A year-long bipartisan Congressional investigation into two private equity-backed U.S. hospital systems found that patient care deteriorated at both operations as their private equity owners reaped significant payouts on their investments in the systems. The findings reinforced academic research showing how private equity healthcare investments harm patients while enriching investors.
The investigation was helmed by two senators who lead the Senate Budget Committee — Sheldon Whitehouse, a Rhode Island Democrat and Charles E. Grassley, an Iowa Republican.
The inquiry centered on private equity giant Apollo Global Management, owner of Lifepoint Healthcare, the nation’s largest operator of rural hospitals, and Leonard Green & Partners, a private equity firm in Los Angeles that owned hospitals under the Prospect Medical Holdings umbrella from 2010 to 2021.
Over the past decade, private-equity firms like Apollo and Leonard Green have spent more than $1 trillion buying health care businesses, including hospitals, nursing homes, physician practices and hospital staffing companies. To finance these deals, private equity owners typically burden the companies they buy with debt, then slash company costs to increase earnings and appeal to potential buyers in subsequent years. Because private equity firms do not make public the financial results of the companies they own, Senate investigators aimed to assess how much profit the private equity firms generated from their investments in the hospitals and whether the deals harmed patients.
“As our investigation revealed, these financial entities are putting their own profits over patients, leading to health and safety violations, chronic understaffing, and hospital closures,” Whitehouse said in a statement. “Private equity investors have pocketed millions while driving hospitals into the ground and then selling them off, leaving towns and communities to pick up the pieces.”
Academic studies show that private equity firms’ involvement in healthcare is associated with significant cost increases for patients and payers, such as Medicare. A lower quality of care is also associated with private equity firms’ investments in healthcare. Patients receiving care at hospitals owned by private equity firms also experienced more bloodstream and surgical site infections and fell more often, a 2023 study by academics at Harvard University and the University of Chicago found.
Adding to this research, the Senate investigation found that whenever Prospect Medical facilities showed financial improvements over the period of private equity ownership, rather than investing in hospital operations to benefit patients, the owners induced the company to issue new debt, using proceeds to pay dividends to themselves.
For example, the investigation found that Prospect Medical Holdings paid out $645 million in dividends and preferred stock redemption to its investors — $424 million of which went to Leonard Green investors — and took out hundreds of millions in loans that it eventually defaulted on.
Likewise, the Senate investigation found that Apollo Global Management underinvested in Ottumwa Regional Health Center, a Lifepoint facility in rural Iowa that the inquiry scrutinized.
At that facility, a male nurse was found to have sexually assaulted multiple incapacitated female patients before dying of a drug overdose in Oct. 2022. Senate investigators concluded that, “this event may have occurred because of unfulfilled promises and underinvestment, which eroded the hospital’s culture of safety.”
While the hospital declined, Apollo received millions of dollars a year, the report said.
“A dependable health care system is essential to the vitality of a community,” Grassley said in a statement. “As always, sunshine is the best disinfectant. This report is a step toward ensuring accountability, so that hospitals’ financial structures can best serve patients’ medical needs.”
Prospect said it was still reviewing the Senate report and was disappointed by “its false conclusions and apparent omissions of key facts.”
“The Committee’s report seems not to acknowledge our many positive contributions to the communities we serve or to accurately reflect the focus on quality of care and patient safety at our hospitals,” Prospect added. “The Committee drew general conclusions about the quality of care at our hospitals without ever reviewing information from those hospitals, which is where the focus on care takes place, rather than at the corporate level.”
In addition, the company said, “Nearly all the hospitals Prospect acquired were cash-starved, neglected, in disrepair and on the verge of closure or bankruptcy. In nearly every instance, no one else wanted to acquire them, and many were headed to closure. Prospect invested more than $750 million in its hospitals and provided more than $900 million in charity and uncompensated care to patients. That is the exact opposite of putting profits above patients.”
A spokesman for Apollo disputed the report’s findings as well. “Apollo Funds have invested billions of dollars in Lifepoint and its predecessor companies, which has been used to improve facilities, expand local healthcare services, recruit care providers, build new centers of care and upgrade technology across Lifepoint’s network,” the spokesperson said. “Apollo Funds continue to support Lifepoint management’s emphasis on continuous improvements in quality of care, including at Ottumwa Regional Health Center.”
“As a result of these investments, quality of care at Lifepoint hospitals has improved, according to third party ratings like Leapfrog as well as CMS Star Ratings,” the spokesperson added. “At a time when many rural hospitals are under pressure and at risk of closing, Lifepoint has not had to close a single hospital and is committed to providing critical services in underserved areas.”
Representatives from Lifepoint Health and Leonard Green & Partners did not immediately respond to requests for comment.
The Senate report also shows the impact that the hospitals’ private equity owners had over the entities’ operations. A June 2022 employee satisfaction survey from Ottumwa cited in the report stated, “As far as our hospital being part of Lifepoint, it feels like we are a number, a budget, anything but a care giving institution.”
After Prospect installed a management audit committee of the board to oversee financial operations, board documents indicated some of the committee’s members “had felt pressured to keep certain things quiet,” the report said.
The attorney general in New Mexico, Raul Torrez, launched an investigation of a Lifepoint-run facility in Las Cruces, NM—Memorial Medical Center—after NBC News reported last year that the facility had turned away a dozen cancer patients. The former chief executive of the facility resigned shortly after the report.
Memorial’s chief financial officer said at the time that the hospital did not turn away patients and Lifepoint said, “many of the assertions being made about Memorial’s practices, conduct and communications with patients are factually inaccurate.”
Neither Memorial nor Lifepoint would identify specific inaccuracies or discuss the experiences of the patients, which were shared with the hospital. Hospital officials called some of them to apologize after they told NBC News their story.