Tuesday, August 25, 2020

Changes in Hospital Income, Use, and Quality Associated With Private Equity Acquisition | Acute Coronary Syndromes | JAMA Internal Medicine | JAMA Network

Changes in Hospital Income, Use, and Quality Associated With Private Equity Acquisition | Acute Coronary Syndromes | JAMA Internal Medicine | JAMA Network

Comment by Don McCanne

These private equity investments in health care are designed to increase the value of the assets acquired and then to sell them for a large profit in just a few years. That is, they are designed to make money for the investors - a high profit in a short time span. These equity firms imply that their motivations are altruistic, that they are increasing value, quality, efficiency that makes their products worth the prices that must be paid to net high profits for the investors. So are they really serving the interests of the patients and providers, or are they just simply squeezing funds out of these deals for their own interests?

It appears that they are operating in ways that maximize margin in the near term. That means charging higher prices for the services. It means providing additional services that are of lower value which may actually increase risk to patient safety and health equity. This study showed that "private equity acquisition was associated with increases in annual net income, hospital charges, charge to cost ratios, and case mix index among hospitals." The hospitals acquired by private equity had a decrease in Medicare patients with an increase in privately insured patients which provided higher reimbursements than did Medicare, suggesting that selective marketing efforts were successful in increasing margins. Increases in hospital charges resulted in higher out-of-pocket costs for the uninsured and for those who were receiving care out-of-network. Even in-network insured patients produced higher net incomes since negotiating leverage was greater for the private equity hospitals. After acquisition, "private equity firms began charging more for services, cutting operating costs, or both." After acquisition, the private equity hospitals reportedly saw sicker patients warranting higher charges, but this likely represented more aggressive coding - upcoding just as we see with the private Medicare Advantage plans that result in increases in net income. These private equity-acquired hospitals also supposedly showed greater improvements in process quality measures when, in fact, this actually likely represented gaming in an effort to maximize opportunities for quality bonuses under pay-for-performance contracts.

The medical-industrial complex is more than ripe for equity investors. As if the greed in the system was not already excessive, bringing in the equity investors to squeeze more out of our overpriced and underperforming system is exactly what we should not be doing.

We really do need the single payer model of an improved Medicare for All, but if the stalling by our political leaders in both major parties continues, the economic structure of our health care delivery system will be damaged as with a blunderbuss to the degree that it may be hard to distinguish it from the economic structure of a war zone in need of a Marshall Plan. Really. Private equity acquisition is only one small example of the damage being done throughout the health care economic infrastructure - damage that will be very difficult to repair.

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