Private Equity Will See You Now
Despite growing public concern, expansion of private equity into healthcare continues. In its 2024 annual report, Bain reported global private equity investment in healthcare entities of $105 billion in 2020, $202 billion in 2021, $98 billion in 2022, and $67 billion in 2023. Private equity has invested more than $1 trillion in healthcare entities in the last decade. However, evidence suggests that PE investments are slowing, particularly in hospitals and nursing homes.[1]
Meanwhile, evidence continues to mount showing PE investment in healthcare poses dangers to patients and can lead to fraudulent conduct to increase profits.
A recent study led by researchers at Harvard Medical School and published in JAMA observed “[p]atients are more likely to fall, get new infections, or experience other forms of harm during their stay in a hospital after it is acquired by a private equity firm[.]” The increased adverse events seen were in outcomes or conditions considered preventable and are therefore key measures of hospital safety and quality.
Further, separate research on the impacts of PE ownership of healthcare operators has found that PE ownership is associated with increases in costs to patients and payers.
Between 2013 and 2022, at least 25 private equity-owned healthcare companies (and sometimes the private equity owners themselves) have entered into settlements or been subject to judgments totaling over $600 million to resolve claims that they fraudulently overcharged government payers. That number has only increased.
The federal government and individual states are making moves to enhance oversight of private equity investments in healthcare using Corporate Practice of Medicine (“CPOM”) statutes, which are already on the books in at least 30 states, and other strategies. Since the beginning of this year:
– Antitrust regulators at the Department of Justice, along with the Federal Trade Commission and Department of Health and Human Services issued a request for public input in connection with an inquiry into the impacts of private equity ownership of health care entities.
– The Massachusetts Senate passed the Health Care Market Review Process Bill. Imposing greater restraints on PE investments in healthcare, the bill emphasizes that PE management companies cannot interfere with the clinical judgment of practitioners and makes such interference actionable.
– California’s Senate Judiciary Committee approved a bill which would authorize the attorney general to approve or deny any change of control between a PE firm and a healthcare entity.
– Congress introduced the “Health over Wealth Act,” mandating greater transparency for PE firms with ownership interest in healthcare entities.
This showing of political will, paired with a track record of prior successful enforcement actions, should empower those with knowledge of healthcare fraud, particularly that driven by private equity pressures and malfeasance, to step forward and blow the whistle. There are increasing tools and interest in addressing this sort of misconduct that puts profits above patients.
Molly Knobler was a former Partner at DiCello Levitt & Jeanne Markey is Of Counsel at Cohen Milstein
[1] “Quantifying PE Investment in Healthcare Providers” by PitchBook Data, Inc., July 8, 2024
