In its first report since launching its investigation into the effects of private equity ownership on hospitals, the Senate Budget Committee accuses Apollo Global Management, the second-largest private equity firm in the U.S., of degrading care and operational quality through service cuts, layoffs, and other actions at the 220 hospitals it operates in 36 states.

The report, Apollo’s Stranglehold on Hospitals Harms Patients and Healthcare Workers, pays special attention to conduct at two reputable American hospitals, Lifepoint Health, which Apollo acquired in 2018, and ScionHealth, which it spun off in 2021. Investigators in the inquiry, known as the Private Equity Stakeholder Project (PESP), say that Apollo's actions put both providers in substantial debt and subjected them to high credit risk.

They also allege that Apollo has put patients and healthcare workers at rural hospital chains at risk and completed questionable transactions that raise concerns about anti-competitive practices, including a complex spinoff as part of its acquisition of Kindred Healthcare, in Seattle, to evade antitrust scrutiny.

PESP Healthcare director Eileen O'Grady told HCB News that the report emphasizes the committee's view that the main priority among PE firms like Apollo is to maximize short-term profits over the needs of patients, hospital facilities, and healthcare workers.

"States should increase oversight over changes in ownership or control of hospitals, including pursuing policies that allow regulators to impose conditions on changes in control, such as requiring capital commitments, limiting the sale of real estate, and prohibiting extractive financial policies, such as management fees and debt-funded dividends," she said.

Senators Chuck Grassley (R.-Iowa) and Sheldon Whitehouse (D-RI) launched their bipartisan inquiry in December to assess how acquisitions by private equity firms affect hospital finances, operations, and care quality. Their decision was motivated by questionable financial transactions allegedly connected to adverse events at Ottumwa Regional Health Center, an Iowa hospital in which both Apollo and Lifepoint have ownership interests.

More transparency needed
While critics have long argued that private equity ownership leads to higher prices for patients, more debt for hospitals, and lower quality care, evidence supporting these claims is not as simple.

When the investigation first launched, HCB News spoke with Rachel Werner, executive director of the Leonard Davis Institute of Health Economics and a professor at the University of Pennsylvania. While acknowledging that growing evidence supports the idea that private equity ownership leads to consolidated markets, causing loss of competition and increased pricing, she says that studies suggesting that it leaves hospitals in debt and has negative financial impacts on operations are mixed.

She added that there is no concrete proof to validate claims that these providers are less financially stable or more likely to close, and that there is very limited evidence, good or bad, to suggest that loss of competition or tactics undertaken by private equity firms to make a profit affect quality.

“In most cases, private equity investment actually improves hospitals’ financial performance, at least in the short run,” she said.

According to Werner, greater transparency around private equity transactions and what hospital management under these facilities entails is essential to addressing concerns about their presence in healthcare settings.

O'Grady agrees, noting that one way this could be done is if the federal government required all Medicare-enrolled hospitals to disclose publicly on websites and to the federal government all ownership stakes and investors.

Are more regulations necessary?
O'Grady also encourages regulations to tackle anti-competitive practices through consolidation and roll-ups, whereby a company makes a series of small acquisitions to build up consolidation of the market in its favor. These deals, while potentially violating antitrust laws, often fall below the size thresholds for reporting the prospective deal to enforcement agencies, making it easier for companies to build up their share of the local market.

"Because private equity roll-ups and mergers typically fall under the radar of antitrust regulation, the FTC and DOJ should scrutinize healthcare deals involving private equity firm owners even if individual deals do not meet the typical threshold to trigger FTC review," she said.

The White House is also examining private equity ownership in its own cross-government probe, assessing the impacts it had on care quality in hospitals and other healthcare organizations. In a recent review of hospital mergers, the Biden administration, which has ramped up FTC scrutiny of these transactions over the last few years, said that consolidation led to price increases often exceeding 20%, and specifically linked private equity firms to rising costs.

Another recent study published in JAMA by researchers at Harvard Medical School and the University of Chicago found that patients in private equity-controlled hospitals experienced 27% more falls, developed 25% more hospital-acquired infections, and contracted 38% more bloodstream infections from central lines, despite there being a 16% decrease in central lines following acquisitions.

But as Werner pointed out, evidence supporting certain accusations against PE firms is limited, with a study out of Columbia University in 2023 finding their effects on quality to be mixed to harmful, and their impact on health outcomes and operator costs to be inconclusive.

The PESP drafted its report in conjunction with the American Federation of Teachers (AFT) and the International Association of Machinists and Aerospace Workers (IAM), both of which represent hospital workers at numerous facilities owned by Apollo. Both organizations say that several of their members have repeatedly complained of their facilities placing profits over patient needs and neglecting care issues, including staff shortages and cost cutting, which in turn has made it harder for employees to perform their jobs.

O'Grady recommends collective bargaining as a potential solution. "In healthcare, collective bargaining is the manner to ensure that worker rights are protected and that healthcare workers have the protections they need to advocate for their patients."

Apollo did not respond to HCB News for comment.