Comment on private equity and health care by Health Justice Monitor
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Private equity firms pool outside investors’ funds and a small amount of their own money to buy assets (e.g. hospitals, nursing homes, doctors’ practices or Toys“R”Us), which they hold “privately”, i.e. their stock is not for sale to the public. That private ownership excuses them from the disclosure requirements applicable to publicly-traded firms.
Private equity purchases are usually funded mostly by loans that amplify the investors’ money, with the acquired asset – not the private equity firm or investors – liable for the debt. So when a private equity firm buys a nursing home, the nursing home is on the hook for repayment, not the investors. The private equity firm usually collects large annual “management fees”, assuring that it takes home profits, and aims to sell off the asset in 3-5 years. In the meantime it seeks to gin up profitability in order to drive up the eventual sale price.
The COVID-19 pandemic has apparently fueled an increase in private equity purchases of physician practices that were struggling because of decreased patient volumes. But exactly how many doctors they own is a mystery, because private equity operates behind a veil of secrecy. Indeed, even MedPAC, Congress’ official Medicare advisory body, couldn’t penetrate that veil.
What is clear is that private equity owns tens of thousands of emergency physicians, a major chunk of dermatologists, and an increasing number of primary care doctors.
The galloping private equity takeover of medical assets should ring alarm bells. These corporate raiders’ only interest is in short term profits. Dentists they own have been pressured to drill healthy teeth in children, dermatologists have been pushed to amp up lucrative procedures, and private equity-owned ED staffing firms are largely responsible for “surprise bills” for ED care. The private equity firm that purchased Hahnemann Hospital – a vital safety net provider in inner city Philadelphia – ran the hospital into the ground, but made a killing by selling off the hospital’s real estate before it crashed into bankruptcy.
In the short term, Congress should lift the veil of secrecy around private equity ownership of medical assets, e.g. by requiring full disclosure of the ownership structure of firms that bill Medicare. (California already requires pharmacies to publicly report the names of individuals and organizations with any share of ownership, as well as the property owner, management company, and administrator). In the longer term, investor ownership of health care facilities and practices should be banned.
Jesus: Hey, Dad? God: Yes, Son? Jesus: Western civilization followed me home. Can I keep it? God: Certainly not! And put it down this minute--you don't know where it's been! Tom Robbins in Another Roadside Attraction
August 14, 2021 at 1:49 PM #440256NV WinoModerator
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