Private Equity's Influence on U.S. Healthcare: A Pressing Concern Requiring Immediate Attention

In recent years, private equity firms have been increasingly investing in the U.S. healthcare sector, drawn by the potential for high returns in a massive and growing industry. While proponents argue that this investment can lead to positive changes, such as improved efficiency and innovation, it's crucial to balance these potential benefits with the mounting evidence suggesting a darker side to private equity's involvement in healthcare.

The Negative Consequences of Private Equity in Healthcare

One of the most significant concerns is that private equity ownership often increases patient prices. This is because private equity firms prioritize profit maximization, which can result in cuts in services and staffing and price hikes to recoup their investments and generate returns.

Research presented at the 2024 AHIP annual meeting by Zirui Song M.D., Ph.D. underscores this concern. His data reveals that:

• Private equity-owned hospitals increased net income by 27% and charges per day by 7% compared to a control group.
• Physician practices acquired by private equity firms saw charges increase by 20% and prices by 11%
• Gastroenterology practices owned by private equity firms increased prices by 28%, professional fees by 78%, and patient volume by 23%
• Retina practices owned by private equity firms increased Medicare spending by 22% and spending on the expensive drug Eylea by 22% (¹).

These findings are further supported by Edward Hoffer's M.D., F.A.C.P, F.A.C.C analysis, which documented higher prices and increased 'upcoding' (billing for more expensive services) following private equity takeovers of medical practices. Upcoding is a practice where healthcare providers bill for more expensive services than what was provided, leading to higher costs for patients and insurers (²).

Beyond price increases, private equity's focus on short-term profits can also lead to lower-quality care. Cuts in services and staffing can compromise patient safety and outcomes. This is tragically illustrated by the alarming increases observed in private equity-owned nursing homes:

• Emergency room visits increased by 11%
• Hospitalizations increased by 9%
• Medicare spending increased by 4%
• Most disturbingly, mortality rates increased by 10%

Finally, private equity's cost-cutting measures often result in job losses in the healthcare sector. This can exacerbate existing staffing shortages and further strain the healthcare system.

The Scope of the Problem

The reach of private equity in healthcare is substantial and growing. Dr. Song's research indicates that in 2024, approximately 460 hospitals in the U.S. — representing 8% of all private hospitals and 22% of for-profit ones — are owned by private equity firms. Additionally, private equity has aggressively targeted specialties like gastroenterology, ophthalmology, urology, and dermatology for acquisition (¹).

Dr. Hoffer's work highlights the rapid expansion of private equity investments in healthcare, with total deals growing from 78, totaling $5 billion in 2000, to 855 deals and over $100 billion in 2018. This trend shows no signs of slowing down, raising serious concerns about the future of U.S. healthcare (²).

Proposed Solutions

To address the negative consequences of private equity in healthcare, several solutions have been proposed, including:

• Increasing transparency and accountability of private equity firms
• Requiring private equity firms to disclose more information about their finances
• Creating task forces to study the effects of private equity on healthcare
• Regulating private equity acquisitions of hospitals and physician practices

One specific proposal gaining traction is the Health Over Wealth Act, introduced by Senators Markey and Jayapal. This Act would enhance the transparency and accountability of private equity firms in the healthcare sector by requiring them to disclose more information about their finances. It would also establish task forces to investigate the impact of private equity on healthcare. The Act has garnered support from various organizations, including nursing unions and patient advocacy groups, who believe protecting patients, workers, and communities from the detrimental effects of private equity is crucial (³).

Conclusion

Private equity's influence on U.S. healthcare is a complex and pressing issue. While the potential for benefits exists, the evidence overwhelmingly points to a pattern of harm, including higher prices, lower quality care, and job losses. Recognizing these risks and supporting policies like the Health Over Wealth Act that prioritize the well-being of patients, workers, and communities over the pursuit of profit is imperative.

Works Cited

1. Wehrwein, Peter. “Harm Not Help: Private Equity’s Influence on U.S. Healthcare   AHIP 2024.” Managed Healthcare Executive, Managed Healthcare Executive, 14 June 2024, www.managedhealthcareexecutive.com/view/harm-not-help-private-equity-s-influence-on-u-s-healthcare-ahip-2024. Accessed 2 Sept. 2024. [In-text citation: (¹)]
2. Hoffer, Edward P. “Private Equity and Medicine: A Marriage Made in Hell.” The American Journal of Medicine, vol. 137, no. 1, 1 Jan. 2024, pp. 5–7, https://doi.org/10.1016/j.amjmed.2023.09.008. [In-text citation: (²)]
3. “Senator Markey, Rep. Jayapal Introduce Health over Wealth Act, Setting Guardrails for Private Equity in Health Care   U.S. Senator Ed Markey of Massachusetts.” Senate.gov, Edward Markey, 25 July 2024, www.markey.senate.gov/news/press-releases/senator-markey-rep-jayapal-introduce-health-over-wealth-act-setting-guardrails-for-private-equity-in-health-care. Accessed 2 Sept. 2024. [In-text citation: (³)]

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