Hospital-acquired complications rose by over 25% after private equity purchase
January 8, 2024
Source: Kannan, et al “Changes in Hospital Adverse Events and Patient Outcomes Associated with Private Equity Acquisition” JAMA December 26, 2023 LINK Purple is statistically significant
Researchers from Harvard Medical School reviewed over 650,000 Medicare hospital discharges from 51 hospitals that were purchased by private equity (PE) companies and 259 ‘control’ hospitals (matched for size and geography) from 2010-2019. They found that sale to a private equity company was associated with a large increase in hospital-acquired conditions, especially falls and infections of central lines (intravenous catheters generally in the chest or neck to deliver medicines directly into the bloodstream.) The increase in line infections and surgical site infections was despite a decrease in central lines and surgical cases at hospitals after PE acquisition. Hospitals acquired by private equity generally take on substantial debt and seek profitability through decreased costs (primarily staffing) and increased revenues.
The researchers also found that after acquisition by private equity hospitals took care of slightly younger Medicare patients, and fewer dual eligibles on both Medicare and Medicaid. PE hospitals had shorter lengths of stay, but were more likely to transfer patients to other hospitals or to skilled nursing facilities. Patients at private equity acquired hospitals were slightly less likely to die in the hospital, but no less likely to die in 30 days. The researchers suggest this might represent the impact of earlier discharges. These researchers previously showed that the ‘charge to cost ratio,’ which indicates more aggressive fee setting, increased at hospitals that were acquired by private equity companies.
This research adds to other reports showing that private equity acquisition of nursing homes leads to lower staffing levels and higher mortality, and research showing that private equity acquisitions of physician practices leads to higher costs and higher utilization of expensive procedures without a clear impact on measured quality.
Implications for employers:
This study was based on Medicare beneficiaries, as there is a publicly available database of Medicare claims. Hospitals with higher levels of complications on the Medicare population likely have lower quality in caring for the employed population, too.
Benefit design that encourages using higher value hospitals can lead to both lower costs and better outcomes in areas with hospital competition. However, many members of health plans have little choice of hospital since most of the US has little hospital competition.
Employers can seek quality reporting from carriers and encourage them to pay for value. Current plan-hospital negotiations are usually not focused on quality or prevention of adverse events.
About 9% of private hospitals in the US are owned by private equity, with the highest number in Texas. Employers can identify any potential hospitals in their local area here.
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