As cuts to public healthcare programs continue to reduce resources and drive up costs, Representative Marc Veasey (D-TX) is calling for greater transparency into how private equity firms operate in the healthcare industry.
Private equity investments in the healthcare sector aim to help struggling hospitals by improving operations, managing administrative functions and, in some cases, avoiding closure through financial support. Struggling hospitals will often turn to private equity firms to ensure they can support the community, but some argue these firms can prioritize profits over patient care.
“Ownership transparency is the first step in understanding when private equity is stabilizing care, and when it may be making health care more expensive and less safe,” Rep. Veasey said.
A Strained Healthcare System
In recent weeks, members of Congress have moved to cut federal funding from Medicaid and Medicare programs due to concerns over government spending, program costs and efforts to reduce fraud and improper payments.
Under these cuts, Sophia Tripoli, the senior director of health policy at Families USA, said hospitals facing financial distress are feeling more pressure to turn to private equity investments to keep their doors open.
“Given the fact that there is so much consolidation in the marketplace already, vulnerable hospitals are already susceptible to that dynamic,” Tripoli said.
Concerns Over Consolidation and Costs
However, Tripoli described the communication from private equity firms on these transactions as a “giant black box,” leaving hospital staff, patients and even federal regulators in the dark by not providing information.
“We need that data, so that we can not only understand what's happening in terms of these transactions and the effects on communities,” Tripoli said. “But that also federal and state regulators can actually intervene and evaluate, investigate these transactions before they happen.”
Brown University School of Public Health Associate Professor Christopher Whaley said private equity firms can quickly buy up smaller hospitals, giving them more control over the healthcare market and potentially driving up costs. He said a lack of reporting requirements can lead to higher prices, fewer staff, reduced services and lower-quality patient care.
“In many cases, with private equity, there is a single transaction that might be too small to be scrutinized regulatory, and then there's a second one that adds on top of that,” Whaley said. “And by and by it essentially adds cumulative market power that leads to higher prices and is passed on to patients entirely out of pocket.”
Transparency Without Added Trouble
Rep. Veasey emphasized that implementing reporting requirements is crucial in resolving this gap in healthcare transparency, but it should also pose as little burden as possible to hospitals.
“The last thing we should do is place new administrative burdens on providers that are already struggling to keep the doors open,” Rep. Veasey said.
At the same time, lawmakers need more insight into private equity activity in healthcare, he said.
“Congress should at least know who owns what, how these deals are structured and what impact they are having on cost and quality,” Rep. Veasey said. “That's why I think transparency is critical.”
