Private equity investment makes the healthcare system worse, according to the findings of a bipartisan Senate Budget Committee investigation published Tuesday.
Sens. Sheldon Whitehouse (D-R.I.) and Chuck Grassley (R-Iowa) issued the report, which zeroes in on Apollo Global Management and Leonard Green & Partners and their healthcare holdings.
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Whitehouse and Grassley don't pull their punches, starting with the title: "Profits Over Patients: The Harmful Effects of Private Equity on the U.S. Health System." Whitehouse was chair and Grassley ranking member of the committee during the last Congress, and both continue to serve on the panel.
According to the Budget Committee, Apollo Global Management and Leonard Green have squeezed hundreds of millions of dollars in profits from health systems while worsening operations and diminishing patient care.
“Private equity has infected our healthcare system, putting patients, communities and providers at risk,” Whitehouse said in a news release. “As our investigation revealed, these financial entities are putting their own profits over patients, leading to health and safety violations, chronic understaffing, and hospital closures." These conclusions are broadly consistent with previous research.
Lawmakers on both sides of the aisle have grown increasingly concerned with private equity in healthcare. This specific issue also dovetails with broader worries about the effects of consolidation in the sector, often sparked by glaring failures such as the bankruptcy of Dallas-based Steward Health and the cyberattack against UnitedHealth Group unit Change Healthcare last year.
The emergence of this highly critical report suggests private equity investment in healthcare remains on Congress' radar, even as the historically business-friendly Republican Party takes charge on Capitol Hill and in the White House.
"As always, sunshine is the best disinfectant," Grassley said in the news release. "This report is a step toward ensuring accountability, so that hospitals’ financial structures can best serve patients’ medical needs.”
The Budget Committee examined the consequences of Apollo's ownership of Brentwood, Tennessee-based Lifepoint Health, which runs the Ottumwa Regional Health Center in Iowa, and Leonard Green's ownership, until 2021, of Los Angeles-based Prospect Medical, which had two Rhode Island hospitals in its portfolio.
In both cases, investors flourished while hospitals suffered from poor oversight, insufficient staffing and other quality failings under pressure to maximize profits for their private equity owners, according to the Budget Committee.
Investors acquired Ottumwa Regional Health Center in 2010. Grassley started investigating the hospital's management two years ago after revelations that a now-deceased nurse practitioner at the hospital had sexually assaulted nine women who were sedated in 2021 and 2022.
"The Ottumwa community has personally felt the impact of private equity on its healthcare system," Grassley said in the news release. "Wait times at Ottumwa Regional Health Center have gone up as patient experience has gone down."
The opposite is true, Apollo said in a statement. “Apollo Funds have invested billions of dollars in Lifepoint and its predecessor companies, which has been used to improve facilities, expand local healthcare services, recruit care providers, build new centers of care and upgrade technology," the company said.
"Apollo Funds continue to support Lifepoint management’s emphasis on continuous improvements in quality of care, including at [Ottumwa Regional Health Center]," Apollo said. "Quality of care at Lifepoint hospitals has improved, according to third-party ratings like [the] Leapfrog [Group] as well as [Centers for Medicare and Medicaid Services] star ratings."
The Budget Committee makes similar assertions about Leonard Green and Prospect Medical.
Investors offered health system executives financial incentives that prioritize profits over safety and quality, the report concludes. Under Leonard Green's ownership, Prospect Medical shrunk its staff, reduced patient capacity and cut back on facility maintenance, according to the committee.
"While Prospect Medical Holdings paid out $645 million in dividends and preferred stock redemption to its investors — $424 million of which went to Leonard Green shareholders — it took out hundreds of millions in loans that it eventually defaulted on," Whitehouse said in the news release. "Private equity investors have pocketed millions while driving hospitals into the ground and then selling them off, leaving towns and communities to pick up the pieces."
Leonard Green disputed these claims. "We respectfully disagree with the findings in the report," the company said in a statement. "The investment enabled Prospect to invest in previously closed or failing hospitals, ensuring healthcare access for the underserved, and to invest over $750 million in its hospitals and provide $900 million in charity care. At the time of exit, almost four years ago, Prospect was in strong financial condition with access to over $500 million to support its operations."
