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Home»News»Private equity buyouts are associated with higher patient harm rates in hospitals
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Private equity buyouts are associated with higher patient harm rates in hospitals

healthtostBy healthtostDecember 27, 2023No Comments6 Mins Read
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Private Equity Buyouts Are Associated With Higher Patient Harm Rates
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Patients are more likely to fall, get new infections or experience other forms of harm during their hospital stay after a private equity firm buys it, according to a new study led by Harvard Medical School researchers.

The survey, published on December 26 in GLASS, is among a handful of recent nationwide analyzes of how private equity buyouts affect the quality of patient care in hospitals. Increases are seen in conditions or outcomes that are deemed preventable and are key measures of hospital safety and quality.

The findings come amid growing concerns about the growing role of private equity in US health care, with $1 trillion invested over the past decade.

We have found in the past that private equity buyouts have led to higher fees, prices and social costs. Now, we are learning that there are also concerns about the clinical quality of care provided to hospital patients.”


Zirui Song, associate professor of policy and medical care at the Blavatnik Institute and director of research at the Center for Primary Care at HMS

The researchers said the findings are troubling because they may reflect incentives that overshadow patient care and safety.

“Hospital success is measured not just in dollars or the number of patients that walk through the doors, but also in lives saved, complication rates, patient satisfaction and a host of other quality and safety metrics,” said HMS researcher, Sneha Kannan. physician in the Department of Pulmonary and Intensive Care at Massachusetts General Hospital. “We need to make sure we fully understand the costs and benefits of this prominent new power in health care.”

The financial implications of private equity buyouts are not a new concern. Previous studies by Song and co-author Joseph Dov Bruch of the University of Chicago show that this high-debt, for-profit financial model of hospital ownership can also lead to increased costs and other financial impacts. Many have raised concerns about private equity-owned hospital bankruptcies that often leave underserved populations with limited access to care. However, until now, the effects of private equity deals on patient health and quality of care have remained poorly studied and poorly understood.

Because private equity is different

“When health systems buy hospitals, they generally don’t use borrowed money,” said Song, who is also an internist at Mass General. “In contrast, the classic private equity buyout uses a small amount of cash, but a large amount of debt.”

A private equity firm raises a portion of the capital from investors and borrows the rest, placing debt on the acquired hospital with its physical assets, such as land and buildings, as collateral for the loan. The acquired hospital must then generate revenue to pay this debt.

Private equity generates revenue by charging management fees to its investors – typically, pension funds, endowments and other institutions or individuals – as well as by focusing on high-income processes, cost reduction, restructuring and financial engineering. One argument in favor of private equity investment is that many struggling hospitals need capital and management experience. However, most private equity buyouts are successful. Private equity firms want to buy bonds of going concern companies that are able to take on debt and generate income in the short term. These financial pressures can create perverse incentives that favor profit over patients, the researchers say.

Private justice and quality of care

For this study, researchers reviewed insurance claims data for all Medicare fee-for-service hospitalizations from 2009 to 2019, totaling more than 600,000 hospitalizations at 51 private hospitals and more than 4 million hospitalizations at 259 similar non-acquired hospitals from private funds. Hospitals not acquired by private equity served as a control group to control for other factors that may have influenced the results.

The researchers compared how often patients had certain outcomes before and after the hospital was acquired by private equity. For example, they looked at how often patients fell while in the hospital or how often they developed an infection after a procedure or surgery. The team also analyzed the composition of patient populations and various other outcomes, such as how often patients died, how long they stayed in the hospital, and how often they ended up being readmitted after leaving the hospital.

After a hospital was acquired by private equity, admitted Medicare patients had a 25 percent increase in hospital-acquired complications, compared with patients admitted before the acquisition. Patients also had 27 percent more falls and 38 percent more bloodstream infections caused by central lines, which are temporary surgically inserted ports that allow easy IV access for patients receiving repeated infusions of drugs or other treatments.

The increase was seen despite private equity hospitals placing 16 percent fewer central lines than before the takeover. All of these results were calculated by taking into account changes, trends, and patterns over the same time period in peer hospitals that are not privately owned to isolate differences due to ownership change.

Surprisingly, the study found a small drop in hospital deaths in private capital hospitals. This, the researchers said, may be due to social and demographic factors -? Private equity patients were younger and less disadvantaged than those at non-private equity peer hospitals. It may also be because patients are more often transferred from private hospitals. When researchers followed patients longer after discharge, the small reduction in deaths disappeared within a month of discharge.

Framework for policy solutions

Policy makers, insurance companies and public sector bodies are increasingly concerned about protecting patients and social resources from the effects of private equity transactions.

Earlier this year, Song and Christopher Cai, an HMS clinical fellow in medicine at Brigham and Women’s Hospital, described such a policy framework in a GLASS opinion piece, which included regulating fraud and abuse, increasing antitrust oversight, reducing moral hazard (such as by reducing debt used in takeovers), protecting against inflated prices, and transparency in the reporting of of private equity buyouts.

Currently, only private equity acquisitions over $111.4 million must be reported. This threshold can cover many hospital acquisitions, but leaves out most medical practice acquisitions.

“Private equity firms have historically operated in the shadow of health care,” Kannan said. “Going forward, it is important to lift the veil and increase transparency.”

And both researchers and policymakers should be rigorous in their efforts to understand how private equity is changing health care operations and downstream consequences, the authors cautioned.

“Patients and providers, investors and taxpayers, employers and insurers, they all have a stake in this,” Song said. “Understanding what it means to corporately deliver health care is a goal shared by many in society.”

Source:

Journal Reference:

Kannan, S., et al. (2023). Changes in hospital adverse events and patient outcomes associated with private equity acquisition. GLASS. doi.org/10.1001/jama.2023.23147.

buyouts Equity harm higher hospitals patient Private rates
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