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Health Affairs This Week places listeners at the center of health policy’s proverbial water cooler. Join editors from Health Affairs, the leading journal of health policy research, and special guests as they discuss this week’s most pressing health policy news. All in 15 minutes or less.
Hello and welcome to Health Affairs This Week. I'm your host, Jeff Byers. We're recording on 02/19/2025. It's snowing here in Richmond, Virginia. We'll see how long that lasts, before this winter keeps on giving.
Jeff Byers:Before we begin, I wanna point listeners to the fact that we released a new ahead of print article for the March 2025 issue on demographic variation in US outpatient drug use such as ivermectin during the COVID nineteen pandemic. And also a quick heads up, on March 12, we are going to do a live taping for a health policy with, your host Rob Lott on March 12. Rob will chat with Yasha Sweeney Singh on her upcoming paper in the March issue of Health Affairs. Again, that's on March 12. And the paper is on private equities effect in health care.
Jeff Byers:And, you know, when it when it snows, it pours. And here to discuss private equity in health care, I'm joined by, Kathleen Haddad. Kathleen, welcome back.
Kathleen Haddad:Hi, Jeff. Nice to be here.
Jeff Byers:Yeah. Thanks for joining. Yeah. As as I mentioned, when it when it snows, it pours. So, there's been a lot about private equity in the health care space for for a very long time, not just this week or the past couple of months.
Jeff Byers:And I don't know about you, but when you hear something or when a lot of people are talking about the same thing, in different formats, I can get you can get, sources a little jumbled up. Does that ever happen to you?
Kathleen Haddad:Oh, yeah. Oh, yeah. And, looking at the reports we're planning to talk about today, there's so much good stuff in each of them, and then I forget which one said what. But since they both play similar things, I'm not sure that matters too much.
Jeff Byers:Yeah. Yeah. So we today are gonna talk about two reports that came out around the same time from each other, maybe a week from each other that looked into the role of private equity in health care space. So when we decided we were gonna do this episode on these reports, I actually thought there was only one report. And then as I was, diving into the details, turns out there is not one but two, and I'm sure there's more reports on this elsewhere.
Jeff Byers:But we're gonna be talking about one was a bipartisan staff report, and another was a report in response to a request for information on consolidation in health care. Both were released in January 2025. And according to our notes, they were released within a week from each other, which is kinda confusing. And so let's look at the HHS report first, which culminates a year long investigation and reviewed more than 2,000 comments. Kathleen, what's the top line here?
Kathleen Haddad:So this report was issued by HHS and also DOJ and the Federal Trade Commission. The purpose was to inform actions these agencies could take to improve competition in health care. So it's good to know that, a a slew of research now has shown that private equity owned practices, hospitals, nursing homes, etcetera, charge more, offer lower quality of care, and limit access. And so this report summarized and categorized thousands of comments that they received focusing on the trends and some solutions that might be considered in the future.
Jeff Byers:Yeah. And just to note, we're talking about private equity, but also there is that kind of dovetail topic of consolidation in health care. So interested to note that private equity owned practices and hospitals were were flagged in this. So the report noted five major themes. Can quickly you go over what those are for our listeners?
Kathleen Haddad:Sure, Jeff. The the issue, with private equity is that seems to be the major driver, the major investor, and that ends up consolidating healthcare in addition to, hospitals in the past, you know, hospitals had been buying practices. And, but right now the, the focus of these reports is mostly on private equity generated consolidation. So the the themes quickly, one, consolidation leads to higher prices and less access for patients, lower quality. Third theme, it changes the work environment for providers, and physicians have some mixed reactions about that.
Kathleen Haddad:Fourth theme was that PE transactions are shrouded in darkness, sort of like when the Baltimore Colts moved to Indianapolis in the dead of night. If anyone remembers that people don't like Put a band plate on. People don't like health insurers is the fifth theme. That's not so not news, but that applies, especially the report said to vertically integrated insurers, such as UnitedHealthcare would be an example. They, own their own the insurance component, and then they buy providers and they earn money based on both the coverage and health care decisions.
Kathleen Haddad:So that's a new phenomenon that was mentioned.
Jeff Byers:Yeah. And I don't think, these themes should be much surprised to people that follow this, topic within a scholarly journal. I know health affairs has published a fair amount of papers on private equity and its influence on the health care costs and and utilization. So what is it about private equity owned health care that causes this?
Kathleen Haddad:So, PE firms, as you know, buy practices, but they also buy practice management firms. They buy emergency department physician groups, anesthesia physician groups, hospitals, nursing homes. The operating companies that operate hospital and nursing homes, and the real estate investment trusts that buy the property upon which hospitals and nursing homes sit. And they do this so that they can evade, it's a bit of a pejorative term, but so they can get best tax benefit by kind of separating all these pieces from the actual hospital entity or nursing home entity. And so what happens is when a PE provider comes in, in the case of a provider practice, it's a little simpler.
Kathleen Haddad:They will cut the cost, so buy one one practice, let's say a dermatology practice in a market, cut costs there by using, lower credentialed staff, you know, LPNs instead of registered nurses, for example, PAs instead of doctors. Take out debt based on the asset they just acquired to buy other practices in the market. So the, practice is saddled with debt or hospital or in the case it may be. And then they sell the consolidated practice, you know, they buy up all these other practices. They control the market rate prices, rise, and then they usually sell that in four to seven years and go on to the next venture.
Kathleen Haddad:So it's easy to see how practices can charge higher prices and offer the most profitable services, and drop less profitable services. I think one example is really helpful in the agency report under the quality theme. The American College of Emergency Physicians shared results from a questionnaire of its members. And 53% of those, emergency docs said their medical decision making authority autonomy was curtailed following the merger acquisition. There was pressure to take shortcuts and give inappropriate and potentially harmful care in quotes.
Kathleen Haddad:And they were guided to meet profit driven metrics and said patients, quote, are treated as numbers rather than individuals, and that care is no longer patient centered but metric centered. The same survey said that these e ED physicians saw wage reductions of 20%.
Jeff Byers:So the theme that provider consolidation leads to, higher prices and less access for patients also showed up in the other report commissioned by, Rhode Island senator Sheldon White house and also Chuck Grassley, who is in a state I'm not, don't have off the top of my head in the senate.
Kathleen Haddad:I think it's Iowa.
Jeff Byers:Iowa. Okay. I was gonna go with Arizona, but so I'm glad I I didn't bet on that. You you know, I lived in Rhode Island for, four years. So, you know I gotta give it up to Sheldon.
Jeff Byers:Yep. What was the top line of that report, though?
Kathleen Haddad:Well, that was interesting. I think an important thing about Chuck Grassley is he's a Republican, and this is a bipartisan report. So, that's useful. The report dug up the financial and operating records from two prominent PE firms, Leonard Green Partners out of Los Angeles, and, Apollo, which is the largest owner of rural hospitals in The US. The report found that PE ownership led to understaffing, unsafe building conditions, hospital closures, declining quality, and unsustainable debt.
Jeff Byers:You mentioned the lack of transparency was a theme. What do you mean?
Kathleen Haddad:Yeah. That was one of the themes. PE acquired health care providers are divided into all these various entities, and the ownership structures are very complex. There aren't too many laws or regulations that require these people or these owners or these companies, entities with equity stakes, in any of these companies to be made public. So not only do patients not know who owns their physicians, but many of the physicians and clinicians don't know who they work for.
Kathleen Haddad:I remember, one time going to my, internist and asking him, who owns this practice anyway? And he was a little cagey and said, well, we did, use a an investment firm and they owned something for a while, and then we did something else. And until this day, I don't know who owns it.
Jeff Byers:They didn't they didn't send it on the put it on the bill?
Kathleen Haddad:No. There are different names on the bills.
Jeff Byers:Okay. So what can be done about this?
Kathleen Haddad:So both reports land on similar solutions. These include greater transparency of ownership, lowering the dollar threshold of the value of acquisitions that have to be reported to the FTC and forbidding noncompete clauses in provider contracts with their owners. The agency report, recommended adoption of a rule that similar to the one adopted last year for nursing homes, and that rule requires nursing homes to report all owners to CMS and be made public. The reasoning is that this allows regulators, not only regulators, to hold PE owners accountable, but allows the public to choose providers based on ownership and even related criteria such as staffing ratios and adverse incidents if these were included in a public facing report. And there is, advocacy for that as well.
Jeff Byers:So what's the likelihood of any solutions being adopted in the current political environment?
Kathleen Haddad:Well, Jeff, that's a good question. One of the, reports contained a link to president Biden's anti competition policy that, he, issued in 2023. So when I went to the link, I found four zero four, a page not found.
Jeff Byers:Yeah. Well, do you do you wanna know, some breaking news Yes. That will be sale by the time this publishes?
Kathleen Haddad:Yes. Yes. Go for it.
Jeff Byers:I got a report from HealthCareDive that FTC this is the headline. FTC retains stricter merger guidelines under Trump, with lead up text saying FTC chair Andrew Ferguson sent a memo to agency staff on Tuesday clarifying that the Biden era guidelines will remain in place for now in a setback for health care mergers. Becca Piper wrote that who I think she's gonna join us in a couple of weeks, so, please don't sue me. And I have not read the rest of the article.
Kathleen Haddad:Well, that's interesting news, Jeff. There soon will be a Trump appointed majority on that commission, but if the chair is stating this and stays with this policy, that's good news for competition in health care. Another piece of good news is that the state's attorneys general have authority to regulate mergers and acquisitions as well, and some are doing so. States are passing laws to empower broader regulation of m and a activity as well.
Jeff Byers:Yeah. Yeah. It will be interesting to see because I think that was, this antitrust guy. I think there was a big question mark from what I gather of, people wondering what kind of line the the new Trump administration will take. So this it's an interesting signpost of what potentially could come.
Jeff Byers:But then, you know, you actually still have to go through the, you know, blocking mergers and and acquisitions kinda activity. So we'll we'll see what happens.
Kathleen Haddad:Right. And they have to have the enough staff to do the reviews. I'm I think I think right now, the dollar threshold for reviews is a hundred and 25,000,000, the value of a of an acquisition. And that's that when it gets that to that level, they have to be reported to the FTC. But we'll we'll see.
Kathleen Haddad:We'll see.
Jeff Byers:Yeah. We'll see. Well, nice to have some news to to dovetail with this with in the addition to, breaking down the the two reports. I think you we mentioned off mic. You you mentioned one of the reports is, like, a pretty nice qualitative study.
Jeff Byers:Is that right?
Kathleen Haddad:Yeah. It it it it was not it was easy to read. It's the agency report.
Jeff Byers:Alright. Well, we're not playing favorites. We'll put both in the show notes, and you, the listener, can check those out. Kathleen, thanks for for joining us today on Health Pairs This Week.
Kathleen Haddad:Yeah. That's what we are, and I'm glad glad to have been with you, Jeff.
Jeff Byers:Yeah. And to you, the listener, thanks for listening. If, you enjoyed the show, please, leave a review. It helps people find the show, and we want to continue making the show for you. So anything that you can do to help, people find the show would be great.
Jeff Byers:For instance, send it to the regulator in your life and or or the venture capitalists. Either one would do it. Venture capitalists. Send it to venture capitalists. And with that, we'll see you next week.