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Loss of autonomy a top concern among physicians working for private equity or other corporate owners

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Loss of autonomy a top concern among physicians working for private equity or other corporate owners

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Loss of autonomy a top concern among physicians working for private equity or other corporate owners

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Another two-thirds of physicians reported having little or no involvement in practice management policies, according to a survey conducted by NORC at the University of Chicago.

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Private Equity in Healthcare Is Under A Microscope, So What's Next? 

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Private Equity in Healthcare Is Under A Microscope, So What's Next? 

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Private Equity in Healthcare Is Under A Microscope, So What’s Next?

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Private equity’s role in healthcare is still up in the air, but investments are going strong despite new concerns about cost and quality.

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Private equity Medicare Advantage investment slumps: PESP report

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Private equity Medicare Advantage investment slumps: PESP report

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Can private equity meet public responsibilities? 

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Can private equity meet public responsibilities? 

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Can private equity meet public responsibilities?

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The sums of capital the sector wields could be critical to financing a sustainable economy, but greater transparency and accountability are needed to ensure this happens

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Penn Experts Testify in Harrisburg About Impacts of Health Market Consolidation

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Penn Experts Testify in Harrisburg About Impacts of Health Market Consolidation

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Penn Experts Testify in Harrisburg About Impacts of Health Market Consolidation

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Appearing before the Pennsylvania House of Representatives Subcommittee on Health Facilities on October 4, University of Pennsylvania Leonard Davis Institute of Health Economics (LDI) Executive...

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Hospital Consolidation : Mergers, Anti-trust & Health Equity

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Hospital Consolidation : Mergers, Anti-trust & Health Equity

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0:04

Good afternoon, I'm Kathryn Santoro, Director of Programming at the National Institute for Health Care Management Foundation. On behalf of NIHCM, thank you for joining us today for this important discussion on the impact of Consolidation on healthcare delivery access and cost. This webinar is part of our affordability roadmap webinar series, where we are sharing research and expert perspectives on the drivers of rising health care costs just for solutions to our nation's health care affordability crisis.

0:36

Previous webinars have covered private equity, the impact of rising drug costs and aging on federal spending, and value based care. We also have a broader portfolio of work on these topics, including research and journalism grants, research briefs, and infographics.

0:53

Today, we will hear from a prestigious panel of experts to learn more about the research on the impacts of hospital consolidation, the role of the Federal Trade Commission, and efforts to ensure access to affordable and equitable health care.

1:09

Before we hear from them, I want to thank NIHCM, President and CEO, Nancy Chockley, and the NIHCM team, who helped to convene today's event.

1:18

You can find biographical information for our speakers along with today's agenda and copies of their slides on our website.

1:25

Closed captioning information for today's event can also be found on our website, as well as in the webinar chat.

1:33

We also invite you to join the conversation on social media using the hashtag hospital Consolidation Web webinar.

1:42

Am now pleased to introduce our first speaker, Zack Cooper. Zack is an Associate Professor of Public Health, an Associate Professor of Economics at Yale University.

1:54

As a Professor and Public Health and Economics, Zack has produced academic work on the topic areas of competition, and hospital insurance markets, surprise out of network billing, and the influence of electoral politics on health care spending growth. His work has been featured in the Quarterly Journal of Economics and the New England Journal of Medicine.

2:15

Zack has also presented his research at the White House, the Department of Justice, the Federal Trade Commission, and the Department of Health and Human Services.

2:24

NIHCM is also proud to have supported some of Zack's research through our grant program.

2:30

We're so grateful. He's with us to today to share some of his research.

2:34

Zack: Terrific. All right, well, thanks so much, Kathryn.

2:38

I'm thrilled to be here, and what I want to do today is start by thinking about why do we care about hospital markets.

2:47

Then, I want to talk a little bit about how hospital markets are functioning, some of the trends we're seeing in consolidation, and then I want to talk about what the academic literature shows on the impact consolidation.

2:58

And I'll finish a little bit with some discussion of policy and what the options are at our, at our disposal.

3:05

So, let's just take a step back.

3:09

It's really important to remember that the hospital sector is an enormous share of GDP, right, At 6% of the entire economy, and so when we think about what's driving health spending and what contributes to health spending, it's the hospital sector. That's the largest single unitary chunk of the health span.

3:29

Often I think there's a lot of focus on PBMs or on cost of prescription drugs, and no doubt those are important to look at.

3:39

The hospital sector is sort of where it's at. That's the big chunk of spending in the system.

3:44

That's why it's really the focus of my research.

3:51

We rely on competition in hospital markets to make them function, Right.

3:56

It's really the backbone of the sort of incentives we create for the hospital sector.

4:03

So, in traditional Medicare, we rely on hospitals to compete with one another to drive up quality, right, And the idea here is prices are regulated.

4:13

Individuals can choose where they go. and that allows hospitals to compete on non price aspects of care.

4:19

Medicare Advantage, we're gonna have competition, albeit somewhat constrained, overprices and quality.

4:26

And then in the private insurance space, we can have competition between hospitals, over price and quality. So they're going to compete on price quality to join contracts with insurers. And then we're going to think about these negotiated prices.

4:39

the hospitals negotiate with insurance companies as a sort of part of their ability to join insurer's networks.

4:49

So, it's worth taking a step back and saying, the markets and the healthcare sector are increasingly consolidated.

4:56

So, for context, the Federal Trade Commission, the DOJ, say, Look, markets with a Herfindahl-Hirschman index, an HHI of over 2500 points is highly concentrated, something that we should really pay attention.

5:09

Most of the healthcare industry has an HHI over 2500 points, you can see the average HHI in the US hospitals sectors, north of about 5000, 90% of hospital markets are highly concentrated, but we're also seeing concentration, high and going up among physicians and also, among insurers.

5:33

Now, the hospital sector has really experienced a pretty significant amount of consolidation over the last two decades. So, this is a graph of, some of the work we've done looking from 22 to 20 17, and there've been north of a thousand mergers between hospitals.

5:49

And during that period, there have been pretty few enforcement actions, So, 11 by the Federal Trade Commission, and that really follows a period where in the late nineties and early two thousands, the FTC really didn't do many cases, in part, because they lost number of neurons.

6:06

Now, they're starting to win cases, but they're really, in my view, going after the most extreme of the mergers. And that's partly because it's hard to win these cases, As I'll talk about later, I think it's partly because the agency itself is doing really well, but they're quite underfunded.

6:22

Beyond that, one of the challenges is that the Hart Scott Rodino Act requires merging parties to notify the government if the deals are of a certain value.

6:32

It turns out, the majority of hospital mergers are actually under Hart Scott Rodino reporting threshold. So, I think that the FTC season, but there isn't the notification that you'd see in a lot of the big transactions across the economy.

6:45

So, the hospital sector is a big share of the economy. It's the largest single chunk of health spending.

6:51

The market's concentrated it has gotten more concentrated because of mergers and acquisitions.

6:57

And if we look at data from the Bureau of Labor Statistics, it looks at prices across industries. In the US, we see the prices in the healthcare sector are growing faster than prices, in, other sectors, on average, at the economy, in, the hospital prices grow faster than prices, in any other sector, even, after the Bureau of Labor Statistics attempts to adjust for quality.

7:17

And the question here is, is this correlation or causation, with a bunch of the consolidation that's happened across the industry?

7:26

So what we can do is, say, well, what is the evidence we have.

7:30

And I want to think about the evidence on hospital prices, and clinical quality, hospital mergers, and prices, and then hospital mergers and quality itself.

7:40

So it turns out measuring the relationship between hospital quality and hospital crisis is actually really tough. Because it turns out sicker patients in all likelihood liked to go to higher priced hospitals.

7:53

And so I have some work with John Gruber and John Great Joe Doyle at MIT trying to get at this by exploiting the fact that ambulance companies have really strong preferences about where they transport their patients.

8:06

And so we can build this sort of fancy identification strategy to get the causal effect of going to a high price hospital. And our results really surprised me.

8:16

What we found was that going to a high priced hospital gets you better outcomes.

8:20

I was not expecting to see that and the effects here really, really big.

8:25

So moving from the 20th, the 80th percentile prices raises spending on an inpatient admission by about 53%.

8:33

But it's going to lower mortality by about 37%.

8:37

Those high prices are going to be cost effective, right? Because they really do have an effect on lowering mortality.

8:45

But here's what's really, really important, this relationship between prices and quality is only present in markets where there's competition.

8:54

So, if you're in a hospital market, where the HHI is 5000 points, we don't find any relationship between high prices and quality.

9:03

In those markets, when you go to a high priced hospital, you just spend more on your care and don't get better outcomes. Right.

9:09

So here what we're seeing is, competition is mediating this relationship between hospital prices and quality that is that markets can function in the health care sector conditional on there being competition.

9:25

So, you know, what about mergers and prices?

9:28

So the first thing that it's really, really important to point out is that mergers need to be reviewed on a case. By case basis.

9:35

It's, we can't just say mergers are good, or mergers are bad, and anybody who says that, you just shouldn't listen to it.

9:43

What we can see, however, is that there's a large literature that shows hospital mergers between parties that are close substitutes, bitter rivals, can lead to price increases.

9:54

And so, I've work showing that, broadly, the closer hospitals are to one another that merge, the bigger the price increases that those mergers generate.

10:02

We're seeing mergers between for-profit and non-profit non-profits, and other non-profit, and for-profit, for-profit, all lead to price increases.

10:11

So it is not true that when non-profits merge, they somehow sort of step back and say, We're not going to raise our prices. They do, just like for-profit merging.

10:21

The other thing to keep in mind, some individual transactions can have very, very large price increases. So, Bob Town is down at University of Texas, Gulf and Gary ..., and the ... now actually hit the FTC, looked at the proposed merger between a nova and Prince William Hospital.

10:41

They are predicting that that merger would have raised prices by north of 30%, and we see in our data price increases certain transactions that are extremely large.

10:51

There's also a growing literature by Limor, Daphne Cato, and Robin Li and some others, looking at so-called cross market mergers. Now, I don't think the name here is totally right, I don't think these are cross market.

11:01

I think it's just that the market is really, really big in some cases and that these mergers can lead to seven to 10% price increases.

11:08

Basically, if these mergers between hospitals that are pretty far apart can raise prices if those facilities share a common insurer.

11:17

So, what about mergers, Quality, and efficiency?

11:22

So there's a little bit of research on hospital mergers and efficiencies that finds that acquired hospitals can actually reduce their costs by somewhere in the neighborhood of four to 7%.

11:32

However, and this is really, really important, those efficiency gains only come from mergers where the merging parties aren't close competitors, right.

11:41

So these mergers of hospitals that are 10, 15, miles apart, we don't see any evidence in the academic literature that those mergers are leading to either quality gains or to efficiency improvements.

11:55

So, what about the literature on mergers and quality?

12:00

I think first it's really important to point out there is literally no academic evidence that I'm aware of. That mergers lead the merging parties to raise quality.

12:09

And so for all of the discussion about this, my sense is if there was something here, somebody would have found it. There have just been studies after studies that have tried to look at this. And nobody's really done anything convincing that went to hospitals, merge, their quality goes up.

12:26

So there's really good work by Limor, Daphne and colleagues at the New England Journal of Medicine, but no systematic changes in mortality.

12:33

There's been some work looking at the Evanston, north-western Highland Park murder, but found some evidence of quality reductions on some measures, and then there's been work Macquarie, CAHPS and others. It sounds a modest evidence. Potentially, mortality increases post merger.

12:47

My sense is to sort of get a summary of the literature.

12:50

Also, murder certainly don't improve quality, and there's some evidence that you can see quality reductions.

12:57

Where there's very, very clear evidence is that hospitals that are more exposed to competition, higher quality, and that exposing hospitals to competition, leads to lower mortality.

13:09

That's based on work that Mark McClellan and Dan Kesler done some work that I've done, and Marty Gainor has done.

13:16

The other thing we're seeing is sort of the opposite of monopoly power to monopsony power. So we're seeing that when hospitals merge together, that allows them to negotiate lower wages with nurses and so that work badly prager and match.

13:32

I'm just gonna wind down here.

13:33

So what can we do that from a policy perspective?

13:38

So the first is I think we really need to think about stronger antitrust enforcement. So President Biden issued an Executive Order gosh, about a year ago on this. I think it was really important to say that.

13:49

My sense, and I think by most accounts the FTC is underfunded.

13:53

I think we really can and should hope for more funding for the agency.

13:57

I think they're vital in guaranteeing that We avoid transactions that lesson competition.

14:04

The second is, in some ways, the FTC has its hands tied a bit when they come to looking at hustle murders and anti competitive action.

14:14

So the FTC and the FTC Act don't allow the agency to take action against anti competitive conduct problems, so they can look at non hospital or non-profit hospitals merging.

14:23

And they can't go after cases for anti competitive conduct among non-profits. I think that needs to change.

14:29

There's also been some discussion of folks who look at antitrust broadly, thinking about antitrust statutes.

14:35

So right now, the plaintiffs have to show likely harm to competition, and that's a really, really high standard. And you might think that there are ways we can sort it.

14:44

Change the burden of proof, potentially to amending are laws to say that transactions pose an appreciable risks, the competition and what I understand from attorneys. That's something that we think could could meaningfully change things.

14:57

The FTC has also put out some really good recommendations and proposals to change the reporting requirements to merger for mergers.

15:04

So that more of these deals that are under Hart Scott Rodino threshold do actually have to notify the agencies taking a step back, OK, antitrust enforcement is good, but there have been a lot of mergers.

15:16

Most of the market actually is already consolidated in this big sort of question of how do you unscramble eggs right. It's actually really, really hard to online mergers.

15:26

And so I think what we're starting to see, states take action and introduce different forms of price regulation, we see that happening in Oregon and Rhode Island.

15:34

I think it's great that states are trying.

15:36

I think we need to study what they're doing and what effects they're having really, really closely and think about the extent to which price regulation can be something that's effective and markets where there isn't scope for actual competition to maintain market determined rates.

15:51

So, with that, I'll turn it over to uh, back to Kathryn.

15:58

Thank you for sharing the impacts of consolidation and helping us understand the impact on price and quality. Next, we will hear from Rahul Rao. Rahul serves as the Deputy Director of the Federal Trade Commission's Bureau of Competition. Rahul, oversees a team of 300 attorneys and support staff that upheld that, uphold Federal antitrust laws as the Deputy Director. He assessed the FTC with conducting merger reviews anti competitive conduct investigations, and antitrust litigation.

16:33

Rahul regularly testifies before Congress, and speaks panels and workshops. And we're so honored to have him with us today to help us understand the FTC's role.

16:45

Oh, thank you, Kathryn. Can you hear me OK? I just wanna make sure.

16:49

Well, thank you. Kathryn, thanks to for inviting me here.

16:53

I want to start with just a simple disclaimer. I want to note that I am speaking on behalf of myself and not the Federal Trade Commission. My comments today don't necessarily reflect the views of the commissioner or any individual Commissioner. So we've really seen discussion today on hospital consolidation.

17:11

Now, consolidation as a general matter is happening across the country, in in all sorts of industries.

17:18

You know, too often we are seeing companies not necessarily focused on improving their products or bettering their services, but rather focused on getting bigger for the sake of getting bigger, because the bigger they are, the more they can crowd out or out muscled the competition.

17:34

And the easier it is for them to raise rates, cut corners, or simply do whatever they need to do to, to eke out a little bit more profit.

17:43

As I said, this is happening across all industries across the country. And antitrust enforcers are focused on harm in all markets.

17:50

But healthcare is unique, and healthcare is different.

17:53

In health care, we are quite literally dealing with life and death stakes.

17:58

So for us, healthcare markets are some of the most important us, some of the most important markets for us to protect.

18:05

In the US federal system, we have two antitrust law enforcers, who review mergers, the FTC, and the Department of Justice. Our jurisdictions overlap. And we enforce mostly the same laws. But it's the FTC that traditionally handles most healthcare provider mergers.

18:23

The principle statute that applies to mergers is the Clayton Act. Section seven of that law prohibits mergers that may substantially less than competition or tend to create a monopoly.

18:34

The focus on competition is our North Star when we review mergers. And so, what do we mean? When we say competition?

18:41

I mean simply it's the rivalry that exists among firms that then engage in any form of economic activity, that rivalry can be motivated by a desire to sell a product or a service to buy a product or service or to hire the best workers.

18:57

Competition, to sell, to buy, to hire, it has many benefits.

19:02

When companies compete to win customers or patients, they're motivated to offer lower prices and better quality, better services, they're motivated to innovate, new and improved products.

19:14

Similarly, when they compete to hire workers like nurses, they're motivated to offer higher wages, better benefits, and improved working conditions.

19:23

We focus on competition when we review mergers because there is real harm if a merger eliminates an important source of rivalry in a marketplace, and thus reduces the motivation to offer better prices, wages, or products or services.

19:37

Now, there are many different types of transactions that can raise concerns. I'm going to highlight two really broadly applicable fact patterns.

19:46

But that's not an exhaustive list. The first and I think, the one that most people are familiar with are mergers between head to head competitors.

19:54

These types of mergers can raise alarm bells for antitrust enforcers, particularly when they are significant competitors in a particular area and especially when there are few alternatives to the merging firms.

20:06

one straightforward way that agencies and courts evaluate this is by looking at metrics for market shares and market concentration.

20:13

Put simply if the merger results in a firm or a hospital system having significant market share and there are a few remaining competitors, or if the remaining competitors are pretty insignificant.

20:24

That's going to draw our scrutiny.

20:27

We're also concerned about other types of transactions. You may be familiar with so-called vertical mergers.

20:33

These are, these transactions involve parties that don't offer the same goods or services. Rather, one merging party offer something that the other emerging party uses in their business. So, a really simple example is a is a car manufacturer uses steel to build cars if a car company buys a steel producer.

20:51

That's a vertical transaction.

20:53

In the healthcare context, a vertical transaction could be something like a hospital system, purchasing medical groups, or an insurance company acquiring a provider.

21:03

While the merging parties themselves aren't direct rival's and insurance companies not competing with the provider group, vertical mergers can also harm competition.

21:12

You know, going back to the insurer example, if the large insure buys a major medical group in a specific community, it can charge rival insurers higher prices for the medical group services or may prevent rival insurers from contracting with the medical group altogether.

21:28

This, in turn, may force rival insurers to charge higher prices or to offer inferior health plans or to exit the market entirely.

21:37

Those are just two species of mergers that may be problematic.

21:41

But regardless of the type of merger, whether it's horizontal, whether it's vertical, or whether it's some other orientation, when we evaluate any transaction, our focus is really on what the law prevents, which are transactions that may substantially lessen competition or tend to create a monopoly.

21:59

Now, how we evaluate that is, is both a backward and forward looking exercise.

22:04

Know, when, when we do merger review, we're necessarily making predictions about the future effects of a merger.

22:10

But we don't do that in a vacuum.

22:11

We look to see how the merging parties compete in the marketplace today and ask how the merger will change their incentives or their ability to compete.

22:20

And here, past is often really prolog.

22:23

The fact that merging parties compete strongly with each other, is a strong indicator that the merger will substantially lessen competition.

22:32

So when we investigate a merger in the healthcare industry, let's say between two hospitals, we ask ourselves a series of questions.

22:39

Are the emerging hospitals important alternatives for patients?

22:43

What other options are available to patients? Are there other hospitals that are equally attractive for patients? Would patients be willing or likely to turn to other hospitals if they're not happy after the merger?

22:54

Are the merging hospitals competing to attract patients through improved quality? Developing new service lines, adopting new technology? Increasing access or making capital investments to increase capacity?

23:06

And would the merged hospital system have the same motivation to undertake those efforts after the merger?

23:11

And also after the merger, will the hospital have a significant market share? And if so, will they be able to demand higher rates from health insurers?

23:20

Would insurers have to accept those rates? Because the newly merged system is too important to exclude from their network.

23:27

Those are some of the questions we ask and oftentimes to rebut the answers to those questions, merging hospitals will often claim that their merger will have some significant benefits.

23:37

When faced with these claims of supposed benefits, we ask, what evidence is there? What evidence is there that the benefits will actually occur?

23:45

Are the benefits, speculative?

23:47

And could those benefits be achieved through some other way that does not involve a merger that eliminates a competitor?

23:54

And you heard me, Sue mentioned this before we also look at emerges effect on workers. And here the questions we ask are fundamentally the same.

24:01

Are the merging parties important alternatives for workers like nurses?

24:05

Are they competing to attract those workers with better wages, better benefits, or better working conditions?

24:11

And what are the other options available to those workers? How similar are the other potential employers, what's the geographic radius that these workers are willing to travel for a different job.

24:21

Ultimately, is the competition for these workers important enough that they would be substantially worse off after the merger?

24:29

Now, reviewing Merger's is a critical part of our authority, but our Principal enforcement power is our ability to sue to block or unwind murders.

24:39

So after an investigation, if we believe that a merger is anti competitive, we file a lawsuit before a federal district court or an administrative law judge to challenge the legality of the merger.

24:49

And we don't always do this alone.

24:51

We frequently work closely with state attorneys general, especially in the healthcare context.

24:56

Healthcare is inherently local and central to our communities. So working with our state law enforcement partners is something we value when it's possible. And so you will often see state AG's join, our Lawsuits to Block a Hospital Merger.

25:10

Now, talking about our lawsuit, Didier ... mentioned this: in the past session, for the past two decades, the FTC has had a, has a pretty solid track record on challenging hospital mergers.

25:22

We've challenged about 12 and a half hospital mergers in the past 20 years and only lost one.

25:27

You know, we've developed a very successful playbook for analyzing and challenging Birders involving hospitals that are head to head competitors.

25:35

That statistic I just mentioned. It does not include hospitals that have abandoned mergers after we've begun our review.

25:42

It does not include mergers that state AG's were able to block using the playbook we put together on how to evaluate hospital mergers, nor does it include proposed hospital mergers that never made it out of the boardroom.

25:55

But, and ...

25:57

mentioned this, despite all these winds we've had in court and all the progress we've made, we're still seeing rampant and concerning levels of concentration in health care markets.

26:06

So our task in the enforcement community now is to identify these other drivers of consolidation, and come up with the right analytical framework to understand and successfully challenged them.

26:18

And there are a few drivers of consolidation beyond the traditional local hospital merger that we are seeing today and that we are scrutinizing.

26:26

The first is on non reportable deals.

26:30

These are deals that fall below that HSR reporting threshold that SACWIS match, and the current threshold is $111 million.

26:39

So these deals are hard to detect, since the parties don't have to tell us about them.

26:43

But just because they're, they're small, and by small, I mean, less than $111 million.

26:49

That doesn't mean that these deals can't have significant impacts on, on their communities.

26:54

And there are two different types of non reportable deals that I want that I wanna focus on. The first is on what we call rollouts.

27:02

Now, traditionally, when we review a merger, we look at the single transaction that is being proposed.

27:08

A roll up, however, is a series of small acquisitions that in isolation, any one of those transactions may not look concerning.

27:17

But taken as a whole, the series of transactions lead to a quiet accumulation of concerning lehi levels of market power.

27:25

In the healthcare context, what we are seeing are health systems and private equity firms, Acquiring small, independent medical practice, through a series of acquisitions.

27:35

A 30 person group here, a five person group there, small acquisitions, like this, done over several years.

27:41

Each acquisition, again, was, when seen viewed alone, may seem insignificant, and the FTC may not even find out about these transactions, because they're so small and fly under the radar.

27:53

But over time, those little acquisitions add up, and they can lead to highly concentrated markets, where one Health System, or one provider group employs a significant number of physicians.

28:03

And while the roll ups are hard to detect, their efforts can be, their effects can be very acute.

28:10

We recently filed a lawsuit challenging a roll up in the healthcare space. That suit was filed in Texas, Challenger and a roll up in the anesthesia market by a national practice and its private equity sponsor.

28:21

As the complaint alleges the defendants, in that case, quietly acquired a number of small anesthesia practices in various cities in Texas, eventually amassing a dominant market share in those cities, and using that market power to extract higher rates in those communities and throughout Texas as a whole.

28:40

So, another concern that was one concern we have with sub HSR transactions.

28:44

Another concern with sub HSR transactions is on what I want to describe as, um, identifying and preventing catalyzing events.

28:53

So, when I say catalyzing events, what I mean is a transaction that serves as a flashpoint for a downward spiral towards consolidation. This is about stopping the snowball at the top of the mountain from ever becoming the avalanche. So an example of what I mean by this. In, in past merger reviews, we've seen situations of a proposed merger in a highly concentrated market.

29:16

Markets where there are three hospital systems and two of them want to merge.

29:21

Under street, legal, and economic analysis, these murders are highly problematic and illegal.

29:26

The problem we face with some of these mergers is that the B side of the hospital that is being bought is oftentimes a very distressed asset. It's a system that may be on the verge of bankruptcy, end up shutting down.

29:40

So blocking a merger does not always help the community.

29:44

Concentration will increase whether the hospital is bought or whether it shuts down in bankruptcy.

29:49

So, the problem is, by the time it gets to us, it's sometimes too late.

29:54

Now, some of the things that we've seen when we're reviewing these mergers that fall into this fact pattern is that at some point, years before one of the three systems, usually not the one that is currently in financial dire straits, but one of the systems engaged in a large, but sub HSR transaction.

30:11

Often, a large provider group acquisition.

30:15

and it was this transaction that started the downward spiral towards consolidation that culminated in a near bankrupt hospital, and in a market with 2 to 3 hospitals in it.

30:26

That group acquisition from years ago, that was the snowball at the top of the mountain.

30:30

So part of our task here is to build out an early detection system to identify these smaller transactions and stop them before they lead to irreversibly, concentrated markets. And, there are things that we can do on this.

30:43

You know, Zack said, we need more funding. I will not say no to that. But first, you know, I hope Congress will give us more resources so that we can pursue more cases preemptively.

30:54

Second, our partners at the state level, they have much more visibility and activity of the activity in their community. And they also have different laws on reporting healthcare transactions. So, our state partners can, and often do alert us to problematic acquisitions that don't rise to the HSR reporting level.

31:13

And, third, we encourage any knowledgable market participants to flag transactions for us in real time.

31:19

Now, these sub HSR transactions, they are one issue.

31:23

But we're also faced with kind of the opposite issue. We are also faced with mega mergers in healthcare.

31:30

And as a general matter, the commission finds out about these murders before they're consummated. because they're very big and we do our best to investigate and challenging these trouble, these troubling mega mergers.

31:40

one challenge, though, is, um, is that, to large hospital systems that are trying to merge, may not actually have facilities in overlapping geographic markets, and thus may not compete for the same patients.

31:55

Some of the antitrust community have referred to these as cross market mergers, and as you heard, that name is, is, may not be fully accurate.

32:04

Now, if the merging parties don't actually compete at all in any capacity, then there are passed to blocking the merger are limited.

32:12

But the problem here is that in the wake of these mega mergers, or these so-called cross market mergers, we see the undeniable effects of lost competition. We see rates go up, We see quality decrease NBC's services cut.

32:27

So when we look at the effects of the merger, we know there is some loss of competition that's driving those effects, even when the merging hospitals aren't directly competing for the same patients.

32:39

So what is that lost competition?

32:41

It could be a dominant statewide employer or a or a payer trying to provide a health plan to all of its statewide employees or insurance enrollees. Or it could be something else.

32:52

So our task here is to better understand what's happening, to understand and identify all the dimensions of competition and the full extent of the commercial realities, not just the ones centered on local geographic area so that we can prospectively analyze a so-called cross market merger and block it before it results in harm.

33:11

Now, another thing you've heard me mentioned is a focus on workers.

33:14

Hospitals tend to be one of the largest employers in a community.

33:17

And so we don't want to lose sight of any effects A merger may have on those who work at hospitals, for example, nurses.

33:24

These are our unsung heroes in healthcare, and we wanna make sure that a merger doesn't create a dominant employer that has the power to lower wages, lower benefits or other working conditions.

33:34

It's obviously worth noting that overworked and underpaid hospital staff also have a direct impact on the quality of patient care.

33:41

So, making sure that our critical workers like nurses are protected and taken care of is important, just is important for them, but it's also important for patients.

33:50

So, evaluating labor impacts is a critical part of our hospital merger review.

33:56

Now, I know I'm running a little past time, and I want to just quickly wrap up. There are some other process developments in the pipeline that we also hope will help us combat consolidation in healthcare markets.

34:07

The first is that the FTC and DOJ are revising our so-called merger guidelines. By way of background, the FTC and DOJ put out these guidelines that describe the analytical framework and the tools we use to evaluate mergers.

34:22

The merger guidelines provide guidance to the public to merging parties into the courts' on how to assess the legality of mergers.

34:28

And while they're not a lot, they don't bind courts or judges, judges do typically find them useful, and have traditionally adopted their framework when Litigating merger challenges.

34:39

So we're in the process of revising our Merger guidelines, which were last updated in 2010.

34:44

To better reflect how we assess Murderer's today, the revised guidelines will provide more clarity on many of the issues we touched upon today including evaluating the effects on workers, better articulating what the concentration thresholds are, for a merger that's presumptively legal and things like that.

35:01

And we also proposed a revision to the form and the information the parties have to submit to the FTC and DOJ as part of their HSR filing.

35:09

The goal here is for the agencies to get more of the critical information upfront so that we can evaluate a merger early. And so we can more effectively assess and screen those mergers that raise concerns and not waste time reviewing mergers that are not problematic.

35:24

And basically, where I just want to leave is that there's clearly a concerning trend towards consolidation and concentration in healthcare markets, and the FTC is committed to doing everything in our power to combat this trend. So thank you for the time.

35:39

Thank you so much travel for helping us understand all the efforts going on at the FTC to address consolidation. Next, we will move into a discussion on maintaining access to care and health equity, and we'll hear from lowest Utley co-founder of Community Voices for Health System Accountability. A statewide alliance that is raising Consumer Voices as Health systems Propose Mergers, Acquisitions, New Construction, Downsizing, and Closing of Hospitals.

36:09

Lois, also teachers and the Masters Health Advocacy Program at Sarah Lawrence College has dedicated july 25 years to protecting patients rights and the access to care when health systems are consolidating and we're so grateful, Lois is here today, O S Yes. Thank you so much, I'm hoping you can hear me.

36:33

Yes. OK, good.

36:36

So thank you so much for the opportunity to say a few words about how hospital consolidation is affecting communities access to care and health equity.

36:47

I wanted to try to give you the view from the front lines at the community level.

36:52

Next slide.

36:54

So hospital consolidation is really changing the healthcare landscape for patients. Their community hospitals are joining large health systems that then shift decision making to add 10 executives.

37:09

And often these executives look to eliminate what they view as duplicative services that can be found at other hospitals in the system.

37:19

People are also seeing their community hospitals closing are downsizing, hospitals are shutting maternity care and they're closing or reducing the hours at hospital ERs.

37:33

Next slide, please.

37:37

As you've heard Zack and Raul explain increasing numbers of hospitals are joining Health Systems. The American Hospital Association, and this is their graphics and kits, reports that there are now 407 Health Systems, and the US, and that more than two thirds of all hospitals belong to one of these systems. You know, being part of a large health system can seem very attractive to the hospital boards and CEOs, particularly, those struggling with financial issues.

38:11

But often, these mergers come with a big catch for the people who depend on the hospital for their medical care.

38:19

Next slide, please.

38:22

So I've worked with dozens of communities across the US where health systems have made big promises about the benefits of mergers or acquisitions. And here are three popular examples.

38:39

Then they say, the merger will stabilize your hospital financially and ensure it's still here for you in the future.

38:48

They may say, the merger will improve the quality of care at your hospital.

38:53

And you've just heard from Jack Cooper that that often is not a promise that's fulfilled and stared. Your hospital will have access to capital, needed to carry out renovations of aging buildings.

39:08

Next slide, please.

39:12

But once the merger goes through, those promises often are broken.

39:17

And the post merger effect can be like some of the examples I have here where communities are then told, Oh, we're closing maternity care.

39:29

But you can just go to our other system hospital 25 miles away or the community may be told we won't be allowing contraception, tubal, ligation, abortion, or other reproductive health services and violate our systems religious directives.

39:48

Lower.

39:49

Often, a private equity firm that's acquired a hospital may say, to achieve optimum efficiency and effectiveness. We need to cut the hospital staff by 25%.

40:02

And sometimes the news is very dire.

40:06

Unfortunately, we must close your hospital entirely.

40:10

Now, sometimes it can take several years for the other shoe to drop and what I call the post merger effect.

40:19

For example, here in New York City, where I'm based, the Mount Sinai Health System took over Beth Israel Medical Center through a 2013 merger where the Continuing Health System.

40:30

six years later, in 20 19, Mount Sinai tried to close Beth Israel.

40:37

That plan fell apart when the pandemic kit and all available hospital capacity was needed.

40:43

But now, Mount Sinai is back planning to close that Israel and leaves a large swath of downtown Manhattan with diminished hospital capacity.

40:54

Thank you. Next slide.

40:58

So, who is harmed by hospital consolidation?

41:02

As Zack Cooper has explained beautifully, hospital consolidation has often been shown to increase the price of health care.

41:11

And that ends up increasing premiums and harming people at high deductibles as well as people who are uninsured. And they can end up in medical debt as a result.

41:24

But access to care and health equity are also harmed.

41:28

People in rural areas can be left without ready access to medical care.

41:34

People in low income, urban neighborhoods of color, often feel abandoned by health systems that are closing their hospitals, and instead moving into suburban areas where people have commercial health insurance.

41:49

Women and other people capable of pregnancy, can be forced to travel long distances for maternity care, or suffer the loss of reproductive health services.

42:03

These changes can pose real problems for people with disabilities and elderly people who cannot easily navigate change and health delivery systems, and also for LGBTQ plus people, who often struggled to find health care providers, they trust, and then can lose them in these hospital changes.

42:24

Next system. Next slide, please.

42:28

So, now I want to talk about an approach that one state New York, where I'm based, has taken to try to introduce a health equity consideration into state review, or proposed hospital consolidation.

42:45

Know, when Kogod 19 to stay really hard and early 2020, I, and some other health advocates, we raised concerns about how decades of hospital consolidation had left some communities without enough hospital beds.

43:02

So a former State Assembly, Health Committee CHHIr, Dick Doctorate, and State Senate Health Committee CHHIr, Gustavo Rivera, sponsored a bill.

43:13

Was intended to introduce health equity into state review of hospital transactions through our state's Certificate of Need Program.

43:25

The measure was signed into law in December 2021 by Governor Kathy Hoell goal, and then underwent an 18 month rulemaking period that engage both health advocates and health facility representatives.

43:39

And the law is being administered by the State Burnette House, New Office of Health Equity, in Human Rights. Now, let me just briefly tell you what the law requires.

43:52

When a proposed health facility transaction would cause the elimination reduction or relocation of services, health facilities must hire an independent assessor to do an assessment of, what's the likely impact of the change on medically underserved people.

44:12

And you can see on the slide that medically underserved, includes low-income, uninsured, women, LGBTQ plus people, racial and ethnic minorities, immigrants, people with disabilities, rural residents, older adults.

44:29

The assessor is supposed to conduct meaningful engagement of these folks and come up with the likely impact, as well as a propos mitigation plan to address any negative impacts.

44:45

The assessor, by the way, is supposed to be independent, have expertise and health equity, and no conflicts of interest, like an interest in approval of the transaction in question.

44:58

Next slide, please.

45:02

So the first test of this new law has been proposed closing of the only maternity service and upstate rental they're counting.

45:11

That county used to have three hospitals with maternity services, but two of them were close through successive rounds of hospital mergers.

45:21

The surviving facility called Samaritan Hospital join the saint Peter's Health Partners System, which is part of the National Trinity Catholic Health system.

45:32

And because triggering doesn't allow certain reproductive services, a separately incorporated hospital within a hospital was created to allow access to post-partum Tubal ligation.

45:48

That creative solution, however, fell apart in 20 20.

45:52

Lambert debt was Reabsorbed into Samaritan Hospital.

45:57

Do they have financial and staffing issues?

45:59

So, OK, No reproductive services, but at least maternity care was still there, but, then last Spring saint Peter's suddenly announced that it was closing number, that verse center entirely because it has been losing money, and the system said, the pregnant patients could travel across the Hudson River to the system's hub hospital in Albany County.

46:24

Next slide, please.

46:28

There was a really strong outcry send the community, which would be losing its own only maternity service.

46:35

And by the way, that Burdette Center also serves people in several adjacent oral tennis, even the local Catholic Bishops spoke out in opposition.

46:47

Next slide, please.

46:50

So, how does the health equity law come into play?

46:54

Well, saint Peter's filed its certificate of need to close the birth center two days before the new law went into effect.

47:04

After considerable public criticism, saint Peters Reluctantly agreed, to go ahead and commissioned a health equity assessment.

47:12

They hired to charge this group a national consulting firm that often advises hospitals and health systems, including Trinity Health, the parent system of saint Peter's. Next slide, please.

47:29

A local coalition to say, Ignore that birth center coalition that includes midwives, dulas, and public health people, decided they would do their own health equity assessment following the model from the state. Frankly, they were mistrustful of what the study commissioned by saint Peter's would find.

47:49

The coalition found that many people who have given birth after the phrase, the midwife, led model of care, and low rate of C section deliveries, black pregnant women.

48:00

And you can see a quote from one of them on the slide here said, They feared the loss of burdette where they felt respected and listened to after many hurtful experiences with other health providers. I should say that in Troy, wherever Deadness located.

48:17

Many low-income people depend on having the birth center close by nearly a quarter of some people, And so I live in poverty, and 22% of the households have no cars, and, thus, no way of going to another birth center. So there are also many rural residents who depend on their debt.

48:36

Next slide, please.

48:41

So the charter screwup did the health equity assessment, and many of its findings actually echoed what the community group had found in terms of health inequities, and some significant transportation problems.

48:57

However, in the mitigation section charges then just accepted saint Peters claims that it could arrange transportation for pregnant people. And that patients could go to saint Peter's and use midwives there.

49:10

Even though only 16% of the births there are currently attended by midwives, add a forum the other night, the CEO of Saint Peter's credited the house equity assessment as being helpful and identifying health equity issues.

49:26

And he and Lee system said they would delay the plan closure up or down and engage the community.

49:35

It remains to be seen, however, how robust stone engagement will be and whether there are any ways to really mitigate the negative impact of closing the birth center.

49:48

Wanted to just note that, meanwhile the State Attorney General, Latisha James has also stepped in. She has regulatory authority over non-profit charities, including saint Peter South Partners. So she's been looking closely at this closure.

50:05

I want to flag that some other states are also looking at health equity, in addition to price effects of competition, Kearney, Oregon, and Minnesota.

50:19

And as both Sac and Grow will have noted, President Biden has has said that hospital mergers are leaving many areas without good options for convenient and affordable health care service. So I am eagerly anticipating the release of the FTC's New Merger Review Guidelines, and hope there can be some way to incorporate health equity concerns there.

50:47

I'll just finish by flagging a few resources.

50:50

You can consult for more details about what I've discussed today.

50:56

Thank you.

51:01

Thank you. Lois, thank you to all of our speakers. Our invite everyone to come back on camera and off mute for our last few minutes of discussion. The audience can continue to submit questions.

51:17

We'll start out. We had a lot of questions come in, and I know a few of you touched on this, but Can you expand on, you know, what are the practical legal options for addressing already concentrated markets as any unwinding, feasible. Do you anticipate seeing more legislation and the states in the year ahead?

51:47

I think, Yeah, and I get my so I think what the Massachusetts HE did, which is sort of say, if you merge, maybe we'll put some price caps on the merchant fees, and sort of a really good start.

52:00

I think unwinding is really, really tough. You know, I think there's been the north-western murders. The only one that I can recall, I think it might be worth looking into. But I think it's just very, very hard.

52:13

So I think there's it's worth considering price regulation. I think you just have to be exceptionally careful. I think our work pretty clearly shows that higher price hospitals if they faced competition, has higher quality.

52:25

And that may be potentially because their costs are higher.

52:27

And so, I think it's sort of assessing what's happening in those markets and looking at what's happening, it's a mistake and proceeding pretty cautiously.

52:39

Yeah, I just want to echo that. I mean, we definitely have within our authority, the ability and the right to unwind an illegal transaction, but it's exceptionally difficult. It's very challenging. The metaphor, often used as unscrambling Eggs, which is an imperfect metaphor, because we actually can unscramble. It's just, it's just challenging.

53:00

I will say, you know, some of the other options, like price caps and things like that, they're, they're interesting.

53:06

But, I think, one of the things that we need to be really sensitive to is, it's really hard to change the, the incentives of the merging parties.

53:13

And if they are incentivized to do to maximize profits, right, and the, traditionally, it would be through price increases capping that just means they may be incentivized to find another way, to eke out that process, such as quality reductions or access issues. So, yeah.

53:31

Our preference is obviously to prevent the consolidation before it happens, because the structural separation is the most secure way to ensure all the equities are at play or are accounted for.

53:45

one of the things we have to think about is, you know, there's sort of breaking up existing firms. And we can think about that. The other is expanding the geographic scope of markets. So, we're seeing evidence of patients being willing to travel farther in certain instances.

53:59

I think the more that we can sort of make these markets bigger, and potentially not expect that our local hospital can do everything for everyone, like the more you're going to see competition in the existing markets.

54:14

Great.

54:16

And I think all of you touched on this as well, but a few questions asking if you can expand on how consolidation is impacting the workforce, specifically nurse staffing, and how that's impacting patient care, and is that an area where we need more research or is there enough research there to help show that?

54:41

I'll be really quick.

54:42

So, but others, please feel free to chime in. There has been a significant amount of research in the last few decades on the, on labor markets, on labor economics, specifically, which has really kind of revolutionized our understanding of of how labor markets work. You know, 50, 60 years ago, we would think of a consolidated labor market as as a company town. Right. Like Pullman, Illinois or something. And we now have much more sophisticated understanding of that and there is more research being done.

55:12

But also taking just a step back. We do have experience looking at input markets in general. We do review mergers for buyer power, so we, we have the tools at our disposal and it is something that we are, you know, we're very actively looking into.

55:28

There was a merger that we challenge not too long ago, made a couple of years ago, where it was a time where we were had a split commission, where there was only four Commissioners and not a fifth one.

55:38

And this is, public staff had recommended, including, a labor count into the Hospital Merger Challenge, and all four commissioners were supportive of, the idea of a Labor Count, is just to didn't think that the fact supported it, in that case, but it's, it's part of all of our merger analysis. So.

56:01

Hmm, I know we have mainly focused on hospitals today, But I know soc, you've pointed to some work on providers and physician groups. The question is, how do we deal with that concurrent horizontal acquisitions officials, physician groups, labs, clinics, to steer referrals to the owner, and not allow referrals elsewhere?

56:24

And some health plans are seeing that.

56:27

Yeah, and then I think, so, there's, you know, again, separating vertical and horizontal, so will sort of take each in turn, you know, the vertical said, I think, the literature, and the theory, or the sort of theory. And the evidence is becoming much, much stronger.

56:41

And, you know, I'm doing some work on a lot of others are, I think, let's just say, the theory for a second, which is, you know, as a hospital by physicians, and those physicians and changed the referral patterns, That actually gives me more market power. That actually helps me, as the hospital, help. those physicians negotiate higher prices. And I think we're starting to see evidence that both hospital physician prices go up there.

57:04

It's really challenging from an enforcement perspective, because each of the individual traction, transactions are small, and ...

57:09

talked about, looking a little more into roll ups and, and I think it's something we need to seriously consider.

57:16

I think the horizontal one, the theory's, just sort of on ambiguous in that case.

57:20

I think it's hard and the physician sector, because there are a lot of physicians and two doctors or 10 doctors coming together.

57:27

That's just a small transaction, and the agency is got a handful already, and so that's like, how do you go after that? And the other thing we have to start thinking about is payers buying physician practices.

57:38

I think that's another area where we need to study what's happening.

57:42

Think about the economics of it and think about what impacts that have on prices and whether it's leading to competitive advantage for certain firms via lessening of optician.

57:55

Yeah, Sorry. Let us go ahead.

57:58

Let's just quickly find the patient perspective, when the health system, in a buys physician practice. one of the immediate impacts the patient say is that there's sometimes encounter a facility's, say, You know, being charged $150 extra to go see the same doctor in the same exact office they saw before, so that's something that is worth considering.

58:22

Just to kinda, I touched upon this, a little bit in the talks about when I describe, like a catalyzing event like that's what, that's what you're describing is.

58:29

What Zack is describing to you is like, you know, these acquisition of these groups that change referral patterns in a way that that causes a spiral towards consolidation. And the challenge there is definitely on the deal size, it's it, they're usually not over $111 million. But, what we're seeing at the state level is that there are a number of states out there that are passing their own healthcare notification laws that have significantly lower thresholds, and, or, or, just based on different threshold metrics. Like, in Washington State, it's based on provider size. So, transactions, that involve more than seven providers have to be reported.

59:01

And, and that's helping us and working with the states in that way. It's helping build out a more robust early detection system, so that we can, you know, we have the authority to challenge the transactions if we know about them.

59:12

And just to build on, you know, I think, what the states are doing, it's vital. And what you're talking about about disclosure requirements makes, it kind of sounds like, the FTC has been really clear about some of the challenges that certificate of need groups can compose. So, I think I'd be really cautious going down that lane, it actually often as a tool to protect incumbents.

59:32

But I think the states have a ton of ability to really support the federal agencies and do a lot of work on their own, make local markets competitive.

59:40

Great. Well, thank you, Zack. We're gonna make that the last word since we're right at two o'clock. But really want to thank our excellent panel of speakers, that was so interesting and helpful to hear about your work, your perspectives, and some potential solutions that our audience can take back to their work. Thank you to our audience for joining this discussion. Your feedback is important.

1:00:05

Please take a moment to complete a brief survey that will open on your screen, and please check out our that comes, resources and research on consolidation. And our other affordability related resources. And you can also register for our next webinar, where we'll be talking about the growing combination drug use issue, an opioid crisis. So, I hope you'll all join us for that. And thank you again to our speakers so much.

1:00:37

Thanks, everybody.

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Hospital Consolidation: Mergers, Antitrust & Health Equity

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In this webinar, leading experts will discuss the multifaceted implications of hospital consolidation as it increases across the US....

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Does UT Tyler Health Science Center's deal with private equity shield doctors from malpractice suits? 

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Does UT Tyler Health Science Center's deal with private equity shield doctors from malpractice suits? 

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Sign up for The Brief, The Texas Tribune's daily newsletter that keeps readers up to speed on the most essential Texas news.

Michael Simington wasn't one to see a doctor. But when the 67-year-old retired welder started having trouble urinating, he knew something was wrong.

He saw Dr. Ruben Garcia, a urologist in Corsicana in October 2019. A biopsy showed he had prostate cancer. But Garcia didn't share those results with him for a year and a half, Simington said.

By the time Simington learned of his diagnosis in March 2021, "it done spread," he said. "They said that usually when it's gone that far, there ain't no going back."

A urologist from the University of California, Los Angeles, hired by Simington's attorney, reviewed the case and determined that the delayed diagnosis may have cost Simington eight to ten years of his life. To Simington, this seemed like a clear-cut case of medical malpractice, so he sued Garcia.

That's when Simington fell through a trapdoor in Texas' medical malpractice system and found himself facing an unexpected adversary: the University of Texas System.

While the clinic where Garcia practices is owned and operated by a for-profit health care system, he is employed by that system's business partner: the University of Texas at Tyler Health Science Center.

Most people don't pay much attention to who their doctor works for. But if things go awry, it becomes a distinction with a significant difference. In Texas, doctors employed by a government entity - like a county hospital or state medical school - are generally not subject to medical malpractice suits. Patients can, under narrow circumstances, sue the doctor's employer, but for far less money than a standard medical malpractice suit.

What began as a case about a delayed diagnosis has spawned something much larger. Simington's lawyer alleges that UT Tyler Health Science Center is fraudulently hiring doctors like Garcia as medical school professors to shield them from lawsuits, while they perform all of their work for a for-profit, private equity-backed health care system the university has an ownership stake in.

The university declined to comment on the pending litigation, but said in a statement that its health care venture "has been exceptionally successful and significantly enhanced medical education and healthcare for East Texas."

In March 2023, Simington recorded a statement from his bed in the corner of his son's living room. The frail, sunken man on camera is virtually unrecognizable from the sturdy, foul-mouthed fisherman featured in photographs around the house. He was in unrelenting, teeth-chattering pain as the cancer essentially starved him to death.

This video affidavit was one of his last acts to allow his children to continue the lawsuit without him. He died at home less than two weeks later.

"Man, they ain't covered by no government immunity," he said, his wispy voice gaining steam. "That's just some type of loophole they found to get their damn foot in the door."

A health system is born

Tucked "behind the pine curtain," Northeast Texas reflects the fundamental mismatch of rural health care. While residents in the area are older and sicker than the state at large, they are less likely to have access to nearby medical care. It's a region that's been hit hard by hospital closures, physician and nursing shortages and lack of affordable health insurance.

A few years ago, these grim economics seemed to be coming for one of Northeast Texas' largest health care providers, East Texas Medical Center. The 9-hospital system, with associated physician practices, outpatient clinics, and ambulance services, had been struggling with debt and operational issues for years.

But then, in 2017, ETMC announced it had found a buyer. Two, in fact. Seemingly overnight, a familiar shade of orange unfurled across the region, signaling the dawn of a new health care system: UT Health East Texas.

UT Health East Texas was created in partnership with UT Tyler Health Science Center, the graduate medical education center in the region. But most of the funding for this acquisition came from the university's for-profit partner: Ardent Health Services. Ardent invested almost $350 million to buy the ETMC properties and promised $125 million in system improvements.

Based in Nashville, Ardent is the fourth largest privately held hospital operator in the country, with hospital systems in six states. It's owned by Ventas, a real estate investment trust; Pure Health, a health care platform in the United Arab Emirates; and Equity Group Investments, a private equity firm founded by billionaire investor Sam Zell.

Zell, who died in 2023, called himself the "grave dancer" for his success buying and selling moribund companies. He is perhaps best known for his failed turnaround of Tribune Co., which owned the Los Angeles Times and The Chicago Tribune. The " deal from hell," as he called it, led to the largest media bankruptcy at that point in U.S. history in 2008.

A decade later, Zell's backing allowed Ardent to move into academic medicine, starting with a University of Kansas hospital in 2017, and soon after, UT Health East Texas.

Despite its affiliation with a public university, UT Health East Texas is a for-profit health care system. Ardent owns 70% of the entity and manages day-to-day operations. The university owns 30%; UT Tyler's president chairs the corporate board.

The exact terms of the joint venture between Ardent and UT Tyler Health Science Center are detailed in a master services agreement, which the university declined to provide to The Texas Tribune through an open records request, saying it would provide an advantage to marketplace competitors. The Texas attorney general's office upheld that denial.

Private equity has become an increasingly dominant force in American health care, snapping up physician practices, hospital chains and whole health care systems with the goal of turning a profit for investors. But it's moved more slowly into academic medicine, which is built on a model of reinvesting at least some of its revenue into less profitable ventures, like education, research and development.

"These partnerships with academic health centers and nonprofits are relatively new, and they're playing under the radar," said Eileen O'Grady, healthcare director at Private Equity Stakeholder Project, an industry watchdog. "It allows a private equity firm to penetrate a market that has historically not been available to PE, and to do so with, I would argue, less financial risk."

Private equity's rapid acquisitions of hospital systems have raised red flags for researchers, watchdog groups and even a bipartisan group of U.S. senators, who worry about the emphasis on profits over patients and providers. But for rural and community hospitals, struggling with debt and shrinking payer bases, private equity firms may present an option too enticing to turn down.

In East Texas, Ardent was welcomed in with open arms, heralded as a savior for a health care system on the brink.

"The formation of UT Health East Texas is a game changer for our region," UT System regent Kevin Eltife said in a press release at the time. "With the support of the UT System and Ardent, UT Health East Texas will continue to raise the bar for quality and accessibility of healthcare services while generating significant economic impact for communities throughout East Texas."

ETMC took the proceeds of the sale and became a private foundation, which then donated $80 million back to UT Tyler to help start the area's first medical school. The medical school, which admitted its first class this fall, hopes to help rebuild East Texas' physician pipeline by recruiting students interested in staying in the region after graduation.

For people who'd watched the rise and fall of health care in Northeast Texas, this all seemed like good news. Reid Martin, a longtime medical malpractice attorney, was excited about the investment in the region - as a Tyler resident, as a UT alum and as the proud parent of a medical student.

"I want the medical school here. I want doctors here," Martin said. "But I want good doctors here."

A few years later, he took on Michael Simington's case. And that's when he started to look more closely at some of the implications of this partnership for medical malpractice lawsuits.

"I didn't realize until I looked into it," Martin said. "But the way they've set up [UT Health East Texas], there's no way to hold the doctors working here accountable."

Governmental immunity?

Since it launched, UT Health East Texas has expanded far beyond ETMC's original footprint. Originally, there were 52 physician clinics under its name. Today, it has more than 90.

Among the acquisitions were four urology clinics owned by Dr. Ruben Garcia. At the time, a press release assured patients they could see the "same providers in the same locations with the same telephone numbers." But Garcia and his fellow doctors would become "official members of the UT Health Athens team."

But Garcia was not actually hired by UT Health East Texas or its subsidiary, UT Health Athens. While UT Health East Texas now owned the equipment, employed the staff, handled the billing and scheduled patients' appointments, Garcia himself was hired by the University of Texas at Tyler Health Science Center, which paid him an annual salary to serve as a 100% clinical assistant professor of surgery.

Since 2018, more than 200 doctors across East Texas have been hired by the university as professors while practicing at UT Health East Texas.

UT Health East Texas CEO G. Todd Hill said in a 2023 deposition that adding the faculty physicians was part of getting ready to have the medical school in Tyler. The UT Tyler School of Medicine admitted its first class this fall, four years after Garcia first signed on as a professor.

"There is a growth of the [graduate medical education] program throughout East Texas," Hill said. "And so I think all of this has been preparatory and planned. So having the growth of university physicians throughout makes sense."

Less than a month after Garcia signed on as a university professor, Simington went to see him for a prostate biopsy. The signage at Garcia's office, as well as his white coat and his web presence, all branded him as working for UT Health East Texas, a for-profit company. To confuse things further, the forms Simington filled out still bore the name of Garcia's private practice.

"I just thought I was paying for his new golf cart," Simington said in his affidavit.

In recent weeks, after the Tribune began asking questions about the partnership, UT Health East Texas updated its website to say that certain providers, including Garcia, are "employed as a clinical faculty physician at the University of Texas Health Science Center at Tyler under the UT Tyler School of Medicine."

When it comes to medical malpractice cases, which entity has the "right to control" your doctor's work can mean the difference between getting your day in court - or getting thrown out on a technicality.

After the biopsy, Simington said he never heard from Garcia. His medical records show a follow-up appointment was scheduled for two weeks later, but Simington said he was never told about this, and there wasn't a "no show" noted in his file, according to the report from the UCLA expert.

Simington called Garcia's office several times, and his primary care provider twice requested the results on his behalf, but got no response, according to the lawsuit.

"He's from the generation of no news is good news," Rodney Simington, his son, said. "Nobody called him. Nobody sent him letters. He doesn't do email or anything like that, so he didn't hear anything."

In March 2021, with his symptoms worsening, Simington's primary care provider urged him to go see Garcia again. Finally, 18 months after the biopsy, Garcia gave Simington the results.

It was cancer. And it appeared to be stage 4.

"I wanted to knock him out of that chair, is what I wanted to do, but I kind of held my temper a little bit," Simington said. "That's when I started getting in contact with all my kids and stuff and giving him a hard time not having me an oncologist onboard."

When an oncologist did a bone scan, "his whole body just lit up," Rodney said. "It was in his hips, his knees, ankles, back, neck, shoulders. It metastasized into the bones."

Garcia declined to comment through his lawyer. But in a legal filing, he denied wrongdoing and said Simington's damages were a result of "unavoidable occurrence" and "pre-existing and/or subsequently occurring conditions and disabilities and/or unrelated treatment of the decedent."

Rodney Simington, a detective with the Tyler Police Department, and his wife, Michelle, a nurse, moved into a single-story house so they could care for Rodney's dad in his final months. In the beginning, he stood around "supervising" Rodney's renovations. But pretty quickly, he was in too much pain to do much more than sit in his recliner and shuffle outside for a cigarette.

"We did all the appointments, anything you could think of, even to the point of ... doing radiation," Rodney said. "It was painful for him. He'd be sick for days afterwards. But he was fighting, tooth and nail."

Just shy of two years after his initial biopsy, Simington filed a lawsuit against Garcia and UT Health East Texas, which he believed to be Garcia's employer. Martin, his lawyer, thought it was a pretty open-and-shut medical malpractice case against a private health care provider.

"Normally, we wouldn't take a misdiagnosis or delayed diagnosis, because they get to them timely enough to where it didn't really change the outcome," Martin said. "But here, 18 months, with no treatment and not telling him and allowing it to spread throughout his body in such an aggressive manner, it's inexcusable."

That's when the question of who Garcia worked for suddenly became very, very important.

If Garcia is employed by UT Health East Texas, a private, for-profit company, Simington could have sued under the typical medical malpractice statute. Under Texas' 2003 tort reform law, a plaintiff can win up to $250,000 in non-economic damages against a doctor, among the lowest damage caps in the nation. But there's no limit on economic damages - things like medical expenses and lost wages - so a plaintiff can sometimes win significantly more in the end. In 2018, Martin won a $43 million judgment against ETMC on behalf of a patient who ended up in an induced coma for a month after he was treated by a doctor who was on probation; the hospital system settled for $9 million.

But Garcia's lawyers say he is employed by UT Tyler Health Science Center, a state agency, a distinction that could protect him from most medical malpractice suits.

Instead of suing Garcia directly, Simington would have to sue the university under a much narrower statute with lower potential winnings. He would have had to have notified the state of his intent to sue within six months, and he would have to prove that the incident involved "tangible personal property." For medical malpractice, that usually means something like a knick with a scalpel or a sponge left inside a patient. Non-treatment or a missed diagnosis rarely qualifies.

Even if Simington's case met these very narrow qualifications, which it likely doesn't, the most he could win is $250,000 - economic and non-economic damages combined. It's difficult to find a lawyer in Texas willing to take on these cases for so small a payout.

This is the two-tiered system of medical malpractice liability in Texas: Doctors employed by private health care systems can be held liable for malpractice; doctors employed by government medical facilities, like county hospitals and academic health centers, generally cannot.

"I don't agree with the limitations of [the law], but I've learned to work within its confines," Martin said. "I've made a practice out of it. But now, they're saying that's not enough for them, they want to stretch this even further."

In his lawsuit, Martin argues that the partnership between Ardent and UT Tyler Health Science Center is an attempt to pull the shroud of governmental immunity over doctors who actually work for a private health care facility.

"I'd never seen anything like this in my 32 years practicing," he said.

Hill, the UT Health East Texas CEO, said in his deposition that the partnership was intended to address health care shortages and expand medical education in East Texas, not close off a group of doctors from medical malpractice liability.

Martin asked Hill if he would characterize it as an "unintended consequence."

"It's not the purpose of it. I'm not going to characterize it," Hill said. "But certainly sitting in my chair...it's not even on the top 10 list of what I'm - why I'm here and what we're focused on."

Medical malpractice attorneys on both sides have spent years trying to figure out just how far this veil of protection extends, litigating cases involving Parkland Health in Dallas, University Hospital in San Antonio, UT Southwestern, M.D. Anderson and other county and state entities.

Texas courts have tended to rule that doctors can carry their immunity with them, even when practicing at a non-governmental medical facility, as long as the government agency still retains the "right to control" the doctor's work.

In an affidavit, Garcia said his employment was entirely directed and controlled by the university, "such as the schedule that I worked, the facility where I worked, the type of patients I cared for ... and the type of medical services I was authorized to render."

The original memorandum of appointment that Garcia signed in 2019, which governed the period when he treated Simington, said he was being paid a university salary "solely for clinical and administrative services provided on behalf of UT Health East Texas." Future versions of the contract added that his work was provided on behalf of the university, at UT Health East Texas facilities.

The contracts say Garcia may be responsible for research and educational activities; in his deposition, he said he did not teach a class or supervise a resident during the period he was treating Simington. The contracts are signed by Garcia, representatives from the university, and the president of UT Health East Texas.

Further details about the partnership and terms of Garcia's employment are contained in nearly 900 pages of documents filed with the court under a protective order. Martin twice had to ask the judge to intervene to get UT Health East Texas to hand over records he was due as part of the standard discovery process. He has, unsuccessfully, petitioned the court to unseal the records.

Martin believes he can prove in court that the university is not actually controlling Garcia's work, and that this partnership involves doctors "pretending" to be state employees to get medical malpractice protections.

"They're purchasing all these clinics, and doctors are signing these MOAs in East Texas from Carthage to Canton," he said. "If we don't fight, we're going to have an area in the state of Texas where the patient is going to lose their rights."

The case continues

On March 6, 2023, less than a month before Simington died, lawyers gathered in a conference room to depose Garcia.

On one side was Martin, representing Simington.

On the other side were two private attorneys from Dallas medical malpractice defense firms; two lawyers from the University of Texas system; and an assistant attorney general.

A case that started out about a delayed diagnosis is now focused entirely on the details of this partnership between the university and a for-profit health care system. Both sides have filed motions for summary judgment, asking the judge to resolve the central questions in this case. The court has not set a hearing date.

Martin is hoping the judge will rule that Garcia is not a state doctor. That would allow Martin to sue him as an individual for his treatment of Simington, as well as pursue his claims that the university and UT Health East Texas engaged in fraud by hiring these doctors as professors.

Garcia's attorneys are asking the judge to remove him from the case and substitute the university, essentially validating the structure of the partnership between Ardent and the university. Simington's case would likely then be thrown out since it was reported more than six months after the incident and didn't involve the tangible use of personal property.

Either ruling will likely result in an appeal. Martin said he is willing to litigate this all the way to the Texas Supreme Court if necessary, and Simington's children say they're not planning to quit anytime soon.

"I miss him everyday, but I'm more angry than anything," Rodney Simington said. "They don't care. To them, it's an issue of shoving the blame somewhere else .... I'm not going to let this go. They picked the wrong person."

Martin ended Garcia's deposition with a question: "Do you think it's fair to the patients in East Texas to have doctors providing medical care on behalf of a for-profit health care corporation while claiming to be protected by governmental immunity?"

"I believe that East Texas has been an underserved community," Garcia replied, "and that the University of Texas Health Science Center is providing opportunities for health care that have not been available prior to this."

"Objection, nonresponsive," Martin responded. "But we'll leave it at that."
Disclosure: The University of Texas System has been a financial supporter of The Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations and corporate sponsors. Financial supporters play no role in the Tribune's journalism. Find a complete list of them here. We can't wait to welcome you to downtown Austin Sept. 5-7 for the 2024 Texas Tribune Festival! Join us at Texas' breakout politics and policy event as we dig into the 2024 elections, state and national politics, the state of democracy, and so much more. When tickets go on sale this spring, Tribune members will save big. Donate to join or renew today.

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Does UT Tyler Health Science Center's deal with private equity shield doctors from malpractice suits?

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A lawsuit claims UT Tyler Health Science Center is trying to pull the veil of governmental immunity over doctors who do all of their work for a for-profit, private equity-backed health care system.

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US to prioritize Private Equity's Role in Healthcare Fraud

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US to prioritize Private Equity's Role in Healthcare Fraud

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US to Prioritize Private Equity’s Role in Healthcare Fraud

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The Justice Department is focusing on private equity’s role in causing healthcare fraud, the head of the Civil Division said Thursday.

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Private Equity is Buying Up Healthcare, but the real problem is why are doctors selling? 

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Private Equity is Buying Up Healthcare, but the real problem is why are doctors selling? 

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https://thehill.com/opinion/healthcare/4365741-private-equity-is-buying-up-health-care-but-the-real-problem-is-why-doctors-are-selling/

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Who owns your doctor's office? More and more often nowadays, the answer is a private equity firm - a type of investment fund that buys, restructures, and resells companies.

Over the last decade, private equity firms have spent nearly $1 trillion on close to 8,000 health care deals, snapping up practices that provide care from cradle to grave: fertility clinics, neonatal care, primary care, cardiology, hospices, and everything in between.

We should all be concerned about how private equity is reshaping American health care. Although research remains mixed on how it affects quality of care, there is clear evidence that private equity ownership increases prices. These firms aim to secure high returns on their investments - upwards of 20 percent in just three to five years - which can conflict with the goal of delivering affordable, accessible, high-value health care.

But amid warnings that private equity is taking over health care and portrayals of financiers as greedy villains, we're ignoring the reality that no one is coercing individual physicians to sell. Many doctors are eager to hand off their practices, and for not just for the payday. Running a private practice has become increasingly unsustainable, and alternative employment options, such as working for hospitals, are often unappealing. That leaves private equity as an attractive third path.

There are plenty of short-term steps that regulators should take to keep private equity firms in check. But the bigger problem we must address is why so many doctors feel the need to sell. The real solution to private equity in health care is to boost competition and address the pressures physicians are facing.

Consolidation in health care isn't new. For decades, physician practices have been swallowed up by hospital systems. According to a study by the Physicians Advocacy Institute, nearly 75 percent of physicians now work for a hospital or corporate owner. While hospitals continue to drive consolidation, private equity is ramping up its spending and market share. One recent report found that private equity now owns more than 30 percent of practices in nearly one-third of metropolitan areas.

Years of study suggest that consolidation drives up health care costs without improving quality of care, and our research shows that private equity is no different. To deliver a high return to investors, private equity firms inflate charges and cut costs. One of our studies found that a few years after private equity invested in a practice, charges per patient were 50% higher than before. Practices also experience high turnover of physicians and increased hiring of non-physician staff.

How we got here has more to do with broader problems in health care than with private equity itself.

The American Medical Association found that the top reason physicians sell their practices (to any entity) is that they need higher reimbursement rates to remain financially viable. On their own, they find that they cannot negotiate those rates effectively with insurers. Physicians also need access to capital to keep up with the high costs of doing business, from legal compliance to technological investments, such as complex electronic health records.

Anecdotally, we've heard that private equity firms often pitch physicians that they'll increase the value of the stake the physicians retain in their practices, making an eventual exit more lucrative. And many physicians appear to prefer private equity employment to grueling hospital hours and schedules because they're able to preserve more autonomy and achieve a better work-life balance.

To fix consolidation in health care will require us to address the system that leads physicians to see profit-driven private equity as their best path to staying afloat, even if they initially entered medicine to help people.

A simple first step is to require better information on consolidation activity. Private equity companies are mostly exempt from ownership disclosure requirements because they are privately held, making it almost impossible for a patient to figure out who owns their doctor's office, or for physicians to know who is behind the firms trying to buy their practices.

Boosting ownership transparency and going after monopolistic behavior - steps the Biden Administration endorsed last week and that the Federal Trade Commission and Department of Justice have also recently started to pursue more aggressively - will help keep private equity's impact in check. We can decrease the attraction of private equity just by making physicians more aware of whom they're selling to and what other practices those firms own.

Ultimately, however, we need to address the pressures that lead physicians to sell in the first place. The most important thing we can do is ease the financial burden of running an independent practice. Earlier this year, Indiana passed a tax credit for independent physician practices. Other states should consider following its lead.

At the federal level, Medicare has long undervalued primary care, partly because rates are influenced by a committee full of specialists. Medicare also frequently relies on a fee-for-service approach that rewards quantity of services delivered, incentivizing physicians to see as many patients as possible as many times as possible.

Congress can reform Medicare to boost payments to primary care practices, which are more financially vulnerable than specialist practices. One group of researchers estimates we need an increase of anywhere from 30 to 50 percent to account for current undercompensation.

We can also move toward value-based-care, which rewards quality and outcomes, and pay practices a set amount per patient every month, providing them with a steady and predictable source of revenue. Since private insurers often base their rates on Medicare, these steps would likely trickle down and boost the financial stability of practices that treat non-Medicare patients.

The best place to stop an avalanche is not at the bottom of the hill, but at the top, and while the future torrent remains only a snowball. We must address the underlying problems making it so hard for physicians to maintain independent practices, so that they are no longer at a disadvantage compared to private equity giants.
Yashaswini Singh is an assistant professor, and Christopher Whaley an associate professor, of Health Services, Policy and Practice at the Brown University School of Public Health.
Copyright 2024 Nexstar Media Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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Private equity is buying up health care, but the real problem is why doctors are selling

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Ultimately, we need to address the pressures that lead physicians to sell in the first place.

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The rising danger of Private Equity in Healthcare

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The rising danger of Private Equity in Healthcare

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https://lowninstitute.org/the-rising-danger-of-private-equity-in-healthcare/

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Private equity (PE) acquisitions in healthcare have exploded in the past decade. The number of private equity buyouts of physician practices increased six-fold from 2012-2021. At least 386 hospitals are now owned by private equity firms, comprising 30% of for-profit hospitals in the U.S.

Emerging evidence shows that the influence of private equity in healthcare demands attention. Here's what's in the latest research.

What is private equity?

There are a few key characteristics that differentiate private equity firms from other for-profit companies. At a 2023 event hosted by the NIHCM Foundation, Assistant Professor of Health Care Management at The Wharton School at the University of Pennsylvania Dr. Atul Gupta explained these factors:

1. Financial engineering. PE firms primarily use debt to finance acquisitions (that's why they're often known as "leveraged buyouts"). But unlike in other acquisitions, this debt is placed on the balance sheet of the the target company (ie. the physician practice or hospital).

2. Short-term goals. PE firms make the majority of their profits when they sell, and they look to exit within 5-8 years. That means they generally look for ways to cut costs quickly, like reducing staff or selling real estate.

3. Moral hazard. PE companies can make a big profit even if their target firm goes bankrupt. This is different from most investments where the success of the investor depends on how well the target company does.

The nature of private equity itself has serious implications for healthcare, in which the health of communities depends on the long-term sustainability and quality improvement of hospitals and physician practices. But are these concerns borne out in the real world?

PE acquisition and adverse events

A recent study in JAMA from researchers at Harvard Medical School and the University of Chicago analyzed patient mortality and the prevalence of adverse events at hospitals acquired by private equity compared to non-acquired hospitals. The study used Medicare claims from more than 4 million hospitalizations from 2009-2019, comparing claims at 51 PE-acquired hospitals and 249 non-acquired hospitals to serve as controls.

In-hospital mortality decreased slightly at PE-acquired hospitals compared to controls, but not 30-day mortality. This may be because the patient mix at PE-acquired hospitals shifted more toward a lower-risk group, and transfers to other acute care hospitals increased.

However, there were concerning results for patient safety. The rate of adverse events at PE-acquired hospitals compared to control hospitals increased by 25%, including a 27% increase in falls, 38% increase in central line-associated bloodstream infections (CLABSI), and double the rate of surgical site infections. The authors found the rates of CLABSI and surgical site infections at PE-acquired hospitals alarming because overall surgical volume and central line placements actually decreased.

What could be behind these higher rates of adverse events after PE acquisition? In a Washington Post op-ed, Dr. Ashish Jha, dean of the School of Public Health at Brown University, writes that it's down to two things: staffing levels and adherence to patient safety protocols. "Both cost money, and it is not a stretch to connect cuts in staffing and a reduced focus on patient safety with an increased risk of harm for patients," he writes.

Social responsibility impact

Private equity acquisitions may have a negative effect on patient safety, but what about social responsibility? In a recent report from PE Stakeholder on the impact of Apollo Global Management's reach into healthcare, the authors use the Lown Institute Hospitals Index to understand hospitals owned by Apollo perform on social responsibility. Lifepoint Health, a health system owned by Apollo, was ranked 222 out of 296 systems on social responsibility nationwide. And in Virginia, North Carolina, and Arizona, some of the worst-ranked hospitals in the state for social responsibility are those owned by Lifepoint Health, the PE Stakeholder report shows.

Apollo Global Management is the second largest private equity firm in the United States, with $598 billion total assets under management, according to the report. The PE stakeholder report outlines concerning practices by Apollo, including putting high levels of debt that lowers hospitals' credit ratings and increases their interest rates, cutting staff and essential healthcare services, and selling off real estate for a quick buck. If we care about hospital social responsibility we should clearly be concerned about private equity acquisitions.

The bigger picture

Private equity buyouts did not come from out of nowhere, so what does this trend tell us about our healthcare system? PE acquisitions are in many ways a symptom of larger issues in healthcare, such as increasing administrative burden, tight margins, and lack of regulation on consolidation. For owners of private physician practices that face a lot of administrative work, deciding to sell to a PE firm to reduce this workload and focus on patient care (not to mention, getting a hefty payout) is a tempting proposal.

In the Washington Post, Ashish Jha describes what made his colleague decide to sell his practice to a PE firm: "The price he was getting was very good, and he was happy to outsource the headache of running the business (managing billing, making sure there was adequate coverage for nights and weekends, etc.)."

"In many ways, private equity is both a response to and an accelerator of broader health system trends - one in which consolidation is happening quickly, care is being delivered by larger and larger entities, and corporate influence is growing."
Jane M. Zhu, MD, MPP, MSHP, Associate Professor of Medicine at Oregon Health & Science University, at NIHCM Foundation Event

PE buyouts are also indicative of a larger trend, what some researchers call the "financialization" of health. As Dr. Joseph Bruch at the University of Chicago and colleagues describe in the New England Journal of Medicine, financialization refers to the "transformation of public, private, and corporate health care entities into salable and tradable assets from which the financial sector may accumulate capital."

Financialization is a sort of merging of the financial and healthcare sectors; not only are financial actors like private equity buying up healthcare providers, but healthcare institutions are also acting like financial firms. For example, 22 health systems have investment arms, including nonprofit system Ascension, which has its own private equity operation worth $1 billion. The financialization of healthcare is also reflected in the boards of nonprofit hospitals. A 2023 study of US News top-ranked hospitals found that a plurality of their board members (44%) were from the financial sector.

What we can do about it?

What can we do to mitigate harms caused by PE acquisitions? In Health Affairs Forefront, executive director of Community Catalyst Emily Stewart and executive director of the Private Equity Stakeholder Project Jim Baker provide some policy ideas to stop the "metastasizing disease" of private equity:

Joint Liability. Currently PE firms can put all of their debt on the balance sheet of the firm they acquire, letting them off the hook for this debt and making it harder for the acquired company to succeed. "Requiring private equity firms to share in the responsibility of the debt...would prevent them from making huge profits while they are saddling hospitals and nursing homes with debts that ultimately impact worker pay and cut off care to patients," write Stewart and Baker.

Regulate mergers. Private equity acquisitions often go under the radar because the acquisitions are small enough to not be reported to authorities. But the U.S. Federal Trade Commission could be more aggressive in evaluating mergers and buyouts by PE, as they have done recently in Texas, where a PE firm has been buying up numerous anesthesia practices.

Transparency of PE ownership. It can be hard to know when hospitals are bought by a PE firm. The Department of Health and Human Services could require disclosure of PE ownership for hospitals as they have done for nursing homes.

Remove tax loopholes. The carried interest loophole allows PE management fees to be taxed at as capital gains, which is a lower rate than corporate income. Closing this loophole would remove a big incentive that makes PE buyouts so attractive for firms.

"It is clear that the problem is not the lack of solutions but rather the lack of political will to take on private equity," write Steward and Baker. We need not to not only stem the tide of PE acquisitions sweeping through healthcare, but address the financialization of healthcare more broadly, to put patients back at the center of our health system.

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The rising danger of private equity in healthcare - Lown Institute

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Emerging evidence shows that the influence of private equity in healthcare demands attention. Here's what's in the latest research.