Senators laid into private equity giants Apollo Global Management and Leonard Green & Partners in a report published Tuesday, alleging the firms downgraded care at hospitals they owned by prioritizing investors’ wealth over patient and provider well-being.
The report is the culmination of a year-long bipartisan investigation into the management of Lifepoint Healthcare, currently owned by Apollo, and Prospect Medical Holdings, which was previously owned by Leonard Green. The senators also sought information from the health systems’ landlord, real estate investment trust Medical Properties Trust, about certain sale leaseback transactions.
The Senate investigation, led by Sheldon Whitehouse, D-R.I., and Chuck Grassley, R-Iowa, comes amid growing scrutiny of private equity’s role in healthcare delivery — which has risen dramatically since the early 2000s.
Private equity firms invest in companies with the goal to then sell them at a profit within about three to five years. There are approximately 457 private equity-owned hospitals nationwide, according to a tracker maintained by watchdog organization the Private Equity Shareholder Project, and over 20% of proprietary for-profit hospitals are owned by private equity firms.
Private equity has invested over $1 trillion into healthcare, with a record year in 2021 in which private equity funded 515 healthcare deals totaling $151 billion, according to the report.
However, research suggests that patients and providers can suffer from the deals. Private equity ownership is associated with worse care quality, increased falls, higher costs for patients and increased employee turnover.
The growing body of research condemning private equity’s involvement in healthcare delivery, as well as a series of alleged assaults at Apollo-backed Ottumwa Regional Health Center in Grassley’s home state, motivated the senators to launch their investigation into the healthcare operators in December 2023.
Tuesday’s report alleges a pattern of mismanagement that prioritized shareholder investments over patient and provider well-being.
“As our investigation revealed, these financial entities are putting their own profits over patients, leading to health and safety violations, chronic understaffing, and hospital closures,” Whitehouse said in a statement accompanying the report.
Whitehouse said documents he reviewed of board meetings between Leonard Green and Prospect showed management used their time to discuss “profit maximization tactics” while grazing over patient outcomes or quality of care.
During Leonard Green’s management of Prospect, the health system paid out $645 million in dividends and preferred stock redemption to its investors — $424 million of which went directly to pay Leonard Green investors.
Meanwhile, quality deteriorated at Prospect facilities, and the health system took on unsustainable debts and untenable lease agreements, according to the report.
By 2020, all but one of Prospect’s hospitals ranked in the bottom 17% of the CMS’ quality of care rankings — a metric commonly used to assess hospital performance — and state regulators had begun to investigate concerns of understaffing at Prospect-owned hospitals in Pennsylvania, Rhode Island and Connecticut, according to the report.
When Leonard Green sold its stake in 2021, Prospect owed Medical Properties Trust more than $100 million in annual rent payments and carried over $3 billion in liabilities. This fall, MPT took control of three Prospect facilities due to outstanding rent payments.
Presently, Prospect is seeking to divest “most of its assets,” according to the report.
A spokesperson for Leonard Green refuted the report’s analysis.
“At the time of exit, almost four years ago, Prospect was in strong financial condition with access to over $500 million to support its operations,” the spokesperson said, adding that the firm’s money had allowed Prospect to invest in struggling hospitals.
At Apollo-owned Lifepoint, the report alleges the private equity firm’s failure to adequately invest in care may have created patient safety concerns.
Under Apollo, the report said patient volumes at Lifepoint “shriveled,” emergency department wait times grew, transfers to other hospitals increased and the health system struggled to recruit and retain staff.
“These underinvestment decisions by ORHC and its parent companies’ leaders created dangerous conditions for patients,” the report concluded.
In one scenario, operational back-ups in the Ottumwa Regional Health Center emergency department caused a patient to remain in the ED for five days, according to the report. During this time there were “multiple delays in examining and treating the patient’s urinary tract infection, evaluating the kidney function, fluid balance, controlling the patient’s high blood pressure, and rapid heart rate.”
The patient died within two days of being in the inpatient unit, according to the report.
A spokesperson for Apollo denied under-investing in Lifepoint and said it had spent “billions of dollars” to help “improve facilities, expand local healthcare services, recruit care providers, build new centers of care and upgrade technology across Lifepoint’s network.”
“At a time when many rural hospitals are under pressure and at risk of closing, Lifepoint has not had to close a single hospital and is committed to providing critical services in underserved areas,” the spokesperson added.
