health
Hey, it’s Anna in Virginia. Private equity piled records amount of money into health-care companies last year. As you might suspect, that’s not great news for patients. But first...
In the last month or so, I’ve noticed several stories about private equity firms getting into a wide array of health care from autism therapy to ophthalmology. None of them paint a flattering picture: Prices almost always go up and the quality of care almost always goes down.
The most devastating article I’ve read recently, from the New Yorker, tells the story of a once idyllic and well-run nursing home that was bought out by private equity during the pandemic. The result? There was a Covid outbreak at the home after the new company slashed staff numbers, and residents died.
STAT News looked at the quality of autism care as private equity invested more and more money into centers that specialize in that kind of treatment. Parents said their kids suffer now as a result of cookie-cutter approaches and pressure to take part in more services than they had before. Kaiser Health News published its latest piece last week in a series on rural hospitals that were bought with private equity money and then closed, leaving two Missouri communities without close-by care.
Private equity investment in health care isn’t new. My colleague John Tozzi wrote in 2018 about devastating air ambulance bills as a result of private equity ownership. Sabrina Willmer also wrote for Bloomberg in 2019 about children who died after an at-home nursing company was taken over by private equity.
None of this negative attention has slowed private equity’s roll.
“The industry roared back after a pandemic-induced lull in 2020,” according to Bain & Co. The consulting firm reported that total health-care investment more than doubled in 2021 to $151 billion from $66 billion the year before.
All of that investment comes at a cost.
Researchers published a study earlier this month in the medical journal JAMA analyzing private equity acquisitions in the fields of ophthalmology, gastroenterology and dermatology. They found that after being bought out by private equity firms, practices charged insurance an average of 20% more than they did before. Patients also used the services more, which may indicate different management practices or potentially overutilization, the study authors wrote.
AHIP, the lobbying association for health insurers, sounded an alarm this month with an issue brief titled “Lower Quality at Higher Costs”and called on Congress to make changes that would remove some of the incentives for private equity firms to invest in health care companies.
“The need for those private equity firms to achieve high returns on investment on a fast time horizon is in direct conflict with the goal of lower health care costs for all Americans and greater investments in quality and safety,” AHIP said. — Anna Edney