Private Equity Buyouts of Health Care Facilities Comes With Cost to Patients
- by Natasha Hobley
- Published September 18, 2023
- Industry
The rising trend in burnout of health care workers in recent years has presented an opportunity for private equity corporations in the United States to invest in the health care market at record high rates.1
For several decades, multibillion-dollar corporate giants have been gaining control of many sectors of American society, including the food industry and companies using high level technology. At the same time, corporate buyouts in the health care sector, including hospitals, health care systems, dental offices, drug companies and laboratories also have been increasing. While corporate control of health care may help alleviate staffing and financial risks for employees, it often negatively impacts patient care.
In 2022, Amazon acquired and closed One Medical, a $3.9 billion primary care organization. In addition to this acquisition, Amazon has an online drugstore and a messaging service for patient-to-doctor communications called Amazon Clinic.2 Earlier this year, CVS Health paid roughly $11 billion to buy a fast-growing chain of primary care centers known as Oak Street Health.3
Amazon CEO Andy Jassy sees stepping into health care as a growth opportunity for the company and an opportunity for innovation in the field. “Together, we believe we can make the healthcare experience easier, faster, more personal, and more convenient for everyone,” Jassy said.2
Corporate Buyout of Health Care Comes with Ethical and Privacy Concerns
But corporate buyouts and control over health care in the U.S. comes with concerns surrounding ethics, patient privacy, and healthcare dominance.2 Peter Kaplan of the U.S. Federal Trade Commission (FTC) has stated that the commission will watch for possible harms to competition and health care consumers alike that are potentially created by corporate mergers. Most corporate health care acquisitions fall below the $100 million threshold that would initiate an antitrust review by the FTC and the U.S. Department of Justice.4
Chris Lee of the Kaiser Family Foundation writes that the business investments “typically result in a ratcheting up of providers’ pursuit of profits resulting in higher prices for patients and an increase in lawsuits and complaints about quality of care.” Since 2014, private equity companies have paid fines of more than $500 million to settle at least 34 claims under the False Claims Act, which imposes liability on companies defrauding governmental programs like Medicaid.4
The corporate monopolization of the health care industry represents a concern to health care providers, as well as patients. A group of emergency physicians and consumer advocates in several states call the practice illegal and are pushing for enforcement of statutes that prohibit corporate ownership of medical practices not owned by licensed doctors. Companies have successfully found loopholes to bypass laws in 33 states plus Washington, DC against the corporate practice of medicine.5
Bobby Wolfson of the Kaiser Family Foundation Health News writes:
These laws and regulations, which started appearing nearly a century ago, were meant to fight the commercialization of medicine, maintain the independence and authority of physicians, and prioritize the doctor-patient relationship over the interests of investors and shareholders.5
Nearly 70 Percent of Doctors in U.S. Employed by Corporations and Hospitals
It is estimated that as of 2020, nearly 70 percent of physicians in the U.S. were employed by corporations and hospitals, and that number has likely increased in the past three years.5
In December 2021, the American Academy of Emergency Medicine Physician Group filed a lawsuit in California against Envision Healthcare, alleging that the private company is in violation of California state law by having “lay ownership of medical practices”.6 The group of medical doctors claim that Envision uses shell business structures to evade the law surrounding corporate ownership of emergency room staffing. The group is not suing for money, but rather is asking for a ban on the model which they believe is not in the public’s best interest. The California Medical Association supports the lawsuit.7 Envision has since filed for bankruptcy but the doctors have vowed to continue to pursue the case.8
Proponents of corporate ownership say the acquisitions bring a lot of good to health care. But physicians who have worked for private equity owned businesses say their for-profit business model is not compatible with patient centered medicine. They cite an emphasis on high patient volume and speed over patient safety. They also cited a corporate preference for lesser trained, cheaper providers, as well as standard treatment protocols that are inappropriate for certain patients or in particular situations.
Doctors Losing Autonomy to Make Medical Decisions in Best Interest of Patients
Emergency room physician Sean Jones, MD worked his first full-time job at a Florida hospital owned by a private equity firm. Jones stated that the collaboration pushed doctors to meet corporate performance goals centered around wait times and treatment, which was not always conducive to the best interest of patients.
Many doctors are seeing their roles shift from doctors with autonomy to make medical decisions, to mere employees of corporate-absorbed medical clinics where an average of seven minutes is spent per patient.3
Experts warn that the major acquisitions threaten the personal nature of the doctor to patient relationship, as well as potentially harming patients and increasing costs by driving out competitors. Researchers have found that private equity-acquired healthcare facilities charge 20 percent more per insurance claim than independent physicians.9
Haley Weiss of TIME magazine wrote:
As private equity absorbs a larger and larger share of the U.S. medical system, ownership of facilities becomes more concentrated and less accountable to patients and regulators. The rate of these takeovers is far outpacing the creation and enforcement of laws that can reign in their potential downsides.10
Corporations Like Vulnerable Patient Populations with High Care Costs
The article states that the health care facilities, which treat vulnerable patients with high care costs, are particularly attractive to private equity firms. Examples of this include nursing homes and fertility treatment centers. Weiss noted:
From 2017 to 2018, private equity firms collectively acquired more than five times the number of fertility treatment centers as they had the previous year with investments continuing to increase each year since then.10
Nursing homes are also attractive to private equity companies due to most nursing homes contracting with the government on state and federal terms, which guarantee financial profits. Many of these private-equity owned nursing homes already have a reputation for poor care. In New Jersey, for example, these nursing homes accrued 50 percent more violations than non-profit facilities and saw SARS-CoV-2 rates that were 24.5 percent higher than the statewide average.10
The U.S. currently spends twice as much on prescription drugs and healthcare compared to other countries.9 11 The country’s medical system is dominated by conflicts of interest and blurred ethical lines—from pharmaceutical company funded textbooks and medical research studies to doctors bribed by drug companies.12 There is justifiable concern that allowing for-profit corporations to acquire and operate most U.S. health care institutions will endanger and further compromise the quality of patient care in a system that is already highly leveraged and controlled by corporations.
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