Many Healthcare Bankruptcies Linked To PE Firms
I often talk about the pernicious impact that private equity firms have on healthcare. Where the firms are successful, they tend to drive up costs in the system by buying provider groups, including owning emergency room providers, and pushing for huge payouts in No Surprises Act (NSA) arbitrations. They also own hospitals where they cut costs due to high debt. Quality of course suffers and patient care takes a back seat. Such firms also force providers to practice at high-cost hospital places of service (the same is true for hospitals who are independent but are buying up doc groups).
But the other pernicious impact is on shoddy investments and the churn and fallout that occurs. PE firms tend to saddle the entities they buy with debt. What’s more, some of the investments are questionable and speculative. A new report says that more than a fifth of the healthcare companies that filed for bankruptcy last year were owned by private equity firms. This is double the year prior. And Moody’s Investor Services says there will be more PR-firm bankruptcies down the road. KKR and H.I.G Capital are repeat offenders with bankruptcies.
Congress is investigating the far-reaching impacts PE firms have on healthcare. The Federal Trade Commission is looking too. They both should. I am all in favor of a private market in healthcare, but it should be accountable.
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Additional articles:https://www.modernhealthcare.com/finance/private-equity-healthcare-2023-bankruptcy-envision-genesiscare-no-surprises-act and https://www.healthcaredive.com/news/private-equity-stakeholder-project-healthcare-bankruptcy/713297/
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