The Problem
Private equity firms, a category of investors known for aggressively slashing costs and increasing prices to increase the short-term value of the companies they manage, have been investing heavily in healthcare in recent years. From hospitals[1] to nursing homes[2], private equity’s influence on healthcare is clear from the many documented instances of chronic understaffing, poor patient outcomes, bankruptcies, and sky-high profits for investors. While not all private equity is harmful by nature, private equity and similar investors present serious risks to the quality of care that patients can expect.
The Solution
States can pass laws prohibiting private equity investors from acquiring or transferring ownership of healthcare investments without the approval of the state government, to ensure that the investment or transfer does not harm the quality of care, the availability of services, or present risks of consolidation.
Model Legislation
California’s proposed SB-977 would prevent private equity funds from acquiring healthcare systems without approval from the state attorney general.[3]
Notes
[1] Peter Elkind and Doris Burke, “Investors Extracted $400 Million From a Hospital Chain That Sometimes Couldn’t Pay for Medical Supplies or Gas for Ambulances,” ProPublica, September 30, 2020, https://www.propublica.org/article/investors-extracted-400-million-from-a-hospital-chain-that-sometimes-couldnt-pay-for-medical-supplies-or-gas-for-ambulances.
[2] Yasmin Rafiei, “When Private Equity Takes Over a Nursing Home,” The New Yorker, August 25, 2022, https://www.newyorker.com/news/dispatch/when-private-equity-takes-over-a-nursing-home.
[3] California SB-997 (2020), https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201920200SB977.