Private equity ownership of hospitals made care riskier for patients, a new study finds

By Brenda Goodman, CNN

(CNN) — Health care became more hazardous for patients at hospitals purchased by private equity firms, a new study shows.

The sweeping study, which was published Tuesday in the journal JAMA, looked at the rates of 10 serious adverse events associated with medical care at 51 hospitals before and after they were purchased by private equity firms — a financing model designed to make money for investors. The researchers then compared those results with the rates of the same complications at 259 hospitals that were not owned by private equity firms.

Private equity firms have been acquiring large chunks of the US health care delivery system in recent years. In addition to hospitals, those acquisitions include nursing homes, behavioral health systems, and private physician practices. Academic research has shown that private equity ownership is associated with higher death rates for patients in nursing homes and increased costs to taxpayers. Earlier this month, the Senate Budget Committee announced its bipartisan investigation of the impact of private equity purchases on health care facilities.

All told, researchers analyzed the outcomes of nearly 5 million hospitalizations, which were available through Medicare claims data. Researchers had at least three years of data on each hospital included in the analysis.

Many of these complications are designated “never events” because they’re preventable medical errors that should never occur during routine care, such as leaving a foreign object in the body after surgery, failing to correctly match a patient’s blood type, falls, infections at certain kinds of surgical sites or where doctors insert catheters or central lines, blood clots after joint replacement surgeries and pressure sores.

Researchers said they did the study because, while there has been some evidence to show the economic outcomes after private equity firms purchase hospitals, such as increased billing rates, there’s been little understanding of how this business model may impact patient care.

The study found that rates of hospital-acquired complications for patients increased by 25% at hospitals after they were purchased by private equity firms.

Study author Dr. Zirui Song said the increase was driven by a 27% increase in falls, which tend to happen on the general floors of the hospital; a 38% increase in central line infections, which are associated with ICU care; and a doubling of the rates of surgical site infections.

The increase in central line infections happened despite private equity-owned hospitals inserting about 16% fewer central lines — ports into large veins that are surgically implanted in patients who need regular intravenous medication, food or fluids.

“In all three so-called layers of the hospital, from the general floors to the ICUs to the operating rooms, we saw a quite striking and concerning average change,” said Song, who is an associate professor at Harvard Medical School, in an interview with JAMA editors.

Experts who have been tracking the impact of private equity ownership in health care called the findings “stunning.”

“I have to say that the number is even higher than than what I expected,” said Eileen O’Grady, who is the health care research and campaigns director for the Private Equity Stakeholder Project, which aims to hold private equity groups accountable.

O’Grady said the research makes sense, based on what she’s hearing from people who work in hospitals that have been bought out by private equity firms, but she believes this is the first time a study has been able to quantify outcomes for patients, partly because there’s little transparency in private equity deals.

So how, exactly, would ownership by a private equity firm diminish patient care? Song says they can’t answer that question from the Medicare claims data alone, but that previous research has shown that these kinds of acquisitions are often linked to staff cuts, and replacing more highly paid workers, such as doctors and nurses, with lower-paid employees.

“So reduced staffing is one potential mechanism that’s at least been documented in the private equity context,” Song said.

An organization that advocates for private equity groups took issue with the study findings.

In a blog posted in response to the study, the American Investment Council, a private equity lobbying and research firm, said the study was unfairly slanted and ignored the benefits that private equity can provide to health care.

“Private equity investment is filling a need that public markets are otherwise unable to provide to help physician practices or other innovative businesses” that don’t have enough money to innovate and grow, the post said.

The AIC points to an earlier study by some of the same authors that found private equity investment was associated with slight increases in the quality of care patients received for some diagnoses such as heart attacks and pneumonia, compared with other hospitals not owned by private equity groups.

“Private equity investments not only improve care, but also expands access to it: when compared to other for-profit counterparts, private equity-backed hospitals are more likely to serve low-income, rural communities, ensuring that rural residents and their families have access to high-quality, life-saving care,” the AIC response noted.

In addition to its findings on patient outcomes, the new study also highlighted a slight shift in patient demographics at private equity-owned hospitals over the study years. In general, there was a trend at these hospitals toward treating fewer patients who were eligible for both Medicare and Medicaid benefits, a sign of patients with lower incomes. Private equity hospitals also shifted to admitting slightly younger patients and were more likely to transfer patients to other acute care hospitals.

Finally, Song said, there’s clinical decision-making, and acquisition by private equity firms may impact that.

“On average, we see that clinicians on the frontlines are making decisions that at least for the Medicare beneficiary population, amount to differences in their clinical outcomes,” he said.

Song said there needs to be more research on how financial considerations linked to private equity ownership may impact clinical decision making. He hoped similar studies would be conducted for other kinds of health care settings, too, such as doctors’ offices, telehealth and even behavioral health practices.

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