Senators probe private equity hospital transactions

Iowa Sen. Chuck Grassley and Rhode Island Sen. Sheldon Whitehouse, ranking member and chair of the Senate Budget Committee, respectively, have launched an investigation into the effects of private equity ownership on hospitals.

The senators sent letters to the CEOs of private equity firms Apollo Global Management and Leonard Green & Partners, Brentwood, Tenn.-based Lifepoint Health, Birmingham, Ala.-based Medical Properties Trust and Culver City, Calif.-based Prospect Medical Holdings, as well as the CEO of Ottumwa (Iowa) Regional Health Center.

They argue that many hospitals experienced significant workforce cuts and reduced quality of care since coming under private equity ownership, and "have been stripped of valuable assets, including their real estate, leaving them saddled with debt," according to a Dec. 6 news release from the office of Mr. Grassley. 

The senators have requested "documents and detailed answers" about related-party transactions and the degree to which private equity firms are calling the shots at these hospitals. 

In March, Mr. Grassley wrote to companies with ownership interests in Ottumwa Regional — a rural hospital that was sold to a private equity firm in 2010 — with concerns following a certified nurse practitioner's assault on nine sedated female patients.

Mr. Grassley sought information on Ottumwa Regional's financial stability to determine to what extent the "related-party transactions" may have contributed to these events. The senator said the companies failed to provide full and complete responses to his questions, prompting additional oversight.

Mr. Whitehouse and Mr. Grassley are now expanding their investigation to include companies that currently own or operate — or formerly owned or operated —- hospitals in California, Pennsylvania and Rhode Island, among other states. .

"When it comes to our nation's hospitals, a business model that prioritizes profits over patient care and safety is unacceptable," Mr. Grassley said. "The shocking events at Ottumwa Regional Health Center prompted me to ask tough questions about how financial maneuvers by private equity and related companies have negatively impacted the resources, and thereby the patient care, at our rural hospitals."

Medical Properties Trust, one of the companies named in the investigation, is a real estate investment trust. The company invests in hospital real estate through sale-leaseback transactions that prohibit its involvement in patient care "or other operational decisions at any of its facilities," a spokesperson for the company told Becker's

"[Medical Properties Trust's] real estate investments have made substantial amounts of capital available to hospital operators that may be used to further invest in facility improvements, technology upgrades and other investments in operations which benefit the long-term health of communities," the company said in a statement. "In some cases, operators have used MPT's real estate capital to acquire and continue to operate hospitals that otherwise very likely would have closed permanently, in part due to the interest expense burden of prior financing strategies."

Becker's has also reached out to Apollo Global Management, Leonard Green & Partners, Lifepoint, Prospect Medical and Ottumwa Regional for comment and will update this story as more information becomes available.

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