Private Equity in Health Care Shown to Harm Patients, Degrade Care and Drive Hospital Closures

Bipartisan Senate Budget Committee investigation exposes how private equity firms prioritize profits over patients, jeopardizing care and eroding hospitals' financial health

WASHINGTON - Today, Sens. Chuck Grassley (R-Iowa) and Sheldon Whitehouse (D-R.I.), in their respective capacities as Ranking Member and Chairman of the Senate Budget Committee during the 118^th Congress, released a bipartisan staff report on the findings of their investigation into the ways in which private equity investment in health care has negative consequences for patients and providers.

The Committee focused on two private equity firms-including the single-largest private equity investor in health care-that currently or previously invested in two prominent hospital operators. Throughout the course of its investigation, the Committee reviewed more than one million pages of documents from Leonard Green & Partners, Prospect Medical Holdings, Medical Properties Trust, Apollo Global Management (Apollo), Lifepoint Health and Ottumwa Regional Health Center, a for-profit Iowa hospital, that revealed new information about the business dealings of private equity-owned hospital operators. Documents obtained by the Committee detailed how private equity's ownership of hospitals earned investors millions, while patients suffered and hospitals experienced health and safety violations, understaffing, reduced quality of patient care and closures.

"The Ottumwa community has personally felt the impact of private equity on its health care system. Under private equity ownership, wait times at Ottumwa Regional Health Center have gone up as patient experience has gone down. The diminishing quality of care, service availability and care capacity at the hospital is forcing Ottumwa residents to travel significant distances in order to receive appropriate treatment. Iowans deserve better," Grassley said. "A dependable health care system is essential to the vitality of a community. 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."

"Private equity has infected our health care system, putting patients, communities, and providers at risk," Whitehouse said. "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. Take private equity firm Leonard Green and hospital operator Prospect Medical Holdings: documents we obtained show they spent board meetings discussing profit maximization tactics-cost cutting, increasing patient volume, and managing labor expenses-with little to no discussion of patient outcomes or quality of care at their hospitals. And while Prospect Medical Holdings paid out $645 million in dividends and preferred stock redemption to its investors-$424 million of which went to Leonard Green shareholders-it took out hundreds of millions in loans that it eventually defaulted on. 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."

Read the full report HERE, and view the documents released by the Committee HERE and HERE.

Key Findings:

Apollo-Owned Lifepoint Health and Ottumwa Regional Health Center (ORHC)

• ORHC has been repeatedly failed by its private equity-owned operators, including current operator Lifepoint Health, which is owned by funds affiliated with Apollo. ORHC's private equity-owned operators failed to fulfill seven promises-including legally binding ones-made to ORHC when it was first acquired by a private equity-owned operator in 2010. These failures are related to hospital growth, physician recruitment, routine capital expenditures, charity care, patient satisfaction and continuation of services.
• The failed leadership of ORHC's private equity-owned operators has decreased patients' quality of care and caused the hospital financial harm. Worsening conditions at the hospital, such as inadequate staffing, have resulted in significant negative consequences, such as a nurse practitioner's assault of female patients in 2021 and 2022.
• Apollo has made millions in profits as a result of its investment into Lifepoint Health and ORHC's previous private equity owners, even as the hospital's operations have suffered. According to the Committee's findings, Lifepoint Health pays Apollo $9.2 million annually just to cover management fees.

Leonard Green & Partners (LGP) and Prospect Medical Holdings (PMH)

• LGP wielded substantial influence over PMH's financial decisions and incentivized PMH management to satisfy LGP's financial goals regardless of patient outcomes. For example, LGP granted stock options to PMH employees based on reaching earnings goals, but similar incentives for improving patient safety and care at PMH's hospitals were nonexistent.
• LGP and PMH's primary focus was on financial goals rather than quality of care at their hospitals, leading to multiple health and safety violations as well as understaffing and the closure of several hospitals. During LGP's majority ownership, several PMH hospitals suffered from the effects of labor cuts, decreased patient capacity, inadequate and unsafe building maintenance, and financial distress.
• Despite gross financial and operational mismanagement of its hospitals, LGP took home $424 million of the $645 million that PMH paid out in dividends and preferred stock redemption during LGP's majority ownership-in addition to over $13 million in fees-that left PMH in severe financial distress. In order to pay out these distributions, PMH was forced to take on hundreds of millions of dollars in debt, eventually leading to PMH running out of cash and defaulting on its loans.

Background:

In March 2023, Grassley wrote to four companies with ownership interests in Ottumwa Regional Health Center in Ottumwa, Iowa-a formerly nonprofit hospital sold to a private equity firm in 2010-with concerns following a nurse practitioner's disturbing assault on nine sedated female patients. Grassley sought information on Ottumwa Regional Health Center's financial arrangements in an effort to determine the extent to which private equity ownership contributed to the alarming events. The companies failed to provide full and complete responses to Grassley's questions, prompting additional oversight.

In December 2023, in recognition of their bipartisan concern about the growth of private equity in health care, Grassley and Whitehouse expanded upon that investigation. The senators sent letters to the chief executive officers of Apollo Global Management, Lifepoint Health, Medical Properties Trust, Leonard Green & Partners, Prospect Medical Holdings and Ottumwa Regional Health Center, a for-profit Iowa hospital. The senators demanded answers regarding questionable financial transactions and business strategy that may have impacted quality of care for patients in hospitals under private equity ownership.

Today's report is a result of their inquiry.

Read the senators' full letters to each of the companies:

• Grassley, Whitehouse Letter to Apollo Global Management Inc.
• Grassley, Whitehouse Letter to Medical Properties Trust
• Grassley, Whitehouse Letter to Lifepoint Health Inc.
• Grassley, Whitehouse Letter to Ottumwa Regional Health Center
• Grassley, Whitehouse to Leonard Green & Partners, L.P., Prospect Medical Holdings, Inc. and Medical Properties Trust, Inc.

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