Private Equity in Medicine is Dangerous to Patients

Lynn Paramore of INET writes on how PE in medicine is dangerous to patients:

Firms that much of the public has never heard of, with names like KKR, Shore Capital Partners, and TPG, have set their sights on a broad range of healthcare businesses, from orthopedic practices to hospices to addiction treatment centers. They’re gobbling up emergency rooms, ambulatory surgical centers, even entire hospitals. Physician owners of private medical practices find themselves wooed by sweet-sounding deals when private equity comes calling, and those worn out by the financial challenges of owning a practice, or reaching retirement age, or just plain greedy, find them hard to resist.

Private equity firms argue that they bring value to health care through better management techniques and investment in newer technologies. But critics say their presence is nothing more than money-driven medicine on steroids, pointing out that the private equity business model is particularly ill-suited for healthcare, when human lives hang on the balance sheet. In order to squeeze greater profits from businesses, say the critics, private equity firms cut corners in dangerous ways, like reducing staff or replacing physicians with less qualified personnel.

Critics also charge that federal regulators are practically blind to what is happening. Because many state laws restrict the corporate practice of medicine, private equity firms have become clever in how they structure takeovers so that the firm does not acquire a practice or facility outright, but instead buys a majority interest, often flying below the radar of regulators.

The stakes are high, and studies on the impact of private equity on health care are far from comforting. Research published in the JAMA Health Forum shows that private equity acquisitions of medical practices result in more lengthy and costly care for patients as well as reduced access to services. A 2021 working paper from the National Bureau of Economic Research found that entering a nursing home owned by private equity increases your chances of dying by 10%.