After we all come through this terrible period I hope Congress will investigate the role that Private Equity has played in exacerbating the overall suffering. Take nursing home/long-term care facilities. This sector has been a favorite target of PE investors for years. The model is to layer excessive levels of debt on the assets acquired and use the proceeds not to invest in care or new equipment but to pay the PE investors hefty dividends and “management fees”. In order to cover the debt service the PE owners typically cut staff, neglect plant improvement, and, in some cases, engage in sale-leaseback transactions on the nursing home properties.
The result is that the patients suffer:
The research showed that private equity-owned nursing homes were able to fill more beds than their peers, as patient volume at these acquired facilities increased by eight percent. At the same time, nursing staff declines following buyout deals. Total nursing staff hours fell by 1.4 percent, the research showed.
These measures combined resulted in the addition of nearly $770,000 to the average private equity-owned nursing home each year, according to the paper.
Good deal for the investors — not so good for the patients. Overall quality has suffered across all indicators including quality of care, facility infrastructure, managerial quality, and patient rights; nurse staffing compliance with guidelines; and patient health outcomes. This was before the COVID-19 outbreak. These facilities were already understaffed and under-resourced — lacking basic PPE such as n-95 masks or ventilators. And we have seen, tragically, how the virus has ravaged nursing homes. In Massachusetts half of the state’s 3,000+ deaths from the virus have come from nursing homes and long-term care facilities.
Another favorite Private Equity target has been hospital emergency room staffing. While hospitals are straining to care for an influx of seriously ill COVID patients, the PE firms are cutting desperately needed staff and pay:
TeamHealth, a major medical staffing company owned by the private-equity giant Blackstone, is reducing hours for ER staff in some places and asking for voluntary furloughs from anesthesiologists, the company confirmed to ProPublica. Multiple ER providers working for a main competitor, KKR-owned Envision Healthcare, said their hours also are being cut.
Even as some hospitals risk running out of room to care for COVID-19 patients, demand for other kinds of health care is collapsing. This irony is straining the business models of hospitals and the companies that staff them with doctors and other medical professionals.
I could go on from sector to sector — from restaurant chains to retail to prison health service groups — to show how the greed of Private Equity has been making an already terrible situation worse in this country. But it will only get worse. For the PE industry has over $1.5 Trillion of “dry powder” and is eager to acquire and “streamline” as many publicly listed companies as possible, now that share prices have declined to new lows. Senator Elizabeth Warren and AOC have teamed up on a bill — The Pandemic Anti-Monopoly Act — to impose a moratorium on PE takeovers. But as long as the Republican Party is in the pocket of Private Equity there is little chance of the bill passing.