Patients deserve to know if private equity owns their health care

Americans should be able to know who controls their health care choices. The American health care system is full of different for-profit entities trying to make as much money as possible, often at the expense of people’s well-being. As private equity firms gobble up healthcare providers, it’s increasingly important that patients have the ability to spot the worst actors and make informed decisions about their own care.

Fortunately, the Centers for Medicare and Medicaid Services (CMS) finalized a rule in November 2023 that will increase transparency for millions of Americans, namely seniors. The rule requires all health care providers who enroll in Medicare—that is, all providers who want to receive money from taxpayers in the Medicare program—to disclose whether they are owned by a private equity firm (PEC ).

CMS subtly incorporated this provision after the original proposed rule required disclosure of private equity only for skilled nursing facilities, noting that PECs had been purchasing nursing facilities that carried higher costs and inferior quality. At the same time, CMS recognized that the problem of PECs harming health care is far more widespread than just nursing facilities. In May, CMS proposed expanding the requirement to report PEC ownership to all providers and suppliers who enroll in Medicare. This covers rural hospitals, skilled nursing facilities, home health agencies, hospice providers and more. This proposal culminated in the final rule.

CMS is right about the pervasive nature of private equity ownership in health care. Since the 2010s, private equity firms have acquired and consolidated areas across the healthcare system, including nursing homes, hospitals, emergency rooms, independent physician practices, behavioral health companies and more.

Private equity buys companies, typically looking to generate as much profit as possible over a 3-7 year period before selling the company. They claim to do this by increasing efficiency and eliminating waste to enable businesses to reach their full potential. In health care, this means operating health care as a profit-maximizing business rather than in line with the core mission of making Americans healthier.

In addition to not producing particularly good returns for investors, private equity firms are looting American health care to the detriment of the health of Americans. Residents of privately owned nursing homes have a higher risk of dying, are more likely to visit an emergency room and be hospitalized, and face significantly higher costs. There are higher costs and worse outcomes with private equity ownership of American health care.

Take the case of hospice: Medicare pays hospice providers a flat rate per day for each patient. Hospices “profit” by keeping the difference between what they receive and what they spend. Privately owned hospices target patients who don’t need hospice or need less intensive care (example: dementia patients) to take as much taxpayer money as possible. Then they cut costs by decreasing the quality of care, such as providing fewer nursing visits even in the last days of life.

Ultimately, the new CMS rule is an important step forward for transparency, allowing the government and researchers to better track and study the effect of private equity ownership across the health care system. However, there are still significant limitations on how quickly CMS will collect the information and whether the public will have access to it.

Providers and providers must fill out the appropriate form when they initially enroll in Medicare and every five years thereafter. Therefore, CMS will take up to five years to catalog all private equity-owned providers. Additionally, CMS has not officially committed to adding PEC data to publicly accessible databases. As CMS expanded its hospice and home health databases last year to include ownership details, we expect it won’t be difficult to ask for a full commitment to transparency.

CMS has the ability to force providers to complete the form before they would otherwise have to go through “off-cycle revalidations.” In fact, the agency disclosed its interest in doing so for skilled nursing facilities specifically in the rule finalized in November. Since the agency itself extended PEC disclosure to all providers, it should extend its intent to use off-cycle revalidations to expedite transparency.

Ideally, policymakers would drive private capital out of health care. In fact, Senators Sheldon Whitehouse (D-R.I.) and Chuck Grassley (R-Iowa) launched a bipartisan investigation into their role in health care. The Federal Trade Commission (FTC) has targeted private equity takeovers, suing Welsh, Carson, Anderson and Stowe for allegedly illegally buying and consolidating anesthesiology practices in Texas.

As long as private equity remains a major player in America’s health care, Americans should have the right to know which hospitals, hospices, and other providers are privately owned. With this knowledge, people can be better equipped to avoid wolves in sheep’s clothing who promise help only to steal from them with little regard for their health.

Brandon Novick is a programming assistant for the domestic team at the Center for Economic and Policy Research in Washington, DC. Before joining CEPR, he carried out political, communication and administrative work for political campaign and non-profit organizations aimed at ensuring a decent standard of living.

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