Private equity meets healthcare: profits up and care standards down
Hello and welcome to the latest edition of The Counterbalance newsletter. This week we are taking a closer look at the impact of private equity on healthcare services.
Last week’s edition unpacked how the Isle of Wight’s ferry service — an essential service for residents — has been slowly strangled under the weight of private equity ownership.
But the Isle of Wight only offers a piecemeal insight into a much larger, global problem.
This week, Balanced Economy Project’s Scott Chipolina attended a SOMO colloquium titled “There is enough money to finance company transitions, but new EU policies need to change direction.”
During the colloquium, SOMO’s departing Myriam Vander Stichele and a series of academics raised alarm bells over the severe harm unchecked private capital is doing to people’s lives.
So this week, we are returning to private equity, because when the same logic used to bleed an island’s transport system is applied to hospitals, nursing homes and social services, the stakes shift dramatically — from inconvenience to lives lost.
Let’s start with the data shared at this week’s colloquium.
First, a 2023 JAMA study by Kannan, Bruch, and Song, titled “Changes in Hospital Adverse Events and Patient Outcomes Associated with Private Equity Acquisition”.
The study analysed almost five million Medicare hospitals in the United States. Their findings revealed that after private equity took over the facility, hospital-acquired conditions — things like infections, accidents, complications — rose by an eye-popping 25.4%.
Secondly, a study by Gutpa (et al) titled “Owner Incentive and Performance in Healthcare: Private Equity Investment in Nursing Homes” revealed an 11% increase in mortality at private equity-owned US nursing homes, due to a decline in standards across several key metrics, including patient well-being, nurse staffing, and compliance with care standards.
As shocking as these findings are, they are also entirely predictable. A business model which is designed — by its very nature — to extract maximum gain on a short-term basis will inevitably cut corners at the expense of your health and well-being.
This is hardly just an American problem, either. A 2022 study by Patwardhan, Sutton and Morciano published in Age and Aging analysed over 10,000 care homes in England, finding that 6% were infiltrated by private equity.
These facilities were almost 7% more likely to receive negative ratings from the UK’s Care Quality Commission, particularly when it came to assessing performance and standards relating to safety, effectiveness and responsiveness.
In Australia, an article published in The Australian reveals how HMC Capital, an asset manager, is offloading debt belonging to one of the country’s largest private hospital operators, yet buyers are only interested in a few high performing facilities.
As a result, less profitable hospitals are facing potential closure, spelling potentially catastrophic consequences for the communities connected to these facilities.
To paraphrase Benjamin Braun, an assistant professor in political economy at the London School of Economics, private equity in social services is “literally killing people.”
This is where monopoly power intersects with private capital: it is not just that private equity firms are investing in critical social services — it’s that they are monopolising them.
A study by Braun, Hye-Young and Casaline in the JAMA Health Forum revealed that PE-owned healthcare facilities were more likely to be part of larger chains, indicating how influx of private capital causes market consolidation.
This concentration leaves communities with less options for their well-being, meaning they cannot “shop around” when local medical facilities fall below an acceptable standard.
To borrow a thought from the Open Markets Institute’s work on cloud technology this week, the data compiled in this newsletter is why anti-monopoly groups should treat private equity not as a niche finance sector, but as critical infrastructure.
We started our venture into private equity last week on a ferry, and this week arrived at morgues. Unless governments and regulators act to stop the flow of unchecked capital, it will wreak havoc on our core and vital services, at time with — literally — fatal consequences.
Weekly highlights:
A concerning joint statement by representatives of the US and UK tech sectors — ITI and techUK respectively — calls for a bilateral economic partnership that allows both parties to “shape the rules, values, and norms of the global digital economy.” If left unchecked, this kind of unchecked influence could force other jurisdictions to adopt standards agreed by other countries, leading to a “race to the bottom” where the interests of other countries are not taken into account.
Bulgarian lawmaker Eva Maydell this week poured cold water on Europe’s long running push for tech sovereignty, arguing that Europe should “sober up” and that “certain trains have left the station.” More here via POLITICO.
This week The Balanced Economy Project and a number of other organisations submitted comments on the UK’s Competition and Markets Authority (CMA) consultation on the design and implementation of merger remedies. Elsewhere the Institute for Public Policy Research has called on the competition watchdog to take on Big Tech, in the wake of the government’s strategic steer to the CMA published earlier today.
Soundbite of the week: cloud computing as critical infrastructure
The Open Markets Institute published a new report this week that offers a “long overdue reconception of cloud computing.”
OMI calls for utility-style regulation for the cloud, drawing on models applied to critical infrastructures like electricity, telecommunications and railways. The report also argues for “structural separation” where dominant tech giants would be required to divest their cloud businesses, and public investment and procurement whereby the public sector would “play an important role in raising standards” for the cloud market.
“Our report argues that cloud should be acknowledged and governed as public infrastructure akin to electricity or telecommunications. This will entail not just regulating systemically important cloud providers, but also restructuring the market to protect this critical infrastructure from the control and influence of dominant tech giants.”
Data mining: US inflation lower than expected
US inflation has climbed at the slowest pace since April 2021, allaying concerns about sharp spikes following President Trump’s roll out of aggressive trade policies. Figures reported earlier this week showed that prices rose at just 2.3% annually.
Source: US Bureau of Labor Statistics, CNBC
While that may sound like good news, US Federal Reserve Vice Chair Philip Jefferson called for ongoing caution, claiming that Trump\s aggressive tariff strategy may well increase the cost of living in the long run:
“If the increases in tariffs announced so far are sustained, they are likely to interrupt progress on disinflation and generate at least a temporary rise in inflation.”
The Counterbalance is published every Thursday. Please send any thoughts and feedback to scott@balancedeconomy.org.