The toxic effects that Private Equity investments have had on healthcare, caregiving, durable medical equipment and nursing homes is a hot topic at DignityMA. We have compiled several opinions and resources on this issue. Updates will be added.
March 1, 2024: DignityMA (Senator Richard Moore and the Legislative Workgroup) has prepared detailed testimony in Code Blue: Concerns Relative to Private Equity and Real Estate Investment Trust in Nursing Homes and Other Health Care Facilities (pdf). This testimony has been sent to the Joint Committee on Health Care Financing and the Massachusetts Health Policy Commission.
“Code Blue,” as defined in Merriam-Webster’s Medial Dictionary is a “declaration of or a state of medical emergency and call for medical personnel and equipment to attempt to resuscitate a patient especially when in cardiac arrest or respiratory distress or failure.”
The state of health care, in nearly all of its forms, from cradle to grave, is in “Code Blue” status primarily because of profit-focused ownership models that have become dominant in health care at every level.
Two books on the subject (Not vetted by DignityMA)
Health Care
In MA, the disintegrating of the Steward Health Care system, which has multiple hospitals, is an ongoing example of private equity in health care.
March 5, 2024: Boston Globe Letters to the Editor by Senator Richard Moore and Margaret Morganroth Gullette
Boston Globe January 24, 2024: Health care: The problem with private equity’s role in medicine
Private Equity in Health Care: Trends, Impact, and Policy
MA Health Policy Commission, December 13, 2023
White House announces plan to scrutinize private equity ownership in healthcare, Radiology Business, December 13, 2023
NY Times Serious Medical Errors Rose After Private Equity Firms Bought Hospitals, December 26, 2023
‘Shocking and Immoral’: Report Details Private Equity’s Stranglehold on US Healthcare Common Dreams, March 22, 2023
WBUR, On Point interviewed author and provided overview of the topic November 7, 2023. Audio recording and transcript: How private equity is changing American health care.
Care Riskier for Patients at Private Equity Hospitals, The Harvard Gazette, January 22, 2024
Home Health Care
Private Equity’s Growing Footprint In Home Health Care Draws Scrutiny
February 8, 2024 by Anna Claire Vollers, Stateline. Disability Scoop
HUNTSVILLE, Ala. — Help at Home employed nearly 800 caregivers scattered across every county in Alabama, helping 1,100 older clients those with disabilities with activities such as bathing, housework and meal preparation.
And then suddenly, it was gone.
Nursing Homes
2024-03-11 Spotlight – The Hidden Profits in the Nursing Home Industry – Report by Dr. Ashvin Gandhi and Dr. Andrew Olenski at the University of Los Angeles
March 4, 2024 – DignityMA Letters published by the Boston Globe on Private Equity
Does Private Equity Investment in Healthcare Benefit Patients? Evidence from Nursing Homes, 3/9/20, Atul Gupta, Howell, Yannelis, Abhinhav Gupta
How Patients Fare When Private Equity Funds Acquire Nursing Homes, The Digest: No. 4, April 2021, revised August 2023, National Bureau of Economic Research By Steve Maas
When Private Equity Takes Over a Nursing Home After an investment firm bought St. Joseph’s Home for the Aged, in Richmond, Virginia, the company reduced staff, removed amenities, and set the stage for a deadly outbreak of COVID-19, The New Yorker, Yasmin Rafiei, 8/25/22
Durable Medical Equipment
PRIVATE EQUITY IN DURABLE MEDICAL EQUIPMENT
How Private Equity Profits Off of Disabled and Chronically Ill Americans
NOVEMBER 2023
In recent years, private equity firms have aggressively sought to acquire and control segments of the healthcare industry. A report from the Private Equity Stakeholder Project (PESP) and the National Disability Rights Network (NDRN) highlights specifically the toll the PE business model has on people who rely on costly and necessary instruments, known as Durable Medical Equipment (DME), which includes wheelchairs, respiratory technology, and other tools needed to manage chronic conditions and disabilities.
PE firms have increasingly bought up DME companies and consolidated them, using debt-funded growth strategies to achieve market dominance. The resulting companies are highly indebted, and are now seeking ways to cut costs to achieve the outsized returns demanded by their private equity owners.
This profit seeking has been linked to understaffing, dangerously long delays in getting repairs (particularly for custom wheelchair users), and billing practices that have resulted in federal lawsuits. Included in the report are several company case studies as well as a handful of illustrative personal stories from wheelchair users.
Chris Hoeh is a front-line advocate for the current Wheelchair Repair bills (2024) in MA. He has detailed the many problems with this service in MA, and sees a direct connection with growing repair problems and private equity.
It’s another example of the reprehensible influence of private equity takeover of healthcare. In this instance, there are only two companies, each owned by private equity that sell and service wheelchairs in Massachusetts, and most of the US. They place their greed for profits over the needs of wheelchair users and the entities that buy the chairs (largely Medicaid and Medicare). Beyond the physical and emotional damage caused by losing mobility for the individual, Medicaid and Medicare will end up paying huge medical bills for those injured by faulty chairs or confinement to bed with resultant, pressure sores, etc.
From Private Equity in Durable Medical Equipment
The two largest suppliers of customized (manual and motorized) wheelchairs,within the larger category of Complex Rehabilitative Technology or CRT, are owned by private equity firms. Cost cutting at these companies has been linked to slow response times for repairs that harm wheelchair users.
This profit seeking has clear impacts. Cuts to staffing means that it can take weeks or even months for wheelchair users to get critical repairs. Companies are pushing consumers to bring their equipment into their central shops for repairs, also to cut down on staffing costs, which is often infeasible for individuals who are dependent on their wheelchairs for basic mobility and may have no means for transporting their broken equipment. Private equity firms meanwhile lobby against legislation that would require timely repair of wheelchairs they have provided or, being unable to get timely repairs from the companies themselves, would at least allow wheelchair users the right to repair and maintain their own wheelchairs.
Private equity’s growing influence in the wheelchair industry poses risk to consumers. Private equity firms seek to double or triple their investment over short time periods (4-7 years), and typically use high levels of debt leveraged against the companies they own to acquire and grow those companies. These financial practices often necessitate significant cost cutting by the PE-owned companies to achieve the firms’ high return expectations. In the wheelchair space, while the firms’ own acquisition and profit goals are key drivers, inadequate insurance reimbursement policies for wheelchair repairs further incentivize companies to prioritize profitable service lines, such as sales, while cutting spending on less profitable service lines, like technician staffing and training.
Consequently, cost-cutting by private equity investors, exacerbated by Medicare and private insurance reimbursement policies, can mean reducing resources spent on those aspects of repair services that are made less profitable by reimbursement policy. For example, a former field service technician for AEA-owned Numotion told Mother Jones “I think Numotion tries to run a skeleton crew to minimize costs.” He said that he was responsible for about 1,500 to 2,000 customers, which meant having as many as 10 appointments a day. anecdotally, technicians tell me they see at the most 4 consumers a day.
Boston Globe Editorial, January 17, 2024 : Scrutinize private equity’s involvement in health care.
Mother Jones May-June 2022: Two Behemoths Dominate the Motorized Wheelchair Industry. Disabled Customers Pay the Price by Paul Roberts