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Death rates rose in hospital ERs after private equity firms took over

785 points| coloneltcb | 6 months ago |nbcnews.com | reply

495 comments

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[+] nabla9|5 months ago|reply
HOSPITALS: “High-markup” hospitals are overwhelmingly for-profit, located in large metropolitan areas and have the worst patient outcomes https://www.uclahealth.org/news/release/high-markup-hospital...

>These “high-markup hospitals” (HMH), which comprised about 10% of the total the researchers examined, charged up to 17 times the true cost of care. By contrast, markups at other hospitals were an average of three times the cost of care.

>They also have significantly worse patient outcomes compared with lower-cost hospitals, new UCLA research finds.

NURSING HOMES: Owner Incentives and Performance in Healthcare: Private Equity in Nursing Homes ( https://www.nber.org/papers/w28474

>After instrumenting for the patient-nursing home match, we recover a local average treatment effect on mortality of 11%. Declines in measures of patient well-being, nurse staffing, and compliance with care standards help to explain the mortality effect.

[+] giancarlostoro|5 months ago|reply
And I am sure the nurses are overworked and not receiving competitive pay to boot.
[+] insane_dreamer|5 months ago|reply
For-profit hospitals, like for-profit prisons, should be banned. They create perverse incentives.
[+] brightball|5 months ago|reply
We were better off when the churches ran the hospitals.
[+] andai|5 months ago|reply
17x. Jesus.

Is the list of such places public? Sounds like very important information for people who need medical care. (Which is... everyone?)

[+] gjgtcbkj|5 months ago|reply
I wonder if we will be allowed to share this information in the future in someone knew a love one died in for profit hospital that might provoke violence against feel market believers.
[+] derbOac|6 months ago|reply
My impression is a lot of US health care problems are caused in part by a sort of unholy combination of restricted competition and access, together with profit driven market participants. So you end up with this marketplace constricted by overregulation — some well-meaning but often basically occurring because of protectionist moats and regulatory capture — increasingly controlled by profiteers trying to extract as much money as possible, with patients at the bottom, providers in the middle, and executives at the top. I think the problems with monopolies in the US are broad in scope but it hits healthcare especially hard because of how grotesquely distorted it is.

I'm not surprised by this finding, although I find in economics and healthcare forums the results tend to be misused (at least in my opinion), because it gets used to argue against any deregulation or cost cutting, instead of cost cutting of the type that tends to happen for the benefit of investors and shareholders, rather than cost cutting of the type that increases healthcare options and access.

[+] palmotea|6 months ago|reply
> So you end up with this marketplace constricted by overregulation — some well-meaning but often basically occurring because of protectionist moats and regulatory capture

Don't hand-wave your claim of overregulation, be specific and name the regulations you think should go away.

[+] giancarlostoro|5 months ago|reply
I summarize it with one word after talking to a hospital billing manager. Subsidized costs. If you cant pay someone else will be receive marked up prices. On top of that and bear with me, but the way health insurance works feels like you gotta be in the right “mob family” where each provider is different in leverage in conjunction with which employer you work for. They can just take hospitals out of their “network” if they dont lower costs, so small businesses dont get this level of leverage, but employers with large numbers of employees do. You could have someone with a drastically lower bill just because of where they work, not even related to how much they make mind you.

It all goes back to your healthcare costs being subsidized by those who are left with the crappy end of the stick. I think transparency in hospital billing is drastically necessary. If not for every single surgery out there at least for all the really standard things that arent so complicated.

I am not a doctor. I think healthcare can be fixed without throwing more government money at it, but we need people to understand it better and work out how to bring costs down.

If you are not aware yet, if you think you need to go to the ER think about what you NEED, is your arm broken? This sounds crazy but find a lab that will xray your arm. It will cost way less, and sometimes the insurance will pay the full cost of labs for you since you saved them a fortune. It sounds dumb, but it could save you so much financially. If you are in more urgent needs dont waste any time go get the care you need.

[+] someguynamedq|5 months ago|reply
Why are we talking about deregulation when the topic is the ill effects of unregulated rentier profit seeking behavior of PE firms? We need to make debt loading and dividend recapitalization of hospitals illegal. Let them hollow out Neiman Marcus and Dunkin doughnuts, I don't really care. But financial engineering should have no place in our healthcare system.
[+] ben7799|5 months ago|reply
This actually sounds a lot like the US problems with energy (electrical, gas) infrastructure and also things like telephone and internet providers.

They've almost always got a state approved monopoly or duopoly and then magically the state always allows them to raise their rates.

[+] joe_the_user|5 months ago|reply
My impression is a lot of US health care problems are caused in part by a sort of unholy combination of restricted competition and access, together with profit driven market participants.

That is not wrong, literally stated. But know a lot of hn people imagine that this means making things completely unregulated might be one reasonable alternative. The obvious problem in this case is scams and unsafely/deadly treatments. Here, one can point countries with functioning, lightly regulated systems. The problem is that these countries depend on cultural and institutional factors keeping people honest, keeping fake medicine at bay, and etc.

But the US has a cultural of religious irrationality coupled with huge, profitable and predatory organizations (the ones soaking health care dollars as well as alternative medicine cults and scammers). Before the last hundred years of regulation, 1910 or so, unregulated US medicine was a deadly, heroin soaked shit show and if you back to that, all the "alternative" scammers along with Stackler types are ready to jump in to try to equal that situation.

[+] thisislife2|5 months ago|reply
"Regulatory capture" is a nice euphemism for the problems that a corrupt political environment creates. It is corruption that really hampers the creation of a fair and competitive capitalistic market.

Regulation can indeed be balanced to create a fair and competitive capitalistic environment. A great example of this was the telecom industry in India during Dr. Manmohan Singh's government. Both the economic and telecom policies created a very booming and competitive telecom industry in India, with many foreign and local businesses trying their best, to be the best. It also ensured that the technology was accessible and affordable to all, providing a further fillip to the indian economy that increased connectivity delivers in a society. Contrast that 2+ decades later with the current telecom industry scenario in India where only 3 major private players (and 1 government owned company) survives today due to flawed and corrupt policies of the Narendra Modi government. (As the government owned telecom enterprise now doesn't really "compete" with the private players, the 3 private players have already formed a cartel to dictate pricing, and keep gouging the public, with increased pricing, with the connivance of a government that believes in oligarchy vis the South Korea Chaebol model).

And let's not ignore that regulation is necessary in a democracy because capitalists are only (rightly) focused on creating capital. But obviously they are not the only contributing members of a society (nor, do I dare say, the most important ones) and the rights and needs of others in a society are just as important in a democracy. That is why everyone today also realises that things like monopoly, hoarding or black marketing, for example, aren't good for the overall well-being of a society, even if that's how capitalists can derive "maximum" value (i.e. make the most profit). History says that imperialism is the capitalist model that delivered peak "efficiency" in terms of deriving the maximum "value" for the (low) capital invested in it. But obviously, imperialism, even in its limited form today, is not compatible with democracy or concepts of sovereignty.

[+] baq|5 months ago|reply
'Your appendix is my pension plan dividend'
[+] dev_l1x_be|5 months ago|reply
Yes, or government intervention that looks good on paper and disastrous in practice.

Somehow people have this notion that healthcare should be treated differently than other service industries.

I would argue that the least amount of government control yields to the best result. There is only the size limitations (antitrust) that had potentially good outcomes. We could simply ban m&a above a certain size and make the externalities have an impact on revenue and that would be probably enough.

[+] phren0logy|5 months ago|reply
Disclosure: I'm a physician.

One popular approach to saving money is to replace physicians with nurse practitioners and physician assistants, who have less education and training. The article does not discuss this element, and I'd be interested to see if that is a factor in patient outcomes. There's less data on this than you might expect.

ETA: From my post lower down, adding for visibility:

[The training gap is] quite a lot more than a year - in primary care, it's more like four additional years of training for physicians, and 15000 supervised clinical hours for physicians (vs 500 to 1500 hours for NPs). The gap can be wider in other physician specialties, because many have longer residencies than the primary care programs. For example, child psychiatry training is four to five years (depending on the route you take), making it longer than the three years of family practice residency.

Here's a chart looking at training for MDs vs NPs in primary care. It is from a physician organization. https://www.tafp.org/media/advocacy/scope-education.pdf

[+] Jcampuzano2|5 months ago|reply
I unfortunately have had to be in and out of medical offices and hospitals recently - and I feel like compared to 10-15 years ago practically everyone I deal with is a physician assistant. Nothing against them but it's kind of annoying that it's almost impossible to actually talk with a doctor anymore.

I get it they're probably overworked too and their time is valuable but it's not quite as reassuring not actually interacting with doctors very much. The few times I have it was literally for my actual surgeries and surgery pre-appointment. Practically everything else is some assistant.

[+] tmiku|5 months ago|reply
What does that look like in a more intensive hospital setting? I've seen the shift to midlevels happening in primary care, but I'm not sure how that translates to inpatient settings - I'm vaguely aware that there are rules around when a PA/NP must consult an MD before making a decision, and I feel like they would encounter those situations way more for an inpatient.
[+] burnt-resistor|5 months ago|reply
Don't worry, MAANG-affiliated startups backed by private equity will work on a way to replace MD/DO/FNP/PAs with AI chatbots so patients can have the full Idiocracy experience while paying zillions for the privilege.
[+] SoftTalker|5 months ago|reply
The next step is going to be turning over primary care to AI. Doctors will be mostly reviewing cases or consulting when the AI decides it's sufficiently nececessary.
[+] kjkjadksj|5 months ago|reply
I mean we are talking what another year in school? Surely those outcome differences are gone once the nurse or pa is in the field for a couple of years.
[+] paxys|5 months ago|reply
Or how about - train more physicians. It is one of the most critical and in-demand professions yet the most artificially gatekept. Doctors will endlessly compain about working conditions and patient load but still not agree to this because they know it will devalue their own labor.
[+] mv4|5 months ago|reply
Serious question: is there a single example where the customer experience has improved after private equity took over?
[+] Aunche|5 months ago|reply
Usually when a company sells to private equity, it is because the business is suffering from financial hardship or the current owner is unable to continue to run the business and cannot find a successor, so selling to private equity would be the least bad option.
[+] someguynamedq|5 months ago|reply
It's not a matter of anecdotes. All you have to do is look at what PE is. It's financial engineering done to increase EBITDA for resale. There is nothing in the PE model incentivising improved outcomes for customers.
[+] mbesto|5 months ago|reply
PE gets a bad rap and for very correct reasons (especially at the large cap where financial engineering is rampant). However, there are a ton of examples where PE does add value and the customer experience improves. However it's impossible for me to list them because your definition of customer experience improvement might be very different than mine. So this point is generally very moot unless we can all agree on a standard quality metric for "customer experience".
[+] anon191928|5 months ago|reply
yes lastpass is not hacked since PE took over. So something bad product is now ok
[+] Vosporos|5 months ago|reply
Yes, when the customer also happens to be the equity manager, so the customer coincidentally gets a big stack of cash. ;-)
[+] testemailfordg2|5 months ago|reply
Privatize the profits and socialize the losses, is this too difficult to understand of being the core motto of a private equity firm. A PE firm will not have patients at the top of their priority, unless legislation enforces and regulates that.
[+] bilekas|6 months ago|reply
> Health care has been a focus of the financiers because it accounts for 18% of gross domestic product in the United States.

This seems extremely high.. Ireland with free public healthcare for example is ~6%.. I think the largest in Europe, by a lot, is Germany? ~13%.

[+] mercutio2|5 months ago|reply
People assert all sorts of nonsense in response to questions like this, usually not at all backed up by the data. The drivers of high US healthcare costs are:

  1. Doctors, nurses, and hospital admins make dramatically, *dramatically* more money in the US than anywhere except Switzerland. Every time a discussion of healthcare costs comes up, everyone tries to point their fingers at middlemen, but the middlemen extract tiny fractions of the revenue stream. Most of it goes to actual humans that are high status, and no one wants to imply they’re lobbying to lower the pay of these folks

  2. The US pays for drug development for the entire world. You can call this the US “overpaying”, or the rest of the world “free-loading”, but the US is a very rich country that has decided to incentivize drug development by allowing drug companies to profit from their massive investments by setting high prices

  3. Americans are fatter than the rest of the rich world (although the rest of the rich world is rapidly catching up) and chronic metabolic-disease is very expensive to treat (everywhere)
All the other factors are noise. Insurance companies extract a few percent, bureaucratic overhead extracts a few more percent. But to get to 100% more, these just don’t matter.
[+] ajmurmann|5 months ago|reply
There are definitely things in the system that drive prices up (like lack of competition (see CON) and middle men). However, a big reason you see this high cost and difference between countries is Baumol cost disease. Productivity and salaries in the US are very high. Meanwhile healthcare, like education for example, has seen very low productivity improvements. This leads to an ever increasing price. It's unintuitive because the healthcare workers didn't get more productive. However, they could be more productive elsewhere, so comp needs to go up to stay competitive with other options available to the workers. One might argue that nurses for example still earn very little, given how hard and important their work is but that's precisely what you'd see in areas affected by Baumol. The comp only gets dragged up to keep people from quitting or striking. There is little to no competition for something like a "10x nurse" because that's not a thing and the industry struggles to keep justifying their high prices while TV prices keep dropping and dropping and cellphones keep getting more impressive.
[+] xtracto|5 months ago|reply
The problem is that it's an inelastic market. So sellers can basically charge WHATEVER they want, constrained only to the line where people will revolt. But that's a very high line in the US.

Health providing shouldn't be a for-profit endeavor. Certainly shouldn't be in the stock market and it absolutely shouldn't be comingled with "insurance"

[+] Aunche|5 months ago|reply
Part of it is that Americans consume a lot more healthcare than other countries. They take more medication. They take more cutting edge medication (e.g. it's rare GLP-1 agonists to be used for weight loss outside the US). They see more therapists and chiropractors. They are more likely to stay in private hospital rooms.

Much of this is heavily subsidized by insurance. Any drastic change in the status quo would inevitably cause pricing and coverage that people are used to be adjusted, which is why they say they want healthcare reform until it actually happens.

[+] dragonwriter|5 months ago|reply
US healthcare expenditures are ludicrously high, because the US healthcare “system” is ludicrously inefficient by global standards.

US public healthcare expenditures are similar to what some developed countries with fully public universal healthcare have—and the private expenditures on top are more than the public costs.

People sometimes joke about the US having gaps in healthcare because of defense or other spending, but the fact is the US effectively pays vast amounts of money to create those gaps, rather than having them because of some resource constraints.

[+] tedggh|5 months ago|reply
Nothing shocking here. The private equity recipe is pretty simple: 1) Buy a profitable business 2) Increase the margins overnight by removing costs or increasing prices 3) Suck the blood out of the business until it collapses. 3) Sell the carcass and write it off. 4) Rinse and repeat.
[+] rootusrootus|5 months ago|reply
Maybe the next Democratic president will use the newly confirmed limitless executive power to reshape our healthcare system. Remove limits on creating new hospitals, eliminate the AMA, add in a public option for insurance, drop the age limit for Medicare to 0, etc. There are plenty of opportunities to use the power for something good.
[+] jameslk|6 months ago|reply
Is there somewhere I can determine if a particular business is majority held by a PE firm?
[+] alexfromapex|5 months ago|reply
People assume staff shortages, but I've been to a cheap non-profit hospital and everyone was very green and TERRIBLE at their jobs due to lack of training.
[+] burnt-resistor|5 months ago|reply
After PE took over regional and rural hospitals, they removed specialties so patients have to be transported to larger hospitals. And guess what else they bought up? Air ambulance services. Flights are up 900% and profits are up too. This undoubtedly increased unnecessary and preventable death and suffering in the name of profiteering. Some things should never be allowed to be under-regulated for-profit cash grabs.
[+] karmelapple|5 months ago|reply
This could be the biggest bipartisan rallying cry around which politicians and elected officials could cheer on improvements.

But I suspect that won't happen.

[+] anordin95|5 months ago|reply
I would have liked more insight into the control group (so called "matched control") hospitals. Typically, PE firms only step in when companies (in this case, hospitals) are struggling. If the PE hospitals were in dire financial straits pre-acquisition, these results don't seem too surprising.

Ideally, the control would be a set of hospitals that PE firms otherwise wanted to acquire but were blocked for reasons unrelated to financials & performance of that hospital, e.g. regulatory. Granted, I expect that might be quite rare.

To be clear, I think private equity firms have had quantifiable negative impacts in many other aspects of healthcare. For example, acquiring helicopter-rescue/air-ambulance companies and sending them out for non-emergency situations.

[+] michaelteter|5 months ago|reply
Ownership by profit focused organizations result in worse service? Who would have imagined!
[+] klik99|5 months ago|reply
I've instinctively been avoiding hospitals run by PE, and now I have a good reason to.

I'll never forget with my first kid they tried to scare us into genetic testing - I mean, they had a pamphlet and video they were required to show us that were meant to scare us into it, but I could tell from the doctors face that she wasn't into it and felt like she was apologizing when she said she had to play this video and leave the room. We switched to a different hospital almost immediately.

[+] fhkatari|5 months ago|reply
Here is a thought experiment, especially for people with pensions (unlikely on the HN comments board). PE's are being funded by pension funds. So, as a pensioner, maybe you get a slightly better return. However, the services you will need as a pensioner (hospital and nursing home care) are significantly degraded by private equity. Would it not be better if pension funds pulled out of PE entirely?
[+] fair_enough|5 months ago|reply
I liked Tulsi Gabbard's "two-tier" proposal for healthcare reform back in 2020. Grant state or federal government full control over emergency care and only the most expensive and obscure cancer treatments all of which act economically as a natural monopoly. Then for every other segment of healthcare where competition can exist, keep them as private markets but greatly enhance antitrust enforcement.

The only thing missing in all the good talk about healthcare is what to do about health insurance, which is the middleman that drives up prices. I propose making all forms of price discrimination illegal in healthcare, i.e. uninsured and HSA patients cannot be charged more than health insurance companies.

I also propose standardizing healthcare into 5 different health plan contracts, then requiring all health insurance companies to make all of their health plans fit into one of those contracts with zero modification to the terms and conditions. This will make litigation faster and easier, and it will avoid fraud disguised as "fine print".

Then, finally I propose requiring all health insurance companies to pay for the services up front and then sue the patient to get the money back, reversing the existing pattern where the burden of proof falls on the patient and the patient has to wait until the insurance provider relents. Think of it like a patient suing an insurance company and getting an injunction to pay out the claim while the legal ruling is pending, but faster.

[+] nataliste|5 months ago|reply
>Beneficiaries in EDs of private equity hospitals experienced 7.0 additional deaths per 10 000 visits after acquisition relative to control (13.4% increase from a raw baseline of 52.4 deaths per 10 000; P = 0.009).

In other words, an increase of 0.00055 deaths per visit.

>Limitation: >Potential unmeasured confounding; lack of generalizability to other acquisitions or patient populations.

[+] jimbo808|5 months ago|reply
I desperately wish to stop the flow of bad news into my brain. I've deleted every social app, but it always finds me...