By Miah Ntepp

Of all the financial pressures placed on working people in this country, the skyrocketing costs of health care rank near the top. As families struggle under the cuts to Medicaid made by the Trump administration, they are now facing yet another barrier to affordable health care: the increasing incidence of predatory private equity firms taking over hospitals and other care facilities.

As many hospitals, nursing homes and other facilities face pressures from federal spending cuts, increased demand and inflation, some are tempted to accept the short-term solution presented by private equity. These are investment companies that acquire “distressed assets,” such as these struggling facilities, with the promise of making structural changes that will make them more financially stable. In fact, what they seek to do is merely provide a quick buck for investors. What happens is that after the takeover, these new owners cut services, lay off staff and essentially squeeze the hospital as a revenue source rather than a health care facility.

Though this may look good on paper, in reality the effect is higher costs for patients, decreased competition and ultimately worse patient outcomes for the acquired facilities. This is backed by considerable research: For example, a 2023 review of existing studies found private equity takeovers of health care facilities resulted in cost increases of up to 32% for payers in the majority of cases — and in no case did costs go down. Another 2023 study found costs for specialty services — such as obstetrics and gynecology — were substantially higher in facilities where private equity had at least a 30% stake.

The reasons for this are not hard to figure out. For one, private equity firms have one goal in mind and one goal only: to make money for their shareholders. Their business model is to make hospitals profit centers rather than places where patients go to for healing, whether or not they actually provide accessible health care.

The other reason costs go up post-private equity acquisition is due to another strategy private equity firms use, and that is consolidation: buying up several smaller health care-related practices in the same area. Consolidation of services simplifies things for the private equity firm but also concentrates their market power, allowing them to raise prices with impunity.  

Ironically, in several cases the facilities that sought to be bailed out by private equity ended up in worse financial positions than they started. There have been several real-life examples where whistleblowers revealed the underhanded practices employed by these firms after the takeovers, resulting in the facilities having to pay millions of dollars in penalties. In one case, an autism center in South Carolina had to pay an $8.8 million settlement after the Department of Justice discovered the private equity firm that acquired it encouraged therapists to bill Medicaid for time not actually spent with patients. In another case, Steward Health Systems, acquired by Cerberus Capital Management, settled with the DoJ for $4.7 million after a whistleblower revealed the hospital re-coded treatments to higher service levels, violating the False Claims Act.

Of course, it is not the financial numbers that are most devastating. The increase in private equity in health care has had a detrimental effect on individual patients’ health as well. As their focus is solely on the bottom line, private equity owners have no qualms about cutting staff, services or needed treatments.

A 2018 study showed private equity-owned facilities had fewer staff per bed, while an earlier 2014 study found such facilities tended to hire lower-skilled health care staff. It is hardly surprising health outcomes fall short. In the case of Steward Health Systems, this resulted in more than 600 documented cases of poor care across Steward’s hospitals and at least one death. Compounding the tragedy was Steward Health System’s ultimate bankruptcy, the closure of its hospitals and the loss of hundreds of jobs, all linked to the lure of a fast private-equity fix.

This cannot be allowed to continue, and there is a growing bipartisan consensus in Congress that’s moving in the right direction. Last March, U.S. Sen. Chris Murphy (D-Connecticut) and U.S. Rep. Mary Gay Scanlon (D-Pennsylvania) introduced the Take Back Our Hospitals Act. This bill would effectively ban private equity ownership of hospitals and nursing homes by denying them access to taxpayer-provided Medicare dollars.

On the contrary, there are other proposed health care legislations that sound productive but, in reality, hurt more than help. For example, the Break Up Big Medicine Act by Senators Elizabeth Warren (D-Massachusetts) and Josh Hawley (R-Missouri) aims to break up all vertical integration in our country’s health care industry. Though consolidation of health care facilities by narrow-minded actors like private equity may be worth breaking up, indiscriminate dismantling of American health care companies is destructive and unproductive.

To lower health care costs for Americans, we must be more thoughtful and targeted in our approach, like tackling private equity, rather than resorting to sledgehammer tactics being considered in Congress. It’s time to make health care about healing, not the bottom line.

Miah Ntepp is a civil rights activist and the Policy Director for the NAACP Denver branch.