Dive Brief:
- Federal regulators have launched an investigation into private equity firms’ and other corporate owners increasing influence over healthcare.
- The Federal Trade Commission, Justice Department and the HHS issued a request for public comment on Tuesday to understand how PE firms and other asset managers might prioritize profits from acquisitions over patient care quality, worker safety and the affordability of healthcare services.
- The cross-agency probe comes amid rising scrutiny from the Biden administration regarding corporate consolidation in healthcare. The HHS appointed its first chief competition officer this year to oversee consolidation in the sector, and the FTC and DOJ finalized new merger guidelines late last year that are predicted to slow the pace of healthcare mergers.
Dive Insight:
The request for information covers a large swath of transactions including those targeted by PE firms, private payers and health systems. Regulators said those transactions could involve dialysis clinics, nursing homes, hospice providers, primary care providers, hospitals, home health agencies and others.
Regulators are also interested in investigating buys that may not fall under the agencies’ threshold for review, according to a press release.
The probe comes as corporate consolidation in healthcare has increased. The share of physicians working in independent practices dipped between 2021 and 2022 as payers, hospital systems and private equity firms bought up practices, for example.
Acquisitions of physician practices by PE firms grew seven-fold between 2012 and 2021, driving up consumer and payer prices, according to a Health Affairs study published this week. Just last year, PE sponsors announced or closed an estimated 788 deals — down from pandemic highs, but still the third-highest on record by deal count, according to Pitchbook data.
Studies have suggested the financiers can turn a profit while cutting care quality — increasing prices for payers and patients while cutting corners on safety, leading to increased risks of infections and falls.
“When private equity firms buy out healthcare facilities only to slash staffing and cut quality, patients lose out,” said FTC Chair Lina Khan in a release. “Through this inquiry the FTC will continue scrutinizing private equity roll-ups, strip-and-flip tactics, and other financial plays that can enrich executives but leave the American public worse off.”
Zirui Song, an associate professor of healthcare policy at Harvard Medical School who has studied private equity in healthcare since 2019, told Healthcare Dive in February that private equity’s core business model is to blame for the quality-control concerns.
Private equity firms typically own assets for a much shorter period than other buyers, holding properties for an average of three to seven years before flipping them to a new buyer, according to Song. In contrast, other buyers might hold a hospital for 10 to 15 years.
“There's basically not as much time [under the PE model] or incentive to make investments in that delivery entity,” Song said.
The proliferation of PE-backed deals have sparked congressional inquiries into private equity ownership of health systems and scrutiny at the state level. Massachusetts’ congressional delegation, for example, wrote to Cerberus Capital Management in February demanding answers for its role in creating the financial problems at Steward Health Care.
The cross-agency probe gives stakeholders until May 6 to submit comments about the impact of corporate deals.
