The COVID-19 pandemic exposed significant flaws in America's healthcare system. With costs already sky-high, budgets are strained to the breaking point. Dr. Ashish Jha, former White House COVID-19 Response Coordinator, sees private equity firms as significant contributors to these problems.
What Is Private Equity And Why Is It Expanding In Healthcare?
Private equity firms are investment companies that acquire private businesses to make a profit. They use borrowed money and rarely long-term personal assets. Private equity aims to score enormous returns for investors within 3-5 years by buying healthcare practices and selling them at much higher valuations. Lately, they've set their sights on the $4 trillion healthcare sector as an arena of untapped money-making potential.
This private capital explosion into healthcare has been extraordinarily rapid and vast in scale, targeting everything from small physician offices to large hospital chains and nursing home complexes. Private equity now touches almost every aspect of how Americans access and pay for care. Healthcare impacts everyone, so the urgent question for patients, clinicians, and policymakers is how this unprecedented private equity influx will affect healthcare quality, affordability, equity, and outcomes in the coming years. Evidence suggests patients and communities risk paying the price if private equity remains unchecked by regulations enforcing patient-centered care and financial transparency.
Driving Up Prices and Reducing Access
Extensive evidence shows private equity fuels skyrocketing healthcare costs across the board. Private equity conglomerates gain monopolistic negotiating leverage with health insurers as they acquire specialty physician practices, hospitals, and nursing facilities in a geographic area. This allows them to strong-arm increased insurance reimbursement rates for their networks up to several times higher than independent practices.
Insurers then pass on those exorbitant costs to employers and patients through rising premiums and out-of-pocket expenses. Individuals wind up draining their savings or going into debt to afford vital care. Lower-income families face impossible choices between medical bills or other basic needs. All while private equity profits swell and executives pay balloons. This contradicts the healing mission at the heart of healthcare - to ease suffering and promote wellbeing for all people, not just the wealthy. Private equity's financially-driven takeovers undermine access, affordability, and quality of care for the many to enrich the few. Communities and clinicians should have a more significant say in protecting their local healthcare infrastructure from private takeovers that override health before wealth.
Short-Term Thinking Hurts Long-Term Health
Private equity firms prioritize fast profits over building sustainable care systems. Their typical strategy is acquiring healthcare practices and quickly slashing operating costs. This allows them to resell the practice at a higher price in 3-5 years and pocket the returns.
But this short-term thinking erodes vital healthcare infrastructure needed to serve community health for decades. Doctors pressured to maintain high patient volumes risk burnout from overloaded schedules. Nursing homes and hospitals cut staffing to skeletal crews, leading to neglected patients, skipped safety checks, and inadequate infection control training. Clinicians aren't given time or resources to provide quality, personalized care.
Ultimately, patients suffer from private equity's laser focus on maximizing short-term financial gains rather than long-view investments in care access, prevention, and community wellness. Government regulators must step up oversight and enforcement to ensure private equity healthcare models meet quality standards - lives depend on it.
Evidence Shows Worse Patient Outcomes
Beyond financial impacts, alarming data now reveals worse health outcomes for patients under private equity models of care. A 2022 study published in the Journal of the American Medical Association compared patient safety records between hospitals acquired by private equity firms versus those without private equity ownership. The results were striking - private equity-owned hospitals experienced over 25% more hospital-acquired conditions, such as patient falls and life-threatening bloodstream infections.
What explains this gap in care quality? Private equity firms often cut costs through measures like reducing nurse staffing ratios. But thin staffing levels lead to rushed care, lack of supervision for vulnerable patients, and skipped safety protocols - increasing risks of medical errors. When profit maximization overrides evidence-based, compassionate care as the success metric, preventable harm increases. This data spotlights how business practices in healthcare require much closer scrutiny when human wellbeing is at stake. The public's health should never take a backseat to financial returns or shareholder goals.
Solutions to Promote High-Value, Affordable Care
Private equity isn't the only culprit behind America's excessive healthcare spending. However, their profit-first approach consistently fails to contain costs or prioritize investments in better community health. Potential solutions include enforcing anti-monopoly laws, tying payments to patient outcomes rather than fee-for-service models, increasing access to preventive screening, and better coordinating care across outpatient and inpatient settings.
While the healthcare landscape evolves, the anchor must maintain care quality and equity for all people. Profit has a role but does not outweigh patient wellbeing. Keeping this moral compass aligned requires all healthcare leaders' vigilance, oversight, and transparency.
Dr. Ashish Jha led the Biden administration’s response to the coronavirus pandemic. Now, he's back at his old job as Dean of the School of Public Health at Brown University. Speaking with Hari Sreenivasan, Dr. Jha lays out how private equity disrupts the medical industry across America.
About the Author
Robert Jennings is co-publisher of InnerSelf.com with his wife Marie T Russell. He attended the University of Florida, Southern Technical Institute, and the University of Central Florida with studies in real estate, urban development, finance, architectural engineering, and elementary education. He was a member of the US Marine Corps and The US Army having commanded a field artillery battery in Germany. He worked in real estate finance, construction and development for 25 years before starting InnerSelf.com in 1996.
InnerSelf is dedicated to sharing information that allows people to make educated and insightful choices in their personal life, for the good of the commons, and for the well-being of the planet. InnerSelf Magazine is in its 30+year of publication in either print (1984-1995) or online as InnerSelf.com. Please support our work.
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