The highest Democrat and Republican on a strong Senate committee launched a wide-ranging investigation into non-public fairness’s affect on the U.S. well being care system on Wednesday. Democratic Sen. Sheldon Whitehouse of Rhode Island and Republican Sen. Charles Grassley of Iowa despatched letters to a constellation of economic corporations looking for details about how their dealings within the healthcare house affect affected person care.
”The American individuals deserve to know the function that PE [private equity] corporations play — and any potential ensuing destructive monetary or affected person care impacts — within the supply of their well being care,” wrote the senators, who lead the Senate Price range Committee.
As a part of the inquiry, the senators are additionally looking for data associated to sure transactions that had been the main target of a latest CBS Information investigation into the collapse of hospitals serving a few of America’s most weak residents.
”As non-public fairness has moved into well being care, we have now grow to be more and more involved concerning the related destructive outcomes for sufferers,” Whitehouse mentioned in an announcement to CBS Information. ”From facility closures to compromised care, it is now a well-known story: non-public fairness buys out a hospital, saddles it with debt, after which reduces working prices by slicing providers and employees — all whereas buyers pocket tens of millions. Earlier than the mud settles, the non-public fairness agency sells and leaves city, leaving communities to select up the items.”
The pair of senators wrote to the heads of two corporations — Prospect Medical Holdings and Medical Properties Belief — that CBS Information discovered had siphoned a whole bunch of tens of millions of {dollars} from hospital operations in Pennsylvania and San Antonio, Texas. Drained of funds, vital care services there subsequently shut down. The senators are additionally looking for data from a 3rd firm, Los Angeles-based non-public fairness big Leonard Inexperienced and Companions, which they allege was ”deeply intertwined” with the opposite two corporations.
With funding from Leonard Inexperienced and Companions, Prospect Medical Holdings quickly grew from proudly owning 5 Los Angeles-based hospitals in 2010, to twenty hospitals in six states by 2018. 5 of these hospitals have since closed, together with the century-old Delaware County Memorial Hospital in suburban Philadelphia. Final November, Pennsylvania’s Well being Division shut the hospital down after studying it was inadequately staffed by Prospect Medical Holdings.
Final yr, CBS Information reported on a sequence of economic strikes executed by Prospect Medical Holdings’ administration that drove the corporate deep into debt earlier than the closure. The primary was in 2018 when the corporate’s house owners took out a $1.12 billion mortgage and paid themselves a $457 million dividend. The corporate’s then-CEO Sam Lee, who’s now chairman of its board, took residence about $90 million.
”It would be like a house owner going to a financial institution, taking out a $100,000 mortgage, and as a substitute of utilizing it to put money into their property or pay for his or her children to go to varsity, what they did was they simply mainly caught it of their pockets as money,” Rhode Island Lawyer Normal Peter Neronha instructed CBS Information final yr.
After paying themselves the $457 million dividend, the house owners of Prospect Medical Holdings then offered off the land and the buildings of the Pennsylvania well being system that features Delaware County Memorial Hospital to the Birmingham, Alabama-based Medical Properties Belief. The transaction, which is known as a sale-leaseback, meant the Pennsylvania well being system owed $35 million a yr in lease to Medical Properties Belief, which has purchased up the true property of practically 200 U.S. hospitals, usually in low-income communities.
In an announcement to CBS Information following the announcement of the senators’ probe, a spokesperson for Medical Properties Belief mentioned the agency’s ”actual property investments have made substantial quantities of capital accessible that could be used to additional put money into facility enhancements, know-how upgrades and different investments in operations which profit the long-term well being of communities.”
”In some instances, operators have used [Medical Properties Trust’s] actual property capital to amass and proceed to function hospitals that in any other case very doubtless would have closed completely,” the spokesperson mentioned.
But CBS Information discovered at the very least one case the place a hospital’s lease obligations to Medical Properties Belief might have contributed to its closure. In April, the 356-bed Texas Vista Medical Heart in San Antonio shut its doorways for good, leaving town’s majority-Hispanic south facet and not using a main well being care choice close by.
”The closest hospital is between 12 to fifteen minutes away from our facility, and in the event you’re having a stroke or a coronary heart assault, time is of the essence,” respiratory therapist Jessica Carrasco instructed CBS Information in April.
For executives at Medical Properties Belief, shopping for hospital actual property has been profitable. In keeping with the corporate’s SEC filings, from 2017 to 2021, wage, bonuses and inventory awards amounted for its CEO, Edward Aldag, totaled about $70 million.
The Senate probe was first reported by NBC Information. A spokesperson for Prospect Medical Holdings did not not instantly reply to a request for remark, nor did a spokesperson for Leonard Inexperienced and Companions, who acknowledged receiving the letter from the senators.
State investigations
In latest months, regulators have taken recent steps to rein in Prospect Medical Holdings in states the place it nonetheless operates hospitals.
Neronha, who beforehand blocked Prospect Medical Holdings from promoting off the true property of their two hospitals in his state, sued the corporate final month for failing to pay its money owed. In keeping with the lawsuit, the hospitals owe greater than $24 million to its distributors, ”jeopardizing the monetary well being and stability of the hospitals, and in the end affected person care.”
Pennsylvania’s Lawyer Normal agreed in October to droop its personal lawsuit towards Prospect Medical, so long as the corporate offered its well being system there to a nonprofit operator by July. State legislators have launched a invoice that may give the AG’s workplace the ability to control all main hospital transactions.
”The AG’s workplace can be required to assessment gross sales and mergers, after which make a dedication as a way to mitigate injury to the general public,” mentioned State Senator Tim Kearney, one of many invoice’s co-sponsors.
And in Connecticut, the place Prospect Medical has been negotiating the sale of its three hospitals to the Yale College’s well being system for greater than a yr, a spokesperson with the lawyer common’s workplace confirmed to CBS Information an investigation into the corporate’s monetary practices has been launched.