Neustatter: Concerns raised as buyouts continue
You may not have heard the story of Steward Health Care, but it epitomizes the growing trend of how health care is being treated as a commodity to invest in — to the detriment of we health care consumers.
I should be writing about gall bladders or thyroid problems you might think. Or other more strictly medical issues, instead of harping on again about politics and the business side of health care — but my justification is that writing about egregious stories like that of Steward Health Care is something that is far more important to the overall quality of health care.
The story is that Steward is a private equity company that owns eight hospitals in Massachusetts. It is the offshoot of another investment company Cerberus Capital Management, which is reported to have made about $800 million off its investment in Steward, and the hospitals it owns, "while the hospital system fell further into debt."
Then, in 2020 Cerberus sold Steward, which now is $475 million in debt and has filed for chapter 11 bankruptcy.
In such circumstances, the investment companies often close hospitals that are not making a lot of money — which are often those in underserved areas.
"There are real dangers to the health care ... if you deplete all the capital from a hospital," notes Dr. Stephanie Woolhandler, distinguished professor of public health at New York's Hunter College, quoted in an NBC News report.
A complaint reiterated by someone as conservative as Iowa Republican Sen. Chuck Grassley, who is looking into the impacts of private equity ownership of hospitals. He says, "Private equity buys out a hospital, saddles it with debt, and then reduces operating costs by cutting services and staff — all while investors pocket millions."
An unhealthy trend
This seems to be a growing trend. Money from private equity investment in health care increased 20-fold from 2000 to 2018, from less than $5 billion per year in 2000 to $100 billion per year in 2018, according to the Institute for New Economic Thinking.
Enterprise News, reporting on the Steward story, notes, "Doctors and local politicians concerned that the private equity business model, which consists of acquiring hospitals with the end game of quickly extracting financial value to deliver large returns to investors, does not lend to high quality care."
A report in JAMA about the quality of care after a private equity fund bought a hospital notes, adverse events including surgical infections and bed sores rose by 25 percent among Medicare patients when compared with similar hospitals that were not bought by such investors.
There are also concerns that hospitals buying up local medical practices — as is happening in our area — create monopolies. Monopolies that are good for the hospitals as it allows more clout in negotiating payments with insurance companies. But it often makes for limited choices for patients.
It also seems to drive up prices — the Massachusetts Health Policy Commission reported in 2022 that hospital prices and revenues increased during a decade at almost 4 times the rate of inflation.
Existential greed
The "trouble" is health care is good business, making it attractive to investors leading to any number of massive mergers/takeovers in different sectors. United Health buying up DaVita Medical, one of countries leading medical groups, for $4.9 billion. CVS purchasing Aetna, the country's third largest health insurance company. Amazon announcing its venturing into health care in partnership with JP Morgan Chase & Co. And Berkshire Hathaway has announced intention to launch an independent health care company.
"This is all just the ebb and flow of free enterprise and competition in the business of medicine" you might claim. Part of the capitalist system where competition and market forces will keep prices low and quality high for the consumers/patients.
The hooker is the industry has massive amount of lobbying clout, because it is so profitable, meaning it can pay lots of lobbyists and contribute to political campaigns, allowing many advantageous legislative fandangles.
You might hope that people who own and run health care businesses view it as an essential commodity. And that our politicians would and impose some kinds of legislative constraints, as in other countries. But instead, evolution of health care seems driven by unbridled greed.
Recently JAMA published paper that to my mind was a pretty radical — at least for such a conservative organization as the American Medical Association's flagship.
This was a paper subtitled "The Existential Threat of Greed in US Health Care."
The authors lament the ruthless profiteering of companies whose interest is in the bottom line rather than the well-being of the patient. "The grip of financial self-interest in US health care is becoming a stranglehold," the authors write, with what they call "kleptocapitalist behaviors" at a "level that poses an existential threat to a sustainable equitable and compassionate health care system."
Dr. Patrick Neustatter of Caroline County is the author of "Managing Your Doctor: The Smart Patient's Guide to Getting Effective Affordable Healthcare."
