Health Care/Joan Retsinas

The Invasion of BIG E

In the movies, aliens invade human bodies. The humans don’t morph into bizarre shapes: they look the same, almost act the same …. except not.

Similarly, the BIG E — more precisely, Private Equity, or its cousin, Venture Capital — has stormed into health care. Nursing homes, physician practices, hospices, dialysis centers, birth centers, home health agencies, dental practices, ambulance companies, hospitals — they are ripe for a voracious E.

BIG E may present with the best of intentions: offering capital, expertise, a hedge against inflation. Yet their help has often morphed into a takeover, so that the recipient/host loses its soul. In retrospect, those providers might have said “no,” but “yes” was so alluring.

The path-to-takeover begins and ends with money. Those health-hosts generate income, generally provided by insurers and government, but often not enough to finance debt, to upgrade equipment or to expand.

Investors step in because healthcare generates so much money. Private equity firms owned 11% of nursing homes, along with 4% of hospitals as of 2021, according to the Medicare Payment Advisory Commission (MedPAC). Private equity owns 130 rural hospitals. In 2018 more physicians were employees than owners of their practices. TeamHealth staffs about a third of the country’s emergency rooms. A patient won’t know who owns their physician, their nurse, their therapist.

When private equity steps in, it seeks, first, to cut costs — an imperative if it has burdened the host with debt. Under the mantle of efficiency, it slashes costs. The easiest route: cut staff and/or downgrade staff credentials.

So we see more physician assistants, nurse practitioners, allied health personnel. This substitution does not necessarily harm patients; in fact, those staff may spend more time talking to patients, listening to families. A patient with diabetes needs a physician to diagnose. Yet a nurse can guide the patient and family through the regimen. Assistants for physical therapy and occupational therapy can translate the therapists’ directions into steps patients can follow.

But when the prime motive for substitution is economic, the patient is likely to lose out. Less credentialed staff are less expansive. A judicious use of those personnel might entail hiring more of them, but that would negate the rationale for stepping down.

Private equity will also need to increase revenue. It can bump up billing, seek higher reimbursement, higher charges for procedures, as well as more procedures. Patients and insurers, including Medicaid and Medicare, will pick up that tab.

Overall, the ultimate goal of private equity is profit. That is why investors invest in the nursing homes, ambulance companies, physician practices, et al.

Crucially, the goals of investors and patients do not often dovetail. Consider the chimerical promise from the CEO of Oak Street vis-à-vis its agreement with CVS Health: “This agreement will accelerate our ability to deliver on our mission … improving health outcomes, lowering medical costs, and providing a better patient experience while offering significant value to our shareholders,” (Wall Street Journal, Feb. 9). When shareholders’ interests vie with those of patients, shareholders win.

After private equity stepped in, one study of nursing homes found excessive bedsores, unnecessary drugs, cuts to per-patient nursing staff, and higher patient mortality. And when the “product line” proves unprofitable, investors may simply pull the plug, closing the facility, as investors did with Seasons Midwifery and Birth Center in Thornton, Colorado, in October, leaving more than 50 pregnant women who were scheduled to give birth scrambling to find providers. Staffers and community advocacy groups stepped in to fill the void for the suburban Denver community and its patients, many of whom rely on Medicaid, the federal-state insurance program for people with low incomes. They reorganized Seasons as a nonprofit organization and reopened in January as the free-standing Seasons Community Birth Center.

The solution is not to bemoan the behemoth: Private Equity is integral to the financing of our health care system, and, as promised, may improve efficiency, provide capital, allow for expansion. But we patients need regulations to protect us from the greed of Big E, to spare us the unnecessary procedures, excessive billing, increased deaths, and the closing of unprofitable facilities that may undergird the bottom line of Big E. Those regulations will increase costs. Regulations in general increase operating costs. But surely we patients are worth it. Health care has a soul. The government must safeguard that soul.

Joan Retsinas is a sociologist who writes about health care in Providence, R.I. Email joan.retsinas@gmail.com.

From The Progressive Populist, March 15, 2023

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