Unraveling the Impact of Private Equity on Health Care

Health Care's Monumental Change: A Myth or Reality?

Mary Bugbee, the health care research director for the Private Equity Stakeholders Project, emphasizes that a monumental change in health care has not been witnessed. Legislators often express their intentions, but there seems to be a lack of willpower and appetite to actually bring about meaningful change. This has led to what Bugbee deems a huge failure.

Despite elected officials' efforts to give regulators stronger tools to scrutinize buyouts of hospitals, nursing homes, and other health care assets, until new laws are in place, regulators have no basis to challenge these transactions. The case of Steward serves as a worst-case example, highlighting the potential consequences of unchecked private equity practices.

Private Equity's Role in Health Care: Limited or Not?

Private equity representatives argue that the bills targeting their industry in Congress and state legislatures are unfair. They claim that their role in health care is limited, citing data that shows they invest in only 8 percent of US hospitals and own less than 4 percent of health care providers. However, health care reformers point to evidence suggesting that private equity is indeed harming the health care system at large.

Studies have shown that health care quality deteriorates at providers owned by private equity. This raises concerns about the impact of private equity on the delivery of care and the well-being of patients.

The Steward Bankruptcy: Lessons and Implications

The bankruptcy of Steward and the subsequent closure of Nashoba Valley Medical Center and Carney Hospital in Dorchester have drawn significant attention. Local officials and the Massachusetts Nurses Association held town hall meetings to oppose these closures, highlighting the importance of the health care system in the state.

Private equity firm Kinderhook Industries' purchase of Stewardship Health laid bare the mismatch between fast-moving Wall Street dealmakers and the government's glacial pace in regulating them. Despite efforts to address the issues, there is still a long road ahead, as Senator Edward Markey's comments suggest.

Reining in Private Equity: State and Federal Efforts

State Senator Cindy Friedman and Representative John Lawn are negotiating in a conference committee to reconcile separate House and Senate health care bills and impose some limits on private equity. However, despite broad support for these measures, there are concerns about delays and the complexity of the process.

Federal agents are also investigating former Steward CEO Ralph de la Torre over overseas business and potential fraud and embezzlement. This adds another layer of complexity to the already challenging situation.

The Post-Steward Era: The Need for New Laws

With the dissolution of Steward, there are no longer any hospitals in Massachusetts owned by private equity firms. However, buyout firms continue to own and run other health care facilities in the state. Health care reformers argue that new laws are needed to enable regulators to block buyout firms and their practices.

Don Berwick, a senior fellow at the Institute for Healthcare Improvement, emphasizes the need to stop profit-minded investors from controlling the delivery of care. Policymakers must ensure that decisions about patient care are made by doctors, not investors.