Private equity ownership of US hospice centers has exploded in recent years – study

Private equity investors are increasingly buying hospice centers: healthcare institutions that focus on pain management and emotional support for people nearing the end of their lives.

The new study was published in the journal Health Affairs and provides further evidence of how private equity has acquired firms using often sophisticated and opaque ownership structures.

“Private equity is moving not just into the hospice sector, but into every aspect of health care,” said Dr. Vikas Saini, president of the Lown Institute, a think tank that is critical of private equity ownership in health care and who was not involved in the study.

The reason private equity has become interested in health care, Saini said, is because the industry “smells like money.” He added: “Their business is making money — it’s not taking care of people.”

Private equity is a form of private, for-profit ownership in which asset managers often invest the money of wealthy individuals. Unlike publicly traded companies, private equity firms do not sell shares and are not required to report as much information.

While for-profit ownership is not new to the U.S. healthcare industry, the rise of private equity ownership is. Such investment groups have an estimated $1 trillion over the past decade, by buying up hospitals and doctors’ offices. During that time, the interest of the industry The purchase of previously non-profit hospice centers has also increased.

A new study published in Health Affairs finds that private equity ownership in hospice care has skyrocketed over the past six years, with the number of acquisitions rising from just a few in 2015 to nearly three dozen in 2021.

While most companies acquired only one or two hospice facilities, at least one company acquired 22 hospice centers spread across 10 states. Another acquired 14 hospice centers spread across four states. Most of the acquisitions were in southern states.

Researchers were able to uncover the takeovers by comparing a proprietary database of mergers and acquisitions, called LevinPro HC, with federal government data on health care ownership collected by Medicare, the public health insurance program for the elderly.

Medicare, which provides nearly universal coverage for seniors in the U.S., is also overwhelmingly the largest payer for such services, covering about 90% of all hospice patient days, according to the National Association for Home Care & Hospice.

“That money should be spent on delivering care, and if you’re a for-profit entity, you have every reason to cut back on that care,” Saini said. “There’s every reason to be very concerned about this wave of acquisitions.”

The American Investment Council, a trade association for the private equity industry, says the industry “plays a critical role in supporting quality, affordable health care in the United States.” The group did not respond to a request for comment.

A new study from Health Affairs finds that for-profit hospice centers are more likely to discharge patients before they die, more likely to transfer patients to hospitals and emergency departments, and more likely to have complaints and deficiencies.

According to the U.S. government, approximately 486 hospitals are owned by private equity firms, representing 30% of all for-profit hospitals in the country. Project for private equity stakeholders. Similarly, private equity firms have also been buying up doctor’s practices, increasing their ownership stake, the Commonwealth Fund.

“In the U.S. in particular, we have an aging population with a chronic disease burden,” said Mary Bugbee, research and campaign director at the Stakeholder Project, which has also been critical of private equity’s actions in health care. “There’s a lot of demand and a lot of opportunity to make money.”

Critics argue that private equity owners often pursue short-term strategies to increase profits that are anathema to good patient care. In some cases, the company sells all of a company’s assets, such as land and facilities, to quickly repay investors. Those facilities are then leased back to the company.

Other times, private equity firms may take out loans to repay investors using the same assets as collateral. A third strategy is to increase profits and then spin the business off to a larger health care player — which often requires cutting costs and raising prices, the Commonwealth Fund.

Researchers from Harvard University recently found that when private equity takes over hospitals, key health care indicators, such as the number of preventable falls and infections, often deteriorate.

“It’s really great that we have researchers who have done a study like this, we need more research that just documents the size and the footprint of private equity in our healthcare system,” Bugbee said. “This is unfortunately needed because we don’t have enough required transparency around these transactions.”