Serious Adverse Events Increased for Patients at Hospitals Owned by Private Equity Firms, Study Shows

Hospital-acquired adverse events increased by 25 percent after private equity acquisition, according to a recent Harvard study.
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By Megan Redshaw, J.D.
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Patients receiving care at hospitals owned by private equity firms were more likely to experience hospital-acquired adverse events, including falls, central line-associated bloodstream infections, and surgical site infections, according to a large study by Harvard researchers.

The study, published Dec. 26 in the Journal of the American Medical Association (JAMA), examined changes in the quality of care and patient outcomes associated with private equity ownership of U.S. hospitals from 2009 to 2019.

Researchers compared the rates of 12 serious adverse events associated with more than 600,000 hospitalizations at 51 private equity-acquired hospitals—before and after they were acquired—with more than 4 million hospitalizations at 259 hospitals not owned by private equity firms, using 100 percent Medicare Part A claims data.

For example, they looked at how often patients fell while in the hospital or whether they developed an infection after a procedure or surgery. Additionally, the team looked at patient populations and causes of death, length of hospital stays, and rate of readmission after leaving the hospital.

Researchers found that, on average, private equity acquisition of hospitals was associated with a 25 percent increase in hospital-acquired adverse events among Medicare patients, compared with patients in hospitals not privately acquired.

The rise in adverse events was driven by a 27 percent increase in falls and a 38 percent increase in central line-associated bloodstream infections, despite placing 16 percent fewer lines. Additionally, surgical site infections doubled from 11 to 22 percent per 10,000 hospitalizations, despite an 8 percent decrease in surgeries performed.

Researchers stated the increase in hospital-acquired infections could be due to decreased staffing, changes in the technique used, poor clinical experience, or patient illness, among other explanations.

“The increase in hospital-acquired conditions after private equity acquisition is particularly worrisome given the national decline in hospital-acquired conditions, as demonstrated by the control group,” the authors wrote in the study. “Taken together, the increased hospital-acquired conditions associated with private equity acquisition spanned the key inpatient settings—from general wards (falls) to intensive care units (central line-associated bloodstream infections), with concern for operating rooms (surgical site infections) as well.”

Despite the increase in certain adverse events, private equity hospitals showed a 5 percent decrease in mortality during hospitalization. However, the researchers said this could be due to younger and lower-risk patients admitted to private equity hospitals, or discharges of relatively sicker patients. Researchers also saw slightly shorter stays, an increase in transfers to other hospitals, and higher turnover at private equity hospitals, observations they consider consistent with “revenue-enhancing behavior.”

The Role of Private Equity in Health Care Settings

In a Dec. 26 press release, the American Investment Council, a trade group for the private equity industry, said the study’s “agenda-driven research” doesn’t tell the whole story.

“Broader research continues to demonstrate private equity’s positive impact on patient outcomes and support for high-quality care delivery across the country. The fact is, many practices across the country that don’t have alternative financing mechanisms depend on private equity’s critical capital to remain competitive, improve patient care, and innovate,” the organization shared in the press release.

Private equity describes investment partnerships that use acquired capital to buy and manage businesses before selling them again at a profit. Capital for the funds is acquired by large outside institutional investors and borrowed money. An acquisition by a private equity firm can make a business more competitive and valuable or strap it with unsustainable debt, depending on the objectives of the private equity firm, according to James Chen, chartered market technician and registered investment adviser.
Private equity firms currently manage $6 trillion in U.S. assets, according to a 2023 Forbes report. Over the past decade, private equity investors have spent more than $750 billion on health care acquisitions, with $120 billion reported during 2019 alone. This includes acquisitions of hospitals, nursing homes, and physician practices. The concern with private equity firms is that they often consist of entities with little health care experience that may put profits over patients.
For example, private equity firm Leonard Green & Partners allegedly extracted $645 million from the hospital chain Prospect Medical Holdings before announcing a deal to sell it—leaving it strapped with $1.3 billion in financial burdens.
Leonard Green & Partners bought Prospect Medical in 2010 for $205 million and reportedly loaded the company with debt while extracting millions in dividends and fees for itself and fund investors. Meanwhile, its elevators persistently broke down, hospital-supplied gas cards were rejected leaving ambulances without gas, and medical supplies were put on credit holds due to unpaid balances.

Prospect’s New Jersey hospital made national news in March 2020 when the first U.S. emergency room doctor died of COVID-19 and reportedly told a friend he got sick because he had to reuse a single face mask for four days.

Critics of private equity are concerned with how the for-profit-ownership model is reshaping American health care. Earlier this month, Sen. Chuck Grassley (R-Iowa) and Sen. Sheldon Whitehouse (D-R.I.) launched a bipartisan investigation into the impact of private equity ownership on U.S. hospitals.

“As private equity has moved into health care, we have become increasingly concerned about the associated negative outcomes for patients,” said Mr. Whitehouse. “From facility closures to compromised care, it’s now a familiar story: private equity buys out a hospital, saddles it with debt, and then reduces operating costs by cutting services and staff—all while investors pocket millions. Before the dust settles, the private equity firm sells and leaves town, leaving communities to pick up the pieces.”

A 2021 study by the American Antitrust Institute and the Petris Center at the University of California–Berkeley researched the adverse effects of private equity ownership and concluded the “private equity business model is fundamentally incompatible with sound health care that serves patients.”

The findings in the JAMA study raised similar concerns, suggesting private equity ownership of hospitals is associated with poor patient care.

Megan Redshaw
J.D.
Megan Redshaw is an attorney and investigative journalist with a background in political science. She is also a traditional naturopath with additional certifications in nutrition and exercise science.
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