Senate Report Blasts Private Equity Ownership in Health Facilities

The increasing involvement of private equity in the healthcare system “potentially pose[s] a threat to the nation’s healthcare infrastructure, particularly in underserved and rural areas,” according to a bipartisan Senate Budget Committee report released Tuesday.

The report focuses in particular on two private equity firms: Apollo Global Management and Leonard Green & Partners (LGP).

Apollo owns a company that manages Lifepoint Health, a healthcare system that includes Ottumwa Regional Health Center (ORHC) in Iowa. In 2022, a nurse practitioner at ORHC fatally overdosed on drugs acquired at the hospital and was later found to have sexually assaulted nine incapacitated female patients in less than 2 years.

“Questions arose as to how such horrific events could have occurred undetected, including the role of the hospital operator and its PE [private equity] owner,” authors wrote. The report noted that the hospital suffered from inadequate staffing and failure to properly manage its facility and its equipment, even as Apollo was reaping millions of dollars from it in management fees.

The report also included comments from ORHC employees who participated in a June 2022 “culture of safety” survey.

“I watch my peers advocate for patient safety, speak up when they have concerns, and listen to leadership be dismissive and judgmental,” said one. “There is no real appreciation for us as workers,” said another. A third commenter said that although local leadership appears to make safety a priority, “division leadership would rank a ‘1’ as they don’t make it a priority when they do not purchase the capital that is needed for our organization, and they do not do anything to combat staffing issues, resulting in staff working unsafely either due to lack of staff, burnout, or fatigue.”

The other private equity firm under fire, LGP, held a majority stake for several years in Prospect Medical Holdings (PMH), the owner of hospitals in Rhode Island and several other states.

“During LGP’s majority ownership, several PMH hospitals suffered from the effects of labor cuts, decreased patient capacity, inadequate and unsafe building maintenance, and financial distress,” even as LGP took home $424 million of the $645 million that PMH paid out in dividends and preferred stock redemption while LGP was the majority owner. This, combined with the $13 million in fees charged by LGP, left PMH in a bind financially, forcing it to close two hospitals and struggle to pay its remaining hospitals’ bills, according to the committee report.

Authors noted that PMH leadership has overseen the closure of eight hospitals, including four in Texas and two in Pennsylvania.

“According to documents obtained by the committee, discussion amongst PMH and LGP leadership during board [of directors] and committee meetings centered around profits, cost cutting, acquisitions, managing labor expenses, and increasing patient volume — with little to no discussion of patient outcomes or quality of care,” they added.

“In sum, the findings of the investigation call into question the compatibility of private equity’s profit-driven model with the essential role hospitals play in public health,” the committee concluded. “This report serves as a call to action for greater oversight, transparency, and reforms to ensure that PE-driven financial strategies in healthcare do not come at the expense of patient well-being or the sustainability of critical hospital services. The American public deserves more when it comes to healthcare.”

The 171-page report resulted from a year-long investigation spearheaded last year by then-Budget Committee chairman Sen. Sheldon Whitehouse (D-R.I.) and then-ranking member Sen. Charles Grassley (R-Iowa).

Both Apollo and LGP disputed the report’s negative findings.

“Apollo Funds have invested billions of dollars in Lifepoint and its predecessor companies, which has been used to improve facilities, expand local healthcare services, recruit care providers, build new centers of care, and upgrade technology across Lifepoint’s network,” an Apollo spokesman said in an emailed statement.

“Apollo Funds continue to support Lifepoint management’s emphasis on continuous improvements in quality of care, including at ORHC. As a result of these investments, quality of care at Lifepoint hospitals has improved, according to third-party ratings like Leapfrog as well as CMS Star Ratings. 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 statement continued.

The committee report did acknowledge positive changes at ORHC since the death of the nurse practitioner.

“Lifepoint Health invested resources to strengthen ORHC’s drug diversion prevention system — the hospital now has over 100 additional surveillance cameras, new pharmacy software, new diversion prevention surveillance software, a new sharps disposal system, and new locks and doors in the pharmacy,” the committee staff wrote. “They have increased compensation for [registered nurses] with at least 8 years of experience to be in alignment with national market rates. Lifepoint Health claims they will evaluate other positions for compensation increases in 2025.”

Meanwhile, an LGP spokesman wrote in an email to MedPage Today that “we respectfully disagree with the findings in the report.”

“As we told the congressional committee, [our] investment enabled PMH to invest in previously closed or failing hospitals, ensuring healthcare access for the underserved, and to invest over $750 million in its hospitals and provide $900 million in charity care. At the time of exit, almost 4 years ago, PMH was in strong financial condition with access to over $500 million to support its operations.”

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