Private Capital Not the Answer for Health Inequities in the US

Private capital, namely private equity (PE) firms, are not the solution to addressing health equity in the United States, according to an article written by Jessica L. Anderson and published in Health Affairs. The article was a response to an article previously published in July 2023, which argued that PE firms were associated with improved clinical outcomes and that private capital investments could improve health equity by addressing the gap between public capacity and public need.

The current article pushes back on that notion by underlining a new systematic review published by Alexander Borsa that found that increased costs to patients and payers was the most consistent outcome of PE ownership. This rise in cost was found in hospitals owned by PEs, hospital emergency departments, inpatient departments, and nursing homes. Although the reason for this increase in cost is unknown, the relationship between costs increasing and PEs is established. Anderson said that, although the systematic review is able to establish the relationship between costs and PE, the effect of PEs on clinical health outcomes did not have enough existing data to make a satisfying conclusion. However, quality of care was mixed or lower in places with PE ownership.

Medical stethoscope with money | Image credit: grek881 - stock.adobe.com

Anderson cited a working paper that spoke on the financialization of health care in the United States. The working paper argued that this financialization prioritizes the value of shareholders more than the health of the patients, including in mergers and acquisitions and using fraudulent billing practices to increase revenue. Anderson also cited the book, Capitalizing a Cure, that found that private firms have started to focus on acquisitions of biopharma start-ups to maximize profit, which can lead to less money being put back into research and development. Anderson argues that this is a trend that is seen across the United States, with companies paying shareholders with their profits and boosting stock through buybacks to create the illusion of growth.

Anderson points out that the acquisitions made by PE firms have led to hospitals closing, which can eliminate the primary care source for many people. PE firms and for-profit health services have also been found to sell infrastructure for health care to real estate investment trusts that offer revenue immediately for the sellers but sacrifices long-term financial stability.

Anderson argues that, although private capital investments can bring a lot of capital into an area, this capital is used in a way that satisfies the investors rather than in addressing the health needs of the public, which leads to investments in places that will garner high reimbursements. Even if private capital investments are made in ways that align with public health needs, the question becomes what private capital will do with their investments should reimbursements, markets, and patient demands reach their threshold. Health services are also not the same when PEs invest, which can lead to selling off the assets or trying to squeeze more money out of the deal, including mass lay-offs or getting rid of parts of the health system that aren’t as profitable.

Anderson concluded that, although it is tempting to get more private capital in health care, patient needs are not often addressed through private capital and costs rise when PE firms are involved. Health equity could be addressed by using public funding to innovate in research. Anderson also calls for public hospitals to not be privatized in the United States to avoid these issues. Price caps, she wrote, could help to eliminate profits due to increasing costs for patients and payers that don’t delivery on quality.

Reference

Anderson JL. Impact of private capital and financialization on health equity: a response to Enekwechi. Health Affairs. January 3, 2024. Accessed January 3, 2024. https://www.healthaffairs.org/content/forefront/impact-private-capital-and-financialization-health-equity-response-enekwechi