Private equity investors put ‘profits over patients,’ according to new Senate report

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Private equity investors earned millions of dollars from hospital investments – far greater benefit than physicians, patients and overall health care received, according to a new report from the U.S. Senate Budget Committee.

The Committee this week published “Profits Over Patients: The Harmful Effects of Private Equity on the U.S. Health Care System,” a 171-page analysis with case studies about private equity (PE) investment in health care entities.

“The growth of PE investing has been dramatic in recent years and is affecting all walks of American life,” said the report’s executive summary said.

Not always for the better when it comes to health care. The report, compiled by Sen. Chuck Grassley (R-Iowa) and Sen. Sheldon Whitehouse (D-Rhode Island) and their staff members, analyzed more than a million pages of new documents. The records “shine light on the business dealings of these PE-owned hospital operators and underscored concerns about the detrimental effects of PE ownership on hospitals and their patients nationwide,” the report said.

PE firms involved

The report dove into details about two private equity firms.

Apollo Global Health manages the fund that own Lifepoint Health, the operating company of Ottumwa Regional Health Center (ORHC) in Iowa. That hospital property is owned by a real estate investment trust called Medical Properties Trust, the report said.

ORHC’s patient volume has dropped, likely due to long emergency department wait times, outgoing transfers due to reduced capacity, lack of staffing and specialist physicians, poor patient experience and poor reputation, the report said.

Worsening conditions and quality of care led to egregious events: In 2022, a nurse practitioner fatally overdosed on drugs obtained at the hospital. Police discovered that nurse practitioner sexually assaulted nine incapacitated female patients in almost two years, the report said. That revelation prompted Grassley to begin the inquiry that led to the report.

“A dependable health care system is essential to the vitality of a community,” Grassley said in an accompanying news release. “As always, sunshine is the best disinfectant. This report is a step toward ensuring accountability, so that hospitals’ financial structures can best serve patients’ medical needs.”

Apollo responds

A spokesperson for Apollo Funds shared a statement via email with Medical Economics.

“Apollo Funds have invested billions of dollars in Lifepoint and its predecessor companies, which has been used to improve facilities, expand local healthcare services, recruit care providers, build new centers of care and upgrade technology across Lifepoint’s network,” the statement said. “Apollo Funds continue to support Lifepoint management’s emphasis on continuous improvements in quality of care, including at ORHC.

“As a result of these investments, quality of care at Lifepoint hospitals has improved, according to third party ratings like Leapfrog as well as CMS Star Ratings,” the company’s statement said. It referred to the Leapfrog Group, now a nationally known advocate and grader of hospital patient safety, and the U.S. Centers for Medicare & Medicaid Services.

“At a time when many rural hospitals are under pressure and at risk of closing, Lifepoint has not had to close a single hospital and is committed to providing critical services in underserved areas,” the Apollo statement said.

Leonard Green & Partners

PE firm Leonard Green & Partners (LGP) held a majority stake in hospital operator Prospect Medical Holdings (PMH), and Medical Properties Trust also own much of Prospect’s real estate, the report said. In short: “LGP and PMH’s primary focus was on financial goals rather than quality of care at their hospitals, leading to multiple health and safety violations as well as understaffing and the closure of several hospitals,” the report said.

Despite financial and operational mismanagement of hospitals, LGP pocketed $424 million of $645 million that PMH paid out in dividends and preferred stock redemption, leaving PMH in severe financial distress. LGP exited its investment when PMH accrued more than $3 billion in debt, leaving the operator struggling to ensure its hospitals can pay their bills, the report said.

The senators’ report said LGP leaders focused on profits, cost cutting, acquisitions, managing labor expenses, and growing patient volume, with little, if any, deliberation on patient outcomes or quality of care. Meanwhile, PMH hospitals declined due to labor cuts, lower patient capacity, unsafe building conditions and financial distress.

PMH also took out hundreds of millions of loans that it defaulted on, Whitehouse said.

“As our investigation revealed, these financial entities are putting their own profits over patients, leading to health and safety violations, chronic understaffing, and hospital closures,” he said. “Private equity investors have pocketed millions while driving hospitals into the ground and then selling them off, leaving towns and communities to pick up the pieces.”

Leonard Green & Partners did not reply to an emailed inquiry from Medical Economics.