Investigation by Laura Katz Olson on the Effects of Private Equity Capital Infusion within the Healthcare Sector
In her latest book, "Ethically Challenged: Private Equity Storms US Health Care," Distinguished Professor of Political Science, Laura Katz Olson, delves into the detrimental effects of private equity (PE) firms on the United States' healthcare system.
The book highlights several key themes, supported by recent investigations and studies, which reveal the potential risks associated with PE ownership in the healthcare sector.
**1. Profit Over Patient Care**
Private equity firms prioritise financial gains through leveraged buyouts and dividend extractions, often at the expense of patients and hospital operations. A bipartisan Senate Budget Committee investigation found that this profit-driven model has led to understaffing, reduced care quality, and increased health and safety violations in hospitals owned by PE firms such as Apollo Global Management and Leonard Green & Partners.
**2. Patient Harm and Reduced Access**
PE ownership has contributed to patient suffering, longer wait times, and closures of healthcare facilities, forcing patients to travel further for care. For example, under private equity ownership, Ottumwa Regional Health Center experienced increased wait times and decreased quality, compelling residents to seek treatment far from their community.
**3. Mixed Outcomes on Quality Measures**
While some studies show worsened outcomes, including a 25% rise in hospital-acquired conditions, more falls, infections, and a 2.7-percentage-point increase in 30-day postoperative mortality after PE acquisitions, others found some improvements in process-based quality measures for conditions like myocardial infarction and pneumonia. However, the overall evidence points towards problematic quality and access issues tied to PE ownership.
**4. Increased Costs and Barriers to Care**
Private equity ownership is linked with higher healthcare costs to both patients and payers, and may also reduce access for low-income populations, as PE-owned practices tend to accept fewer Medicaid patients, favouring those with commercial insurance.
**5. Systemic Underinvestment**
PE investments have been associated with underinvestment in critical hospital infrastructure, weakening long-term healthcare system resilience while extracting short-term financial gains.
Laura Katz Olson’s work aligns with these findings by highlighting the ethical challenges posed by private equity in US healthcare — namely, the conflict between the profit motives of investors and the mission of providing quality patient care. The infiltration of PE firms into healthcare has, according to Olson and corroborating investigations, put patients, communities, and providers at substantial risk while enriching investors.
It is important to note that private equity firms typically invest with money from public pension funds, wealthy individuals, and university endowments. They own a variety of health care services, including autism agencies, alcohol and drug treatment centers, hospice care, home care, dental practices, and physician practices.
Moreover, the book "Ethically Challenged: Private Equity Storms US Health Care" has won two gold medals: one from the 2022 North American Book Awards and another from the 2023 Axiom Best Business Book Awards.
In conclusion, Olson's book serves as a timely and critical examination of the role of private equity in the U.S. healthcare system, shedding light on the potential risks and ethical challenges associated with this form of investment. As private equity firms continue to amass "dry powder" and entrench themselves in nearly every industry, including healthcare, it is crucial to consider the impact on patients, communities, and providers.
- Private equity investments in the healthcare sector have been found to pose ethical challenges, as they often prioritize financial gains over patient care, leading to understaffing, reduced care quality, and increased health and safety violations.
- The influx of private equity ownership in healthcare has resulted in mixed outcomes, with some studies showing worsened patient outcomes, such as an increase in hospital-acquired conditions, while others indicate minor improvements in process-based quality measures.
- PE ownership can lead to increased costs for both patients and payers, and may also reduce access for low-income populations, as PE-owned practices tend to accept fewer Medicaid patients, favoring those with commercial insurance.
