Concurrent with the broader call for online comment, the same agencies held a virtual public workshop this week, ahead of President Biden’s SOTU address, on the role of private equity investment in healthcare. Keynote speaker Eileen Applebaum, MD, co-director of the Center for Economic and Policy Research and fellow at the Rutgers University Center for Women in Work, drew a sharp contrast between traditional private investment, and the deals done by private equity firms that focus on quick profits.
“The difference is that when private equity buys up companies and rolls them up and builds them up and has a huge footprint, it intends to remain there for only a short period of time. Three to five years is its preferred period, sometimes as long as seven years,” Applebaum said at the workshop. “So it needs to make a lot of profit in a short period of time. Those roll-ups give it revenue, make it look very successful, make it desirable to another buyer.” More:
“But the effect of it as we have seen, since these roll-ups are financed by a lot of debt, is to really encumber the healthcare companies that it buys up. So it buys them up with the idea of selling them in a short period of time, and it uses various strategies to extract as much profit from them, before it sells, as it can. So if it’s a hospital chain or a nursing home that has real estate, it will sell off the real estate and pocket the proceeds.”
FTC Chair Lina M. Khan also spoke to potential harms of private equity acquisitions, noting that as of summer 2022, more than 40% of U.S. emergency rooms were overseen by private equity-owned staffing firms. “Under private equity ownership, emergency physicians have reported their experiences of endless cuts to staffing hours that have left doctors with significant patient safety concerns and result in poor patient experiences and outcomes,” Khan said. “One ER doctor wrote to us that they felt as if their ‘medical license was being exploited by private equity to maximize profits to shareholders at the expense of patients.’”
A full transcript of the workshop can be viewed here.
