Curbside Consult with Dr. Jayne 1/13/25

I’ve worked in two different situations where the arrival of private equity funding dramatically changed the patient care environment.

The first was when I was working in the emergency department. Although I was a contractor, I worked for a physician-owned organization that treated us fairly and was overall pleasant to work for. Unfortunately, our contract ended, and rather than renew it with us, the hospital went with a private equity-backed firm that promised to onboard the existing staff so that there would be no problems with quality of care. As one can guess, this didn’t happen. Although the full-time physicians were hired, none of the part-time physicians were offered contracts. Instead, we were replaced by midlevel providers, some of whom were brand new to the safety net hospital environment.

Since I was also working on the informatics team, I saw that in the first six months, there were spikes in emergency department wait times, an increase in patient complaints, and a host of other data findings that supported concerns about how the new provider group was operating. We went from having zero administrative leadership meetings where the emergency department was a topic to having to address issues at nearly every session. Hundreds of hours of administrative time were spent dealing with all of the complaints and issues and threatening the new group with contractual penalties. They would improve just enough to get our leaders to back off, and then things would slide again. After three years of this, their contract ran out and they were replaced with another group. I can’t help but think about how many hours were wasted dealing with their nonsense and how that time could have been better spent on patient-centric initiatives.

The next time I encountered private equity folks in the clinical space was in the urgent care setting, when the physician founders sold a 51% stake to a private equity organization. There was a lot of cheerleading when the announcement was made on our 7 a.m. provider call. I was fortunate to be at home during that call and not at one of the facilities, so I could immediately dig up some information on who had just bought us.

It turns out that although they were an established organization, they were just starting to get into the healthcare space. Their experience had been with multiple franchises of a chicken wing restaurant, although they had a couple of imaging center acquisitions under their belts. Although we had been pressured previously to maximize billing and promote our highly profitable in-house pharmacy, the pressure to focus on these measures rather than actual patient care outcomes was intense. I ended up resigning not long after the private equity firm took control, but had to work out a 90-day notice period, which was far more painful than I would have imagined.

It was with these experiences in mind that I saw an original investigation piece that was published in JAMA this week, directly addressing the topic of “Changes in Patient Care Experience After Private Equity Acquisition of US Hospitals.” The authors looked at 73 private equity-acquired hospitals alongside 293 control hospitals, finding that “global measures of patient care experience worsened after private equity acquisition of hospitals, as did patient-reported staff responsiveness.” Additionally, the changes in these measures continued to increase with each year following the acquisition.

In digging deeper into the research, I found that it looked at data from 2008 to 2019 and looked specifically at patient experience measures from three years prior to an acquisition to three years after. The primary outcomes of the study were part of the standardized Hospital Consumer Assessment of Healthcare Providers and Systems (HCAPS) survey, namely the overall hospital reading and patient willingness to recommend the facility. Secondary outcomes were also assessed from among the remaining HCAPS measures and included those on clinical process, communication, and environmental measures. It should be noted that this goes beyond patient satisfaction – bad experiences have been associated with longer times to recover from an illness, failure to follow treatment plans, and increased utilization of healthcare resources.

The authors followed a thorough process in matching the acquired hospitals with relevant controls, looking at bed count, whether or not the facility was a teaching hospital, metropolitan versus non-metropolitan, safety status, geographic region, and year. In their discussion, they review a number of reasons why care experience might change as a result of private equity ownership of hospitals. The first one is fairly straightforward – nurse staffing. There is a strong association with staffing ratios and patient care experience, and one of the first things that private equity-led organizations do when they come in is to reduce the nurse-to-bed ratios. In states where there are no laws addressing this, conditions can become downright dangerous. I’ve heard horror stories from my peers at large for-profit organizations, and concerns that leadership just becomes desensitized to the fact that patients are actual human beings and not just nebulous “consumers.”

These organizations also institute cost-cutting measures that span all aspects of patient care, from the supply chain to housekeeping and facilities management. The authors note that such strategies “may not be aligned with clinician and health system efforts to improve patient care.” They go on to call upon policymakers to consider a higher level of oversight for private equity acquisitions and to consider minimum staffing ratios to further protect patients. The authors note that there are some limitations to the study, one being the relative opacity on data surrounding private equity acquisitions. In my experience, however, when PE comes to town, all you have to do is talk to the people caring for the patients because they’re highly motivated to share what is going on. They also start buffing up their resumes and may ask if you’re hiring within your competitor organization. It doesn’t take much to figure out what is going on.

Large numbers of my physician colleagues are burned out and quite a few continue to choose early retirement. When you ask them what the most significant issues are, inability to do the right thing for their patients tops the list, along with lack of physician autonomy. The problem of administrators who are more focused on profits than patients is right up there, and depending on the facility, might be cited as the primary problem. As long as our healthcare system is for profit (we all know the non-profits are making buckets of cash too, they’re just not calling it a profit) I don’t see anything changing.

What do you think about the continued movement of private equity into the healthcare space? Leave a comment or email me.

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