[Senate Hearing 118-330]
[From the U.S. Government Publishing Office]
S. Hrg. 118-330
WHEN HEALTH CARE BECOMES
WEALTH CARE: HOW CORPORATE
GREED PUTS PATIENT CARE AND
HEALTH WORKERS AT RISK
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON PRIMARY HEALTH AND RETIREMENT SECURITY
OF THE
COMMITTEE ON HEALTH, EDUCATION,
LABOR, AND PENSIONS
UNITED STATES SENATE
ONE HUNDRED EIGHTEENTH CONGRESS
SECOND SESSION
ON
EXAMINING WHEN HEALTH CARE BECOMES WEALTH CARE: HOW CORPORATE GREED
PUTS PATIENT CARE AND HEALTH WORKERS AT RISK
__________
APRIL 3, 2024
__________
Printed for the use of the Committee on Health, Education, Labor, and
Pensions
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
55-874 PDF WASHINGTON : 2024
COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS
BERNIE SANDERS (I), Vermont, Chairman
PATTY MURRAY, Washington BILL CASSIDY, M.D., Louisiana,
ROBERT P. CASEY, JR., Pennsylvania Ranking Member
TAMMY BALDWIN, Wisconsin RAND PAUL, Kentucky
CHRISTOPHER S. MURPHY, Connecticut SUSAN M. COLLINS, Maine
TIM KAINE, Virginia LISA MURKOWSKI, Alaska
MAGGIE HASSAN, New Hampshire MIKE BRAUN, Indiana
TINA SMITH, Minnesota ROGER MARSHALL, M.D., Kansas
BEN RAY LUJAN, New Mexico MITT ROMNEY, Utah
JOHN HICKENLOOPER, Colorado TOMMY TUBERVILLE, Alabama
ED MARKEY, Massachusetts MARKWAYNE MULLIN, Oklahoma
TED BUDD, North Carolina
Warren Gunnels, Majority Staff Director
Bill Dauster, Majority Deputy Staff Director
Amanda Lincoln, Minority Staff Director
Danielle Janowski, Minority Deputy Staff Director
------
SUBCOMMITTEE ON PRIMARY HEALTH AND RETIREMENT SECURITY
ED MARKEY, Massachusetts, Chairman
PATTY MURRAY, Washington ROGER MARSHALL, M.D., Kansas,
TAMMY BALDWIN, Wisconsin Ranking Member
CHRISTOPHER S. MURPHY, Connecticut RAND PAUL, M.D., Kentucky
MAGGIE HASSAN, New Hampshire SUSAN M. COLLINS, Maine,
TINA SMITH, Minnesota LISA MURKOWSKI, Alaska
BEN RAY LUJAN, New Mexico MIKE BRAUN, Indiana
JOHN HICKENLOOPER, Colorado MARKWAYNE MULLIN, Oklahoma
BERNIE SANDERS (I), Vermont, (ex TED BUDD, North Carolina
officio) BILL CASSIDY, M.D., Louisiana, (ex
officio)
C O N T E N T S
----------
STATEMENTS
WEDNESDAY, APRIL 3, 2024
Page
Committee Members
Markey, Hon. Ed, Chairman, Subcommittee on Primary Health and
Retirement Security, Opening statement......................... 1
Warren, Hon. Elizabeth, U.S. Senator from the State of
Massachusetts, Opening statement............................... 4
Witnesses
Stinson, Ellana, M.D., MPH, MBA, Emergency Medicine Physician,
President, New England Medical Association, Boston, MA......... 6
Prepared statement........................................... 8
O'Grady, Eileen, Research and Campaign Director, Healthcare,
Private Equity Stakeholder Project, Washington, DC............. 10
Prepared statement........................................... 12
Drummond, Hannah, RN, Emergency Department, Mission Hospital,
National Nurses Organizing Committee (NNOC), National Nurses
United (NNU), Asheville, NC.................................... 21
Prepared statement........................................... 23
Berwick, Donald M., M.D., MPP, President Emeritus and Senior
Fellow, Institute for Healthcare Improvement, Newton, MA....... 28
Prepared statement........................................... 29
ADDITIONAL MATERIAL
Statements, articles, publications, letters, etc.
Markey, Hon. Ed:
Tamara Bedard, RN............................................ 45
James Durkin, Legislative Director, AFSCME Council 93........ 46
Barbara Pearson, MA.......................................... 47
Bob Mason, Clinical Social Worker (Retired).................. 48
Brad Judson, M.D............................................. 49
Coalition for Patient-Centered Care.......................... 50
Daniel Nadworny, RN, DNP, FAEN............................... 52
Disability Law Center........................................ 54
Bruce Fleischer, Mass Care................................... 67
American College of Obstetricians and Gynecologists.......... 68
Mardge Cohen, M.D............................................ 69
Melinda E. Barrett, Mayor of Haverhill, MA................... 71
Karen Lavertue............................................... 73
Norman Daoust................................................ 74
Massachusetts Independent Pharmacists Association............ 75
Americans for Reform Education Fund.......................... 77
Randi Weingarten, President, AFT............................. 80
Sara Lennox, M.D............................................. 82
Senator Pavel M., Payano, First Essex District, MA........... 83
Stephen K. Epstein, M.D., MPP, FACEP......................... 84
John Brady, RN, Executive Vice President AFT, CT............. 86
Tracy Kidder, Author......................................... 89
WHEN HEALTH CARE BECOMES
WEALTH CARE: HOW CORPORATE
GREED PUTS PATIENT CARE AND
HEALTH WORKERS AT RISK
----------
Wednesday, April 3, 2024
U.S. Senate,
Subcommittee on Primary Health and Retirement Security,
Committee on Health, Education, Labor, and Pensions,
Washington, DC.
The Subcommittee met, pursuant to notice, at 11:10 a.m., at
Gardner Auditorium, Massachusetts State House, 24 Beacon
Street, Boston, MA 02133, Hon. Edward Markey, Chairman of the
Subcommittee, presiding.
Present: Senators Markey [presiding], and Warren.
OPENING STATEMENT OF SENATOR MARKEY
Senator Markey. The Senate Health, Education, Labor, and
Pensions Subcommittee on Primary Health and Retirement Security
will come to order. Thank you for joining us today for the
hearing, When Health Care Becomes Wealth Care, How Corporate
Greed Puts Patient Care and Providers At Risk.
Thank you to HELP Committee Chair Bernie Sanders for the
assistance in putting this hearing together. And thank you
especially to my colleague and partner, Senator Warren, for all
of her work on these issues. And we are very grateful to Senate
President Spilka and to Speaker Mariano for hosting us here in
this historic State House.
A special thank you to Senate President aide Jim Zambrano
and Ayanna Clark for all their help with preparing the
auditorium for this hearing. Thank you also to Governor Healey,
Massachusetts Health and Human Services Secretary Kait Walsh,
State legislators, local elected officials, the Massachusetts
Nurses Association, SEIU 1199, AFSCME, Massachusetts Medical
Society, the Massachusetts League of Community Health Centers,
the Massachusetts Health and Hospital Association, Mass CARE,
and the many health care leaders in Massachusetts for their
ongoing partnership in the wake of the Steward crisis. Health
care is a sacred trust, a sacred responsibility.
Health providers hold the trust of their patients in
moments of fear and vulnerability. They are with us from our
first days on Earth to the last, and the hospitals that
providers work in should and must enable them to do this work
well. But Steward Healthcare, led by Dr. Ralph De La Torre,
Cerberus, and Medical Properties Trust, and greedy corporate
executives like them are failing in their responsibility to
patients, providers, and communities.
When Cerberus and Dr. De La Torre partnered to buy Caritas
Cristi in 2010, they sold themselves as saviors. W. Brett
Ingersoll, the then co-head of private equity and now managing
director at Cerberus, said their investment would enable
providers to, ``deliver world class care to patients in the
communities where they live.'' In 2014, Dr. De La Torre said
his mission was to provide people with ``really good health
care.''
Instead, Dr. De La Torre and Cerberus, like the
mythological dog that it is named after that guards the gates
of the underworld, trapped their hospitals in financial
instability as the rot of their greed spread.
Cerberus and Dr. De La Torre stripped the hospitals of
their assets and staff and forced these hospitals to pay rent
to Medical Properties Trust on land they used to own, all while
they extracted billions from Massachusetts institutions to
expand globally. Steward and Cerberus made millions, rejoiced
in their profits, and sailed away from their responsibility to
workers and patients on their luxury yachts.
Meanwhile, their hospitals drowned. Steward owned hospitals
in Massachusetts, from Methuen to Brockton, buckled under $50
million in unpaid rent to Medical Properties Trust. New England
Sinai closed. In one hospital, Sungida Rashid, who had just
given birth, bled to death when vendors went unpaid, and a
medical device needed to stop the bleeding wasn't available.
Across the country in Utah, Ohio, Florida, Louisiana,
Pennsylvania, and Texas, Steward owned hospitals are without
needed supplies, cutting their services or closing their doors.
Now we are forced to clean up Steward's mess without clear
information. Just last week, Optum announced their intent to
purchase Steward's physician group.
In order to protect patient care, we must guarantee that
the Department of Justice and the Federal Trade Commission
closely scrutinize the potential impacts of this deal. And
despite our inquiries, Steward insists on hiding their
finances, flouting requirements set by law. Dr. Ralph De La
Torre was invited here today to answer to the public for the
decisions he made not only as the Chairman and CEO of Steward,
but also as a physician.
His expertise afforded him legitimacy, but it also carries
a responsibility, a responsibility he was acutely aware of when
Steward took on the care of 2.2 million patients in the United
States, including 434,000 here in Massachusetts. The stakes for
his success were high when Dr. De La Torre promised to deliver
really good health care, but he failed.
He failed the health providers, he failed communities. He
failed to show up here today to answer even the most basic
questions about what he has done. Dr. De La Torre's chair is as
empty as the promises he made to the public, and we are going
to not stop until we get the answers from Dr. De La Torre for
the people of Massachusetts. But this story goes far beyond
Steward Health Care.
A $33 billion deal by Bain, Kohlberg Kravis Roberts, and
Merrill Lynch to buy Hospital Corporation of America Healthcare
in 2006 showed greedy corporate executives that there was money
to be made off of hospitals. HCA, now a publicly traded
company, laid the groundwork for a playbook that others have
followed.
Joel Friedman, from Paladin Healthcare, a private equity
firm, promised to ``sustain and enhance clinical programs''
when Paladin purchased Hahnemann Hospital in Philadelphia.
Instead, they closed the hospital while private equity retained
the valuable hospital real estate.
Dr. Mark Bell of Pipeline Health, a private equity backed
health system, promised high quality care when they purchased
Westlake Hospital and Weiss Memorial Hospital in Chicago. Weeks
later, Pipeline closed Westlake Hospital and sold Weiss
Memorial's parking lot to a real estate developer.
HCA's CEO Sam Hazen has said that HCA aims to ``care for
and improve human life.'' In a year when nearly 80 percent of
health workers and staff said that they had seen patient care
jeopardized by short staffing, HCA made $60 billion in revenue.
Corporate executives like these deploy promises for a profit.
They believe their sacred responsibility is not to
patients, it is to their bottom line. But health care isn't an
oil change franchise or a coffee brand. A broken health care
promise could cause communities their lives and livelihoods.
It is insufficient to simply replace one for-profit company
with another, like Steward or Optum, without assurances. And
that is why I am announcing a new agenda that provides for
stronger oversight of corporate greed, building a system that
guarantees health care for all, and preventing Stewards'
failures from becoming America's health care standard.
This includes my new legislation, the Health Over Wealth
Act, which would protect every patient and provider that
private equity touches. First, the Health Over Wealth Act would
protect patients and providers.
It would mandate that private equity companies set aside
funding to protect access to care, remove tax breaks that
incentivize companies to strip hospital assets, and give a
bigger voice to workers and patients to review and block deals
that would impact patient care, access, or safety. And second,
the Health Over Wealth Act would guarantee transparency.
Steward's refusal to disclose their financial information
maximized the harm they inflicted on communities. This bill
would require that for-profit companies report on their
finances, real estate deals, and how much their investors and
shareholders are getting paid. They must also report on worker
retention, staffing ratios, and how much their care is costing
patients.
Third, the Health Over Wealth Act would demand
accountability. Cerberus made more than $800 million in profit.
Dr. De La Torre is still sailing on his yacht. Medical
Properties Trust owns health property across the country.
The Health Over Wealth Act would give the Federal
Department of Health and Human Services the tools to prohibit
private equity investments by companies engaging in price
gouging, understaffing, or creating barriers to care and to
block real estate deals that destabilize health systems. And
that is just the start.
The strongest protections will come from elevating the
voices of patients, providers, and communities. And that is why
I posted a discussion draft of my Health Over Wealth Act on my
website, and we would appreciate any public comment on that
legislation.
Little did Ralph Waldo Emerson know when he wrote in 1860,
the first wealth is health, that a force as greedy and
pernicious as Steward would take it literally, using our health
care system as a cash cow to line their pockets and those of
their investors. What they did was immoral, and we need to make
sure that it becomes illegal.
Together, we will guarantee every American a health care
system, not a wealth care system. That is what the hearing
today is all about, and that is why I am so proud to be joined
up with my great, partner and leader on this and so many other
issues, Senator Warren.
OPENING STATEMENT OF SENATOR WARREN
Senator Warren. Thank you very much, Senator Markey. And a
very special thank you to you for holding this hearing. I
appreciate the work you are doing and the leadership on this.
You are, as always, a wonderful partner here.
I have been warning about the dangers of private equity for
years. In industry, after industry, after industry, when
private equity marches in, a few wealthy investors see an
opportunity to turn a quick buck. They buy a business, they
load it up with debt, they strip out the assets, and then they
sell it off.
They take the money and run, leaving a hollowed out shell
behind. Stores get closed, consumers get cheated, workers get
laid off, pensions get raided. When private equity gets hold of
health care providers, it is literally a matter of life and
death.
One example, when private equity firms buy up nursing
homes, they cut costs to the bone, they reduce staff and suck
money out the door to boost investor profits. Quality of care
declines. During the pandemic, private equity owned nursing
homes had a 40 percent higher COVID mortality rate than other
nursing homes.
I will say it bluntly, turning private equity loose in our
health care system kills people. Steward Healthcare is a clear
cut case of private equity exploiting for profit health care.
Investors looted the hospital and got rich, while nurses,
doctors, and other workers tried hard to provide care, supplies
ran out, and contractors walked away because they weren't
getting paid.
Investors got rich while communities struggled with the
reality that they might lose access to reliable health care.
Steward was created when a private equity firm, Cerberus
Capital Management, bought a small non-profit hospital system,
Caritas Christi.
Six years later, Cerberus sold the land and hospital
buildings, the operating rooms, the nursery for the babies, the
gift shop, the parking lots to a real estate investment trust
called Medical Properties Trust, or MPT, for $1.25 billion.
What did private equity do with the money from that sale?
Did they upgrade the operating room equipment or modernize the
nursery? Nope. Private equity paid themselves hundreds of
millions of dollars.
Meanwhile, the hospitals now had to make huge rent payments
to MPT. Not enough money was coming in and Steward fell behind
on bills everywhere. Steward's fate was pretty much sealed at
that point. It was economically dead, a zombie.
But that news wasn't public yet. The private equity guys
knew it, of course, but they had their money, and they were off
on their yachts, sipping pina coladas. Now the entire system
could collapse. There is one and only one thing of value that
private equity hasn't already taken, Steward's physician group.
Now, Optum, a subsidiary of the conglomerate UnitedHealth
Group, wants to buy that last asset. Optum may be willing to
pay steward hundreds of millions of dollars, but the deal
provides no guarantee that the hospitals would stay open. None.
In fact, the money could go into Steward and right back out the
door again to corporate lenders or investors without a single
penny used to help these hospitals.
Worse yet, this deal gives Optum, which has already bought
up physician practices all across the country, a chance to buy
an even bigger chunk of health care here in Massachusetts.
Optum is already the largest employer of physicians in
Massachusetts, counting more than 53,000 of our doctors in its
network.
For comparison, Mass General Brigham has about 7,500
doctors. Now, Optum, with its more than 53,000 doctors, wants
to get its hands on thousands more physicians in the Steward
group. The net result could be a disaster. Optum isn't offering
to pay hundreds of millions of dollars so that they can make
health care better in Massachusetts.
Nope. This is all about making more money and Optum has run
this same play in other states. Optum boosts its profits by
overbilling Medicare and cutting care for the patients who need
it most.
I do not understand how regulators can approve such a deal.
I appreciate the work that Governor Healey and Secretary Walsh
are doing to find a solution to a problem that they inherited.
The blame for this crisis falls squarely on the private equity
firm that bought the hospitals and stripped their assets, and
on Steward's CEO Ralph De La Torre, who sold the deal both to
regulators and to the health care community here in
Massachusetts.
While we hold this hearing, Dr. De La Torre is hiding out.
Shame on Dr. De La Torre. He owes the residents of
Massachusetts an explanation for his part in looting Steward
hospitals. His refusal to appear at today's hearing is
cowardly. We need accountability here, and law enforcement
authorities should carefully review every aspect of this
fiasco.
We also need to change the law. Private equity should not
be allowed to loot one business after another, and I have
introduced the most comprehensive bill to overhaul the private
equity industry. In addition, investors should face extra
restrictions when they buy up hospitals and health care
practices.
I have a bill to accomplish that as well. In the meantime,
either of these laws could be put in place by our state
legislature and protect the people of the Commonwealth of
Massachusetts. This hearing is a good start, and I am grateful
to Senator Markey for getting the ball rolling.
Senator Markey. Thank you.
Senator Warren. Thank you.
Senator Markey. Thank you, Senator Warren. And we are
joined by many health care leaders here in the Commonwealth.
Senator Cindy Friedman is here. Senator Mark Pacheco, Senator
Mike Brady, Representative Chris Flanagan, Representative Vanna
Howard, Representative Carol Doherty, Representative Gerry
Cassidy, Representative John Lawn, Representative Sean
Garballey.
We thank all of you for all of the work which you do on
these issues on a daily basis, and we are looking forward with
the Federal delegation partnering with you in order to get the
answers and find the solutions to this problem. So, now we will
turn to our witnesses. Our first witness is Dr. Ellana Stinson
Elena.
Dr. Stinson is a board certified emergency room physician
at Boston Medical Center. She also serves as President of the
New England Medical Association, and as a Massachusetts
delegate to the American Medical Association.
Dr. Stinson previously served as Associate Medical Director
at the Reggie Lewis mass vaccination site in Roxbury, at the
height of the COVID-19 pandemic.
She earned her medical degree at Meharry Medical College,
her Master of Public Health, with a focus on access to care in
underserved communities from Harvard, and she has also received
a Master's in Business Administration from Babson College,
focusing on health care finance and her Bachelor's of Science
degree from Spelman College. Dr. Stinson, you may proceed with
your testimony.
STATEMENT OF ELLANA STINSON, M.D., MPH, MBA, EMERGENCY MEDICINE
PHYSICIAN, PRESIDENT, NEW ENGLAND MEDICAL ASSOCIATION, BOSTON,
MA
Dr. Stinson. Thank you, Senator Markey, Senator Warren, for
having me this morning. My name is Ellana Stinson. I am a board
certified emergency medicine physician and have practiced
medicine for 15 years.
From 2013 to 2020, I was employed as an emergency medicine
physician at Carney Hospital, and also worked at Good Samaritan
in the former Quincy Hospital, all part of the Steward Health
system. In addition, over the past 11 years----
Senator Markey. Could you move the microphone just in, a
little bit closer? Yes, please.
Dr. Stinson. In addition, over the past 11 years I have
worked intermittently throughout the country at various
facilities run and operated by HCA, Envision, Tenet, Team
Health, and CHS.
When I entered medicine, I deeply loved what I did, the
caring for a patient in the most vulnerable moments and working
in a beautifully orchestrated chaos, while bearing witness to
many life changing moments filled me with pride at the end of
each shift. Unfortunately, so much of what I loved about
emergency medicine has changed drastically over the years.
Initially, my time at Carney felt very fresh and
fulfilling. Being able to serve a very diverse population in
the Dorchester neighborhood of Boston was essentially how I
always imagined my career trajectory, serving the most
vulnerable populations.
When I could no longer provide for my patients the way I
would want my loved one, I had to make a decision to stay or
go. Having spent time at several other Steward hospital--
facilities briefly, I began to realize how resources were being
dwindled down and pooled from each facility.
Most of the facilities no longer had certain specialty
services, and Quincy Hospital eventually was taken down to bare
bones before it ultimately closed. Not having blood products,
respiratory therapy at times, or certain specialty services no
longer felt like I was able to provide safe or quality care.
What is happening here in the Commonwealth is happening all
over the country.
We have now seen the buyouts and M and As led by private
equity firms, over 30 percent of hospitals here in the U.S.,
and over 40 percent of emergency departments. Having spent time
in other PE sites around the country, the level of deprivation
was seemingly worse in some areas.
Increasing wait times, critical shortage of staff, leading
to dangerous boarding levels and critical dangerous patient to
nurse ratios in the emergency departments seeing upwards to 14
to 1 ratios at times. All of this only to be exacerbated by the
pandemic, which resulted in increased cost of care, infection
rates, mortality, and even death.
Practicing medicine in PE led places is no longer about
patient safety or quality, but about making medical decisions
and judgments due to corporate decision-making with profit
motives at the expense of patients.
Forcing staff to see patients in waiting room in order to
have it appear wait times were being reduced and improving door
to doc time. Calling codes on sepsis and stroke in order to
find innovative ways to make profits through up-coding.
Increasingly daunting metrics required by physicians and other
staff to meet were unattainable and unsafe in many instances,
but very much expected.
In addition, many sites across the country began to remove
emergency physicians from in-network, resulting in higher bills
for patients known as surprise billing. This propagating
practice not only harms patients, but also increases financial
burdens on patients who do not have a choice where they go when
they are experiencing that crushing chest pain or those stroke
like symptoms.
Especially when facilities sometimes are not close, and you
have to travel more than an hour away. Most of these facilities
work--I have worked in very vulnerable populations that were
mostly people of color, low income, and had limited access to
other facilities or primary services, forcing them to only seek
their care at a PE-VC site.
It's also known that most of these buyouts of hospitals and
facilities are already struggling and have higher Medicaid and
Medicare population, but ultimately affects our most vulnerable
populations. It is critical that we consider not only the
impact that facilities have on our healthcare system, but also
on the worsening care, access, and quality being provided to
those communities already harmed by historical injury.
The financialization of medicine will continue to
exacerbate health disparities, despite the work that we are
doing on the ground to close these gaps. In addition, these
private equity backed facilities are where I typically ran into
other physicians of color looking to serve the underserved
communities.
As it pertains to myself and my colleagues, these practices
oftentimes felt unsafe, which sparked many questions of medical
legal risk, as well as the emotional toll it took on all of us
to enter into a profession to do no harm. In addition, being on
staff at PE-VC facilities also would not qualify a physician
swimming in student debt for loan forgiveness.
A profession once competitive when I first began my medical
journey is now one of the least competitive fields to enter as
students bear witness to the destruction of the profession. In
2023, 554 of the residency spots went unfilled.
We also saw more PE-VC hospitals opening residency programs
that were not adequately equipped to provide the proper
training for emergency medicine trainees. We trained to do--
deal with hard stuff, but we are running out of options on how
to continue providing safe and adequate care to our patients.
[The prepared statement of Dr. Stinson follows.]
prepared statement of ellana stinson
Thank you, Senator Markey and Senator Warren for having me this
morning.
My name is Ellana Stinson. I am a board-certified emergency
medicine physician and have practiced emergency medicine for 15 years.
From 2013 to 2020, I worked on staff as an emergency medicine
physician at Carney Hospital, Good Samaritan and the former Quincy
Hospital, all part of the Steward Health System. In addition, over the
past 11 years, I have worked intermittently throughout the country at
various facilities run and operated by HCA, Envision, Tenant, Team
Health and CHS.
When I entered medicine, I deeply loved what I did. Caring for
patients in their most vulnerable moments and working in beautifully
orchestrated chaos while bearing witness to so many life changing
moments filled me with pride at the end of each shift. Unfortunately,
so much of what I loved about Emergency Medicine has changed
drastically over the years.
Initially, my time at Carney felt very fresh and fulfilling. Being
able to serve a very diverse population in the Dorchester neighborhood
of Boston was essentially how I always imagined my career trajectory,
serving the most vulnerable populations. But when I could no longer
care for my patients the way I would want a loved one treated, I had to
make decisions to stay or go. Having spent time at several other
Stewart facilities briefly, I began to realize how resources were being
dwindled down and pulled from each facility. Most of the facilities no
longer had certain speciality services and Quincy Hospital, eventually
was taken down to bare bones before its ultimate closure. Not having
blood products, respiratory therapy at times or certain specialty
services no longer felt like I was able to provide safe or quality
care. What is happening here in the Commonwealth is happening around
the country.
We have now seen the buyouts, mergers and acquisitions led by
private equity firms of over 30 percent of hospitals in the U.S. Having
spent time at other PE sites around the country the level of
deprivation was seemingly worse in some areas. Increased wait times and
critical shortage of staff leading to dangerous boarding levels and
critically dangerous patient to nurse ratios in the emergency
department, seeing upwards to 14 to 1 ratios at times. All of this only
to be exacerbated by the pandemic which resulted in increased cost of
care, infection rates, mortality and even death.
Practicing medicine in many PE led places is no longer about
patient safety and quality, but about making medical decisions and
judgment due to corporate decision-making with profit motives at the
expense of patients. Forcing staff to see patients in the waiting room
in order to have it appear wait times were being reduced and improving
door to doc times, calling codes for sepsis and strokes in order to
find innovative ways to make profits. Increasingly daunting metrics
required of physicians and other staff to meet were nearly unattainable
and unsafe in many instances, but very much expected. In addition, many
sites across the country began to remove emergency physicians from in-
network, resulting in higher bills for patients known as surprise
billing. These profit gaining practices not only harm patients but also
increase financial burdens on patients who do not have a choice of
where they will go when they are experiencing crushing chest pain or
stroke-like symptoms. Especially when the next closest facility has
been in some of my experiences, upwards to an hour away.
Most of the facilities I worked in were in very vulnerable
populations that were mostly people of color, low income, or had
limited access to other facilities or primary care services. Forcing
them to only seek their care at a PE backed site. It is also known that
most of the buyouts are of hospitals and facilities already struggling
or with higher Medicaid and Medicare populations which ultimately
affects our most vulnerable populations. It is critical we consider not
only the impact these facilities have on our health care system, but
also on the worsening care access and quality being provided to those
communities already harmed by historical injury. The financialization
of medicine will continue to exacerbate health disparities despite work
being done on the ground to close these gaps.
In addition, these Private Equity backed facilities are where I
typically run into other emergency physicians of color. As it pertains
to myself and my colleagues, these practices often felt unsafe, which
sparked many questions of medical legal risk as well as the emotional
toll it takes on all of us who enter this profession to do no harm. In
addition, being on staff at a PE backed facility also would not qualify
physicians swimming in student debt for loan forgiveness. A profession
once competitive when I first began my medical journey is now one of
the least competitive fields to enter as students bear witness to the
destruction of the profession. In 2023, 554 of the residency spots went
unfilled. We also saw more PE backed hospitals opening residency
programs that were not adequately equipped to provide the proper
training for an emergency medicine trainee.
We train to deal with hard stuff, but we are running out of options
on how to continue providing safe and adequate care at these PE run
facilities.
______
Senator Markey. Thank you, Dr. Stinson. Next we are going
to hear from, Eileen O'Grady. She is the Health Care Research
and Campaigns Director for the Private Equity Shareholder
Project. She has written extensively on the topic of private
equity investments in the United States health care system.
She has published nationally. Ms. O'Grady previously worked
for Unite Here and the Center for Economic and Policy Research.
Ms. O'Grady, thank you for being here today. Whenever you feel
comfortable, please begin.
STATEMENT OF EILEEN O'GRADY, RESEARCH AND CAMPAIGN DIRECTOR,
HEALTHCARE, PRIVATE EQUITY STAKEHOLDER PROJECT, WASHINGTON, DC
Ms. O'Grady. Thank you, Chairman Markey, and thank you,
Senator Warren. I am Director of Health Care Research at the
Private Equity Stakeholder Project. We are a nonprofit watchdog
organization dedicated to understanding the impacts--the
increasing influence of private equity in our economy and its
impact on people.
Our mission is to empower communities, working families,
and others impacted by private equity in the broader financial
industry. And because private equity industry is so huge, those
impacts are widely felt, even if we don't always recognize when
a private equity firm is behind them.
In fact, we have seen private equity investing in virtually
every aspect of the health care industry, from buying up mental
health and addiction treatment clinics to almost completely
dominating the market for motorized wheelchair parts and
supplies. As the Private Equity Stakeholder Project, we found
that almost 1 in 10 private hospitals in the U.S. are owned by
a private equity firm.
About a third of those hospitals serve rural communities,
and many of them are safety net hospitals serving poor and
uninsured patients. And this is really troubling because we
have seen time and time again that the private equity business
model, which is intensely focused on maximizing profit at all
costs, is often at odds with providing quality care.
We have seen that private equity health care profiteering
has resulted in dangerous conditions, declining quality,
Medicare and Medicaid fraud, increased costs, and closures, and
those consequences have been borne by health care workers and
the communities they serve.
To better understand how this happens, it is important to
understand the private equity business model in health care.
Private equity firms are short term investors. They usually try
to own companies for around 4 to 7 years.
During that time, they have to generate as much cash-flow
as possible, often with a goal of doubling or tripling their
investment. There are a few financial tactics central to this
business model. The first is debt.
Private equity firms routinely use much higher levels of
debt than other companies, and they do it differently than I
think a lot of people understand. Firms typically buy companies
through leveraged buyouts, where private equity firm finance is
a substantial part of the purchase price by taking out a loan
secured by the company they are buying.
That means that the company is on the hook to pay down the
debt that the PE firm took out. That kind of high leverage can
divert cash away from operations to paying interest on the debt
and leave companies more at risk for restructuring or
bankruptcy. We are acutely seeing the effects of this now, as
private equity owned companies are struggling under mountains
of debt in a high interest rate environment.
We found that over 20 percent, the health care bankruptcies
that happened last year, were private equity owned companies,
and 90 percent of the health care companies that are considered
most at risk for bankruptcy now are owned by private equity
firms. Bankruptcies in healthcare are more than just legal or
financial events.
They can lead to closures, disruption, or cessation of
critical health care services, layoffs, and those outcomes have
ripple effects on the broader health care infrastructure, like
overburdening health care providers that need to fill the gaps
left by those closures.
Another financial tactic we have seen private equity firms
use with hospitals, sale lease back transactions, where a
private equity firm will sell a hospital's underlying real
estate and lease it back from the new owner.
PE firms will do this because it provides a quick and easy
way to monetize the real estate and generate cash for
investors, but they often leave hospitals with higher monthly
lease payments and beholden to a landlord.
This is obviously the lesson we have learned with Steward
Healthcare. There are a few other ways we have seen private
equity firms blatantly extracting wealth from health care
companies. Private equity firms have taken out new debt on the
companies they own, and then use the proceeds from that debt to
give themselves a cash payout, which is known as a dividend
recapitalization, and somehow that kind of deal is completely
legal.
On top of all of these tactics, debt stripping out real
estate, extracting fees, dividends, we have seen private equity
firms cutting costs. This might mean cutting staffing, skimping
on medical supplies, failing to maintain equipment, cutting
charity care.
I am going to give you another example of how all of these
financial strategies have played out at a hospital system.
Prospect Medical Holdings is a safety net hospital chain that
was for 10 years owned by a private equity firm called Leonard
Green and Partners.
Over the course of its ownership, Leonard Green loaded the
hospitals with debt to pay itself hundreds of millions of
dollars in dividends and fees. And then, in order to pay down
some of that debt, it sold off the hospital's real estate and
leased it back, saddling it with expensive rent payments to a
new hospital landlord, you might know the name, Medical
Properties Trust, which now own Steward.
All the while its hospitals suffered atrocious conditions,
holes in the ceiling where the rain came through, failing to
pay for medical supplies or gas for ambulances, shuttered a
hospital in San Antonio and sold the real estate to a luxury
hotel developer. Leonard Green sold its stake, but now it
appears Leonard Green's chickens are coming home to roost.
Prospects hospitals are in poor financial shape, shutting
down services, laying off hundreds of workers. Leonard Green,
meanwhile, lined its pockets and left the communities Prospect
serves holding the bag. I am worried that what we have seen
about private equities profiteering in health care is just the
tip of the iceberg.
It has been nearly impossible to hold private equity firms
accountable, even when it is clear that their financial tactics
harmed patients and workers, and that is because private equity
firms largely operate in the shadows. They rely on the fact
that there is very little oversight over what they do.
I want to be clear, we know the intense focus on profit
isn't unique to private equity. We see this in all kinds of
companies, including, unfortunately, at nonprofit providers.
But private equity amplifies and exacerbates these kinds of
extractive tendencies, and it gets away with it because complex
corporate structures shield these firms from transparency and
accountability.
It is therefore critical for policymakers to pass
legislation and for regulators to propose rules that increase
transparency and accountability for corporate actors in health
care. This hearing is a critical step for creating the tools
necessary to shed light on the impacts of corporate health care
profiteering and give stakeholders the tools to hold Wall
Street accountable. Thank you so much for the opportunity to
speak, and I look forward to your questions.
[The prepared statement of Ms. O'Grady follows.]
prepared statement of eileen o'grady
Chairman Markey, Ranking Member Marshall, and Members of the
Subcommittee, thank you for the opportunity to provide a statement
regarding the April 3, 2024 hearing ``When Health Care Becomes Wealth
Care: How Corporate Greed Puts Patient Care and Health Workers at
Risk,'' by the Subcommittee on Primary Health and Retirement Security.
My name is Eileen O'Grady, and I am the Healthcare Research and
Campaigns Director for the Private Equity Stakeholder Project. The
Private Equity Stakeholder Project is a non-profit organization whose
mission is to identify, engage, and connect stakeholders affected by
private equity with the goal of engaging investors and empowering
communities, working families, and others impacted by private equity
investments.
This hearing could not come at a more critical time. The private
equity industry has grown dramatically in recent years. Private equity
and other private funds firms had less than $1 trillion in assets under
management in 2004. They now manage more than $13.1 trillion, and are
growing quickly. \1\
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\1\ ``A routinely exceptional year,'' McKinsey, Feb 2017. https://
www.mckinsey.com/-/media/mckinsey/industries/
private%20equity%20and%20principal%20investors/our%20insights/
a%20routinely%20exceptional%20year%20for%20private%20equity/mckinsey-
global-private-markets-review-february-2017.pdf; ``Private markets: A
slower era,'' McKinsey, February 20, 2024. https://www.mckinsey.com/
industries/private-equity-and-principal-investors/our-insights/
mckinseys-private-markets-annual-review.
Private equity increasingly makes up a substantial portion of
investment in U.S. healthcare companies, and reached an all-time high
in 2021 of 515 deals valued at $151 billion. \2\ These investments
touch virtually every aspect of the healthcare industry, including
hospitals, physician specialties such as gastroenterology and
anesthesiology, emergency medicine, dentistry, travel nursing, durable
medical equipment, behavioral health, disability services, and
healthcare services for people in prisons and jails.
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\2\ ``Healthcare Private Equity Market 2021: The Year in Review''
(Bain and Company, March 16, 2022), bain.com/insights/year-in-review-
global-healthcare-private-equity-and-ma-report-2022/.
The growing presence of private equity in healthcare raises
concern. The private equity business model, which is characterized by
the pursuit of outsized profits over short periods of time and a
reliance on high levels of debt, is in many ways incompatible with
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providing quality affordable healthcare.
Right now, hospitals in Massachusetts owned by Steward Healthcare
are facing an existential threat following ownership by private equity
firm Cerberus Capital Management. The experience of Steward is
unfortunately not unique; there have been many stories of private
equity firms looting healthcare companies at the cost of patient care.
Given the backdrop of Steward's acute financial distress, my
testimony will focus on the risks of private equity hospital ownership.
I will include at the end a list of resources for additional research
on the impact of private equity in other aspects of the healthcare
industry.
As private equity ownership of healthcare companies grows and
continues to benefit from taxpayer funded healthcare spending, it is
essential for lawmakers to understand the risks associated with private
equity investment in the industry and create policy that protects
patients and supports healthcare workers.
The Impacts of Private Equity Investment on Hospitals
Private equity ownership of hospitals has drawn scrutiny in recent
years as some private equity hospital acquisitions have produced
troubling impacts for patients and workers across the country. We have
seen private equity firms aggressively loot safety net hospitals, strip
out valuable real estate, cut critical but less profitable services,
and exploit government funding programs designed to support and
stabilize healthcare access.
The consequences have been borne by healthcare workers and the
communities they serve. Private equity's hospital profiteering has
resulted in dangerous conditions, closures and reduced access to
services, declining quality, and fraud.
Private equity firms often seek to double or triple their
investment over 4-7 years. The pursuit of outsized returns over
relatively short time horizons can lead to cost-cutting that hurts
care. In addition, use of high levels of debt can divert cash from
operations to interest payments and dividends paid out to private
equity owners.
Below are some financial tactics characteristic of private equity
investment:
High leverage: Private equity firms often utilize
significant amounts of debt when buying companies. Firms
typically buy companies through leveraged buyouts, whereby a
private equity firm finances a substantial portion of an
acquisition by taking out a loan secured by the company it is
buying. High leverage can divert cash away from operations to
paying interest on debt and leave companies more at risk for
restructuring or bankruptcy.
Sale-leaseback of real estate: Private equity firms
that own hospitals sometimes conduct sale-leaseback
transactions, where the firm will sell the hospital's real
estate to a third party and lease it back. While these
transactions provide a quick way to monetize real estate and
generate cash, they can leave hospitals with fewer assets and
higher monthly lease payments. \3\
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\3\ Brian Spegele, ``How a Small Alabama Company Fueled Private
Equity's Push Into Hospitals,'' Wall Street Journal, February 14, 2022,
sec. Markets, https://www.wsj.com/articles/hospitals-private-equity-
reit-mpt-steward-11644849598.
Debt-Funded Dividends: Some private equity firms
siphon money out of companies they own through dividend
recapitalizations, where a private equity firm directs its
portfolio company to take on new debt and use the proceeds to
pay the private equity owner a cash payout. These transactions
can unnecessarily load healthcare providers with debt. While
the private equity firm in these situations makes money, the
healthcare provider often does not receive proceeds from the
loan and still must pay it back, leaving it more vulnerable to
market conditions and with fewer resources to support
operations as it pays its monthly debt service payments. \4\
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\4\ Eileen O'Grady, ``Dividend Recapitalizations in Health Care:
How Private Equity Raids Critical Health Care Infrastructure for Short
Term Profit'' (Private Equity Stakeholder Project, October 2020),
https://pestakeholder.org/reports/dividend-recapitalizations-in-health-
care-how-private-equity-raids-critical-health-care-infrastructure-for-
short-term-profit/.
Roll-ups: Private equity companies often conduct
``roll-ups'' by buying up multiple companies in the same
industry segment and merging them under the same corporate
umbrella. These transactions can allow firms to take advantage
of economies of scale. However, a wide body of research has
shown that provider consolidation leads to higher healthcare
prices for private insurance and public healthcare programs
like Medicare. \5\
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\5\ Karyn Schwartz et al., ``What We Know About Provider
Consolidation,'' KFF (blog), September 2, 2020, https://www.kff.org/
health-costs/issue-brief/what-we-know-about-provider-consolidation/.
Fees: Private equity firms often charge management or
advisory fees to the companies they own, which can cost
companies millions of dollars each year. Fees are typically
stipulated in a management services agreement between the
private equity firm and a company that it controls. In some
cases, companies must pay fees to the private equity firm even
for services never rendered (``accelerated monitoring fees'').
These fees can further drain a company's cash away from
hospital operations into the pockets of investors. \6\
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\6\ Eileen Appelbaum and Rosemary Batt, ``Fees, Fees and More
Fees: How Private Equity Abuses Its Limited Partners and U.S.
Taxpayers'' (Center for Economic and Policy Research), accessed March
24, 2023, https://www.cepr.net/report/private-equity-fees-2016-05/.
The case studies below provide examples of private equity firms
employing these financial tactics and others, and will demonstrate how
investors' unbridled profit-seeking can harm patient care.
1. Steward Healthcare--Cerberus Capital Management
In 2010, private equity firm Cerberus Capital purchased Caritas
Christi Health in a $420 million leveraged buyout through its affiliate
Steward Healthcare, converting the nonprofit health system to for-
profit. \7\ Steward also assumed $475 million of debt and pension
liabilities in the transaction, putting the value of the overall deal
at $895 million. \8\
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\7\ FierceHealthcare. ``Acquisition of Caritas Christi Now
Complete.'' November 9, 2010. https://www.fiercehealthcare.com/
healthcare/acquisition-caritas-christi-now-complete.
\8\ Pg. 38 of Batt, Rosemary, Eileen Appelbaum, and Tamar Katz.
``The Role of Public REITs in Financialization and Industry
Restructuring--Working Paper No. 189.'' Center for Economic and Policy
Research, July 9, 2022. https://www.ineteconomics.org/uploads/papers/
WP-189-Batt-Appelbaum-Public-REITS-2.pdf.
Because of the conversion to for-profit status, the deal required
approval from the state Attorney General's office, which imposed
conditions on the transaction and a 5-year monitoring period. \9\
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\9\ ``Interim Reports on Steward Health Care System Pursuant to
2010 and 2011 Assessment and Monitoring Agreements,'' Office of the
Massachusetts Attorney General, January 30, 2023. https://www.mass.gov/
doc/interim-reports-on-steward-health-care-system-pursuant-to-2010-and-
2011-assessment-monitoring/download.
These conditions included a requirement for the new owners to
invest $400 million into the system's infrastructure. \10\ Despite
Cerberus Capitals's deep pockets, these ``investments'' would come from
debt loaded onto Steward as well as sale-leasebacks of some of its
medical office buildings. \11\ Another condition of the deal was that
the system could not take additional debt to pay investor dividends for
the first 3 years following the transaction. \12\
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\10\ Pg. 39 of Batt, Rosemary, Eileen Appelbaum, and Tamar Katz.
``The Role of Public REITs in Financialization and Industry
Restructuring--Working Paper No. 189.'' Center for Economic and Policy
Research, July 9, 2022. https://www.ineteconomics.org/uploads/papers/
WP--189-Batt-Appelbaum-Public-REITS-2.pdf
\11\ Pg. 39 of Batt, Rosemary, Eileen Appelbaum, and Tamar Katz.
``The Role of Public REITs in Financialization and Industry
Restructuring--Working Paper No. 189.'' Center for Economic and Policy
Research, July 9, 2022. https://www.ineteconomics.org/uploads/papers/
WP--189-Batt-Appelbaum-Public-REITS-2.pdf.
\12\ Pg. 20 of La France, Aimee, Rosemary Batt, and Eileen
Appelbaum. ``Hospital Ownership and Financial Stability: A Matched Case
Comparison of a Non-Profit and Private Equity Owned Health System.''
Center for Economic and Policy Research, March 22, 2021. https://
cepr.net/wp-content/uploads/2022/03/LBA-Advances-Chapter-Final-03-24-
21.pdf.
After its 5-year monitoring period with the Attorney General
expired, \13\ Steward Health Care executed a $1.2 billion sale-
leaseback transaction in 2016 with real estate investment trust (REIT)
Medical Properties Trust (MPT). MPT made an additional $50 million
equity investment in Steward. \14\ Many Steward hospitals were then on
the hook for rent payments and no longer owned their most valuable
asset.
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\13\ Pg. 5 of La France, Aimee, Rosemary Batt, and Eileen
Appelbaum. ``Hospital Ownership and Financial Stability: A Matched Case
Comparison of a Non-Profit and Private Equity Owned Health System.''
Center for Economic and Policy Research, March 22, 2021. https://
cepr.net/wp-content/uploads/2022/03/LBA-Advances-Chapter-
Final032421.pdf.
\14\ Steward Health Care System. ``Steward Receives $1.25 Billion
Investment from Medical Properties Trust, Setting Stage for National
Growth.'' Accessed March 14, 2024. https://www.prnewswire.com/news-
releases/steward-receives-125-billion-investment-from-medical-
properties-trust-setting-stage-for-national-growth-300334227.html.
This sale-leaseback deal was used to pay nearly $500 million in
dividends to investors as well as fund a rapid expansion strategy for
Steward that also relied heavily on debt. \15\ Steward eventually grew
to be the largest private for-profit hospital system in the U.S. in
2017.
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\15\ Pg. 2 of La France, Aimee, Rosemary Batt, and Eileen
Appelbaum. ``Hospital Ownership and Financial Stability: A Matched Case
Comparison of a Non-Profit and Private Equity Owned Health System.''
Center for Economic and Policy Research, March 22, 2021. https://
cepr.net/wp-content/uploads/2022/03/LBA-Advances-Chapter-Final-03-24-
21.pdf.
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During its ownership under Cerberus Capital, Steward also:
Took on millions more in debt; \16\
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\16\ See pg. 40 of Batt, Rosemary, Eileen Appelbaum, and Tamar
Katz. ``The Role of Public REITs in Financialization and Industry
Restructuring--Working Paper No. 189.'' Center for Economic and Policy
Research, July 9, 2022. https://www.ineteconomics.org/uploads/papers/
WP-189-Batt-Appelbaum-Public-REITS-2.pdf.
Saw poor financial performance; \17\
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\17\ See pgs. 39-40 of Batt, Rosemary, Eileen Appelbaum, and Tamar
Katz. ``The Role of Public REITs in Financialization and Industry
Restructuring--Working Paper No. 189.'' Center for Economic and Policy
Research, July 9, 2022. https://www.ineteconomics.org/uploads/papers/
WP-189-Batt-Appelbaum-Public-REITS-2.pdf.
Broke commitments to regulators by failing to share
financial information with regulators in a timely manner \18\
and attempting to close hospitals or cut services at hospitals
it had acquired; \19\
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\18\ Torrieri, Marisa. ``MA State Imposes $1,000-per-Week Penalty
on Steward Health Care System.'' Healthcare Dive, December 19, 2014.
https://www.healthcaredive.com/news/ma-state-imposes-1000-per-week-
penalty-on-steward-health-care-system/345671/.
\19\ Primack, Dan. ``Hospital Debacle Puts Focus on Private
Equity.'' Axios, March 6, 2024. https://www.axios.com/2024/03/06/
hospital-debacle-private-equity-cerberus-steward; Bartlett, Jessica.
``On Steward's Path to Financial Ruin, a Series of Missed
Opportunities.'' The Boston Globe, March 25, 2024. https://
www.bostonglobe.com/2024/03/25/business/steward-financial-ruin-state-
intervention-massachusetts/.
Cited the pandemic in March 2020 in order to collect
$8 million from the Pennsylvania state government to keep an
Easton, PA hospital open and then sold it in May 2020. \20\
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\20\ Spegele, Brian, and Laura Cooper. ``As Coronavirus Cases
Climbed, Private-Equity-Owned Hospital Demanded Bailout.'' WSJ, April
26, 2020, sec. Markets. https://www.wsj.com/articles/as-coronavirus-
cases-climbed-private-equity-owned-hospital-faced-closure-11587893400.
Collected $675 million in Federal loans and grants
money during the pandemic; \21\
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\21\ Willmer, Sabrina. ``A Wall Street Giant Tapped $1.5 Billion
in Federal Aid for Its Hospitals.'' Bloomberg.Com, September 14, 2020.
https://www.bloomberg.com/news/articles/2020-09-14/a-wall-street-giant-
tapped-1-5-billion-in-Federal-aid-for-its-hospitals.
Was sued under the False Claims Act (ultimately the
system would reach a $4.7 million settlement with the
Department of Justice in 2022). \22\
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\22\ Bartlett, Jessica. ``Steward Health Care to Pay $4.7M to
Resolve Anti-Kickback Allegations--The Boston Globe.'' BostonGlobe.Com,
June 9, 2022. https://www.bostonglobe.com/2022/06/09/metro/steward-
health-care-pay-47m-resolve-anti-kickback-allegations/.
Saw higher than average patient hospital-acquired
infections, falls, and readmissions at its Massachusetts
hospitals. \23\
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\23\ See pg. 40 of Batt, Rosemary, Eileen Appelbaum, and Tamar
Katz. ``The Role of Public REITs in Financialization and Industry
Restructuring--Working Paper No. 189.'' Center for Economic and Policy
Research, July 9, 2022. https://www.ineteconomics.org/uploads/papers/
WP-189-Batt-Appelbaum-Public-REITS-2.pdf.
As Cerberus began its exit in fall of 2020, Steward Health was
struggling, reporting a net loss of more than $400 million in 2020. The
private equity firm reportedly made $800 million in the decade it owned
Steward. \24\ Cerberus Capital's exit was made possible by Medical
Properties Trust, which provided a $335 million loan to a new set of
physician owners. \25\
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\24\ Sabrina Willmer, ``Cerberus Quadruples Money After Unusual
Exit From Hospital Giant,'' Bloomberg, May 27, 2021. https://
www.bloomberg.com/news/articles/2021-05-27/cerberus-quadruples-money-
after-unusual-exit-from-hospital-giant.
\25\ For a description of the complicated transaction, see pg. 41
of Batt, Rosemary, Eileen Appelbaum, and Tamar Katz. ``The Role of
Public REITs in Financialization and Industry Restructuring--Working
Paper No. 189.'' Center for Economic and Policy Research, July 9, 2022.
https://www.ineteconomics.org/uploads/papers/WP-189-Batt-Appelbaum-
Public-REITS-2.pdf.
The role of Medical Properties Trust in the pillaging of Steward
cannot be overstated. Without a willing REIT like MPT to abet Steward's
asset-stripping, Steward would not have been able to generate so easily
the more than a billion dollars it ultimately used to pay millions to
investors. The rent payments for those hospitals would ultimately
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burden the system's finances at the expense of operational costs.
Even though Cerberus exited its investment in 2020, its pillaging
continues to have an impact on the system.
In September 2023, state and Federal officials declared that
patients were in immediate jeopardy at Steward's Good Samaritan Medical
Center in Brockton, MA. The Massachusetts Nurses Association had been
warning state and Federal officials since 2021 about major issues in
the Emergency Department at Good Samaritan. \26\
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\26\ Kowalczyk, Liz, and Felice J. Freyer Globe Freyer. ``Sick
Patients Collapsed Waiting for Care in Overwhelmed Steward Hospital's
Emergency Department--The Boston Globe.'' The Boston Globe, February
15, 2024. https://www.bostonglobe.com/2024/02/14/metro/steward-health-
care-emergency-department-overcrowding/.
In December 2023, the U.S. Attorney's Office filed another False
Claims Act lawsuit against Steward regarding allegations spanning from
2012 to 2022. \27\ Earlier that month, Steward notified state
healthcare officials of its plans to close New England Sinai Acute
Long-Term Care and Rehabilitation Hospital, a 182 bed-hospital. \28\
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\27\ ``District of Massachusetts United States Files Complaint
Against St. Elizabeth's Medical Center, Steward Medical Group and
Steward Health Care System United States Department of Justice,''
December 18, 2023. https://www.justice.gov/usao-ma/pr/united-states-
files-complaint-against-st-elizabeths-medical-center-steward-medical-
group.
\28\ Vogel, Susanna. ``Steward Health Care to Close Massachusetts
Hospital amid Financial Troubles.'' Healthcare Dive, December 6, 2023.
https://www.healthcaredive.com/news/steward-health-care-to-close-
massachusetts-hospital-amid-financial-troubles/701695/.
In January 2024, MPT announced that as of December 31, 2023,
Steward Health Care was $50 million behind in rent payments. \29\
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\29\ ``Medical Properties Trust Provides Update on Steward Health
Care,'' January 4, 2024. https://www.businesswire.com/news/home/
20240104928323/en/Medical-Properties-Trust-Provides-Update-on-Steward-
Health-Care.
Steward's hospitals currently face a dire financial situation.
Vendors are suing over nonpayment \30\ and staffing and patient quality
of care issues have been mounting. \31\ In January 2024, the Boston
Globe reported that a new mother died after the embolization coil
needed to treat her post-birth bleeding was unavailable. It had been
repossessed weeks before by the medical device company that owned it
due to Steward's nonpayment. \32\
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\30\ Vogel, Susanna. ``Steward's Legal Battles Offer Insight into
Pattern of Mismanagement.'' Healthcare Dive, March 20, 2024. https://
www.healthcaredive.com/news/steward-health-care-mismanagement-lawsuits/
710102/.
\31\ Niezgoda, Abbey. ``Steward Health Care Patient Care Concerns
Top of Mind.'' NBC Boston, February 21, 2024. https://
www.nbcboston.com/news/local/stewards-financial-woes-are-impacting-
patient-care-workers-say/3286716/; Steward Health's Financial Woes Are
Impacting Patient Care, 2024. https://www.youtube.com/
watch'v=UE5u4VKC2zg.
\32\ Bartlett, Jessica. ``Steward's Medical Devices Were
Repossessed. Weeks Later, a New Mother Died.'' The Boston Globe,
January 25, 2024. https://www.bostonglobe.com/2024/01/25/business/
steward-health-care-mother-death/.
As of February 2024, Steward had not complied with the
Massachusetts Attorney General's office to provide audited financial
statements. \33\
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\33\ Boston 25 News. ``Deadline Passes without Steward Health Care
Providing Financial Statements to State,'' February 24, 2024. https://
www.boston25news.com/news/local/deadline-passes-without-steward-health-
care-providing-financial-statements-state/4HB4Z6MLKBGEDEWP37P526RMHY/.
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2 Prospect Medical Holdings--Leonard Green and Partners
Between 2010 and 2021, private equity firm Leonard Green and
Partners owned Prospect Medical Holdings, a safety net hospital company
with 17 hospitals in 5 states. \34\
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\34\ https://pmh.com/. Accessed May 6, 2020.
After Leonard Green acquired Prospect in 2010, it used the hospital
chain as a platform to raise debt so it could siphon off hundreds of
millions of dollars in dividends and fees. According to Prospect's own
financial statements, the owners collected at least $658 million from
the hospitals--despite dramatic operating challenges, substantially
underfunded pensions, and increasing regulatory scrutiny. \35\
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\35\ https://www.propublica.org/article/rich-investors-stripped-
millions-from-a-hospital-chain-and-want-to-leave-it-behind-a-tiny-
state-stands-in-their-way.
The largest dividend that Prospect's owners collected in 2018
directly contradicted a commitment Prospect had made to state
regulators. When it bought several hospitals in Rhode Island in 2014,
it told regulators It would not pay out any more dividends. Just 4
years later, it paid the ownership an almost $460 million dividend.
That same year, Prospect generated a $244 million net loss. \36\
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\36\ https://pestakeholder.org/wp-content/uploads/2020/05/UPDATE-
Leonard-Green-Prospect-Medical-Dividends-PESP-051420.pdf.
As a result of that dividend, Prospect ran out of cash by early
---------------------------------------------------------------------------
2019, forcing the owners to provide emergency cash infusion.
Prospect was eventually able to pay off the existing $1.1 billion
in debt it had accrued in part to fund dividends, but only by selling
off the bulk of Prospect's real estate to a REIT. The transaction
replaced debt with lease liabilities and left Prospect with fewer
assets. \37\
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\37\ https://pestakeholder.org/broken-promises-rhode-island-
regulators-question-leonard-greens-investment-in-prospect-medical-
holdings/.
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Leonard Green's Representations to Members of Congress, Regulators
Leonard Green and Prospect misrepresented the financial condition
of some of the hospitals when lawmakers and other stakeholders raised
concerns.
Members of Congress with Prospect hospitals in their districts have
written to Leonard Green twice raising concern about the firm's
treatment of the safety net hospital company and asking it to return
the fees and dividends it collected. \38\ Leonard Green dismissed the
lawmakers' concerns, writing: ``We can assure you with firm, empirical
confidence that Prospect remains well-capitalized with adequate
liquidity and resources for its staff to address the current COVID-19
epidemic.'' \39\
---------------------------------------------------------------------------
\38\ Laura Cooper and Chris Cumming, ``Lawmakers and Leonard Green
Spar Over Hospital Operator,'' Wall Street Journal, July 6, 2020, sec.
WSJ Pro, https://www.wsj.com/articles/lawmakers-and-leonard-green-spar-
over-hospital-operator-11594076954.
\39\ Goldberg, ``Leonard Green and Partners Response Letter to
Members of Congress,'' June 12, 2020.
In response to a letter my organization wrote to Rhode Island
regulators, Prospect wrote: ``Contrary to PESP's assertions, Prospect
today remains extraordinarily well capitalized, faces no material
financial challenges, and is at no risk of financial failure.''
Hospitals Suffered While the Owners Lined Their Pockets
Here is what was happening at the hospitals while Leonard Green was
siphoning money from the company:
Prospect's hospitals had some of the lowest quality
ratings from the Centers for Medicare and Medicaid Services--
all but one had received one or two stars, the lowest quality
ratings from CMS. \40\
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\40\ CMS Hospital Compare, accessed March 2020. https://
www.Medicare.gov/hospitalcompare/search.html.
In Connecticut, state regulators placed Prospect's
three hospitals under review in 2019 for deteriorating
conditions that placed patients in ``immediate jeopardy.'' \41\
---------------------------------------------------------------------------
\41\ https://www.courant.com/news/connecticut/hc-news-waterbury-
hospital-prospect-medical-protests-20190602-hqc3yulngngwnd6qftmeiogdsq-
story.html.
Prospect completely shut down all of its facilities
in San Antonio in 2019--laying off nearly 1,000 workers \42\--
and sold its hospital building to a hotel developer. \43\
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\42\ Ayla Ellison, ``Texas Health System Closes Hospital, Lays off
972,'' Becker's Hospital Review, November 26, 2019, https://
www.beckershospitalreview.com/finance/texas-health-system-closes-
hospital-lays-off-972.html.
\43\ Sanford Nowlin, ``Hotel Company Purchases Downtown San
Antonio's Historic Nix Hospital Building,'' San Antonio Current,
January 3, 2020, https://www.sacurrent.com/news/hotel-company-
purchases-downtown-san-antonios-historic-nix-hospital-building-
22709799.
The California Attorney General formally charged
Prospect executives with ``gross negligence'' related to
persistent mold contamination of a hospital pharmacy, including
in equipment used to mix patient medications. In March 2021,
the California Attorney General and State Pharmacy Board
entered into a settlement with Prospect's Southern California
subsidiary, placing its hospital pharmacy permit and sterile
compounding on probation for 2 years. \44\
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\44\ Peter Elkind, ``Investors Extracted $400 Million From a
Hospital Chain That Sometimes Couldn't Pay for Medical Supplies or Gas
for Ambulances,'' ProPublica, September 30, 2020, https://
www.propublica.org/article/investors-extracted-400-million-from-a-
hospital-chain-that-sometimes-couldnt-pay-for-medical-supplies-or-gas-
for-ambulances.
In Rhode Island, poor infection control led to COVID-
19 infection of 19 of the 21 geriatric psychiatric ward
residents: six of them died. Six housekeeping staff also got
COVID due to limited access to PPE. The head of the department
died. \45\
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\45\ Elkind.
Workers have complained of inadequate staffing. When
Leonard Green first tried to sell Prospect in 2015, the
company's prospectus touted its ``cost-effective care'' model,
daily ``flex'' management of hospital staffing, and use of low-
cost sources for medical supplies. In Pennsylvania, workers
reported in September 2020 that staffing shortages forced
scheduling delays for medical procedures. \46\
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\46\ Elkind.
Despite what happened to Prospect and its hospitals, Leonard Green
is off the hook--in June 2021 Leonard Green sold its majority stake in
Prospect to the minority shareholders after a contentious year-long
investigation by state regulators into the company's finances. \47\
---------------------------------------------------------------------------
\47\ Laura Cooper, ``Rhode Island Regulator Approves Hospital
Sale,'' Wall Street Journal, June 1, 2021, https://www.wsj.com/
articles/rhode-island-regulator-approves-hospital-sale-11622591539.
For more on Prospect Medical Holdings, see our report: ``How
Private Equity Raided Safety Net Hospitals and Left Communities Holding
the Bag'' (November 2022) and here for a November 2023 update.
3. Lifepoint Health, ScionHealth--Apollo Global Management
Lifepoint Health and ScionHealth are two of the largest hospital
systems in the U.S. \48\ They are both owned by private equity firm
Apollo Global Management. \49\
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\48\ Definitive Healthcare. ``Largest Health Systems in the U.S.
Biggest Healthcare Systems.'' Accessed October 31, 2023. https://
www.definitivehc.com/blog/top-10-largest-health-systems.
\49\ David Muoio, ``Lifepoint Health to create new 79-hospital
company upon close of Kindred Healthcare acquisition,'' Fierce
Healthcare, October 27, 2021. https://www.fiercehealthcare.com/
hospitals/scionhealth-Lifepoint-health-to-create-new-79-hospital-
company-upon-close-kindred.
The two companies are the result of a series of hospital
acquisitions by Apollo, which in 2018 bought Lifepoint and merged it
with another hospital chain, RegionalCare Hospital Partners. \50\ Then,
in December 2021 Lifepoint acquired the large long term acute care
hospital chain Kindred Healthcare. As part of the transaction,
Lifepoint shifted some of the acquired facilities and some of its
existing hospitals into a new company called ScionHealth, \51\ which is
also controlled by Apollo. \52\
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\50\ Prang, Allison. ``Lifepoint Health Agrees to Apollo Buyout.''
WSJ, July 23, 2018. https://www.wsj.com/articles/Lifepoint-health-
agrees-to-apollo-buyout-1532347207'mod=article-inline.
\51\ ``Lifepoint Health Completes Kindred Healthcare
Transaction,'' December 23, 2021, https://Lifepointhealth.net/news/
2021/12/23/Lifepoint-health-completes-kindred-healthcare-transaction.
\52\ See pg. 15 of ``Form 10-K (Filed February 25, 2022), Apollo
Global Management.'' United States Securities and Exchange Commission,
December 31, 2021. https://www.sec.gov/Archives/edgar/data/1411494/
000141149422000014/apo-20211231.htm.
Through Lifepoint and Scion together, Apollo has an extensive
hospital footprint, owning approximately 220 hospitals across 36
states. \53\ As of December 2021, Lifepoint employed 50,000 workers,
\54\ and Scion reportedly employs approximately 25,000 workers as of
2023. \55\
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\53\ See Lifepoint's list of hospitals here. Scion's list of
hospitals is here. Accessed September 2023.
\54\ Kacik, Alex. ``Lifepoint Health and Kindred Healthcare Close
Deal, Form New Company.'' Modern Healthcare, December 22, 2021, sec.
Mergers and Acquisitions. https://www.modernhealthcare.com/mergers-
acquisitions/Lifepoint-health-and-kindred-healthcare-close-deal-form-
new-company.
\55\ ScionHealth. ``Employees.'' Accessed September 8, 2023.
https://www.scionhealth.com/employees.
As healthcare consolidation continues to accelerate and drive up
healthcare costs, \56\ Apollo's merger of Lifepoint and Kindred and
creation of ScionHealth merits scrutiny for potentially anti-
competitive impacts. Though Lifepoint and Scion now position themselves
as entirely separate businesses, they are both owned and controlled by
Apollo. \57\
---------------------------------------------------------------------------
\56\ Jamie Godwin, Zachary Levinson, and Scott Hulver,
``Understanding Mergers Between Hospitals and Health Systems in
Different Markets,'' Kaiser Family Foundation, August 23, 2023. https:/
/www.kff.org/health-costs/issue-brief/understanding-mergers-between-
hospitals-and-health-systems-in-different-markets/.
\57\ Lifepoint itself also has an ownership stake in ScionHealth.
To support the acquisition of the Kindred hospitals, Lifepoint made a
$350 million preferred equity contribution to ScionHealth, in addition
to ScionHealth raising $550 million in debt. See here: ``ScionHealth
Completes $450M Term Loan Wide of Talk; Terms,'' S and P Global
Intelligence, December 20, 2021, https://www.spglobal.com/
marketintelligence/en/news-insights/latest-news-headlines/scionhealth-
completes-450m-term-loan-wide-of-talk-terms-68148901.
Press reports and regulatory investigations describe operating
challenges that pose a threat to quality care and access to medical
services at Apollo's Lifepoint and ScionHealth hospitals around the
---------------------------------------------------------------------------
country.
Lifepoint's Wilson Medical Center in North Carolina
faced regulatory scrutiny in 2022 and 2023, including threats
by CMS to revoke its Medicare payments and an investigation by
the state's attorney general. On three separate occasions in
under a year, compliance surveys by state regulators found that
quality deficiencies warranted an ``immediate jeopardy''
designation for the hospital. Wilson is the only hospital in
Wilson County, located about an hour east of Raleigh. \58\
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\58\ Mariah Taylor, ``Duke LifePoint hospital at risk of losing
Medicare funding for 3rd time in 1 year,'' Becker's Hospital Review,
March 31, 2023. https://www.beckershospitalreview.com/hospital-
physician-relationships/duke-lifepoint-hospital-at-risk-of-losing-
Medicare-funding-for-3rd-time-in-1-year.html; Tyler Dukes, ``Wilson
hospital again facing Federal threat to end Medicare contract,'' News
and Observer, November 5, 2022. https://www.newsobserver.com/news/
local/article268249967.html.
In 2020 the Wall Street Journal reported on how in
Wyoming Lifepoint chipped away at staffing and services at its
hospital in working-class Riverton until most services were
transferred to another Lifepoint hospital in Lander, 30 miles
away. Riverton residents reported that the consolidation
severely reduced access to medical services and the transfer
led to increased utilization of air ambulances, from 155 in
2014 to 937 in 2019. \59\
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\59\ Brian Speegle, ``A City's Only Hospital Cut Services. How
Locals Fought Back.,'' Wall Street Journal, April 11, 2021, sec.
Markets, https://www.wsj.com/articles/a-citys-only-hospital-cut-
services-how-locals-fought-back-11618133400.
According to The Lown Institute Hospital Index, which
ranks hospitals and health systems based on health equity,
value, and outcomes, multiple Lifepoint facilities rank among
the worst hospitals in their states., including in Virginia,
New Mexico, and North Carolina. \60\
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\60\ ``Apollo's Stranglehold on Hospitals Harms Patients and
Healthcare Workers,'' Private Equity Stakeholder Project, AFT, IAMAW,
January 2024. https://pestakeholder.org/news/new-report-details-harm-
caused-to-healthcare-industry-by-apollo/.
Lifepoint hospitals have notably high readmission rates; in 2022
Lifepoint's North Alabama Medical Center, National Park Medical Center
in Arkansas, and Fauquier Hospital in Virginia each had the highest
readmission rate in their respective states. \61\ Fauquier Hospital and
Lifepoint's Nason Hospital in Pennsylvania each faced the maximum
Medicare payment cut for fiscal year 2022 as a penalty for their high
readmission rates. \62\
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\61\ Schwartz, Noah. ``Hospitals with the Highest CMS Readmission
Penalties in Each State.'' Becker's Hospital Review, November 11, 2022.
https://www.beckershospitalreview.com/finance/hospitals-with-the-
highest-cms-readmission-penalties-in-each-state.html.
\62\ Ellison, Ayla. ``The 39 Hospitals Facing Maximum Medicare
Readmission Penalties.'' Becker's Hospital Review, October 29, 2021.
https://www.beckershospitalreview.com/finance/the-39-hospitals-facing-
maximum-Medicare-readmission-penalties.html.
For more on Apollo's ownership of Lifepoint Health and ScionHealth,
see our report: ``Apollo's Stranglehold on Hospitals Harms Patients and
Healthcare Workers'' (January 2024)
Pipeline Health--Stanton Road Capital, Davidson Kempner Capital
Management, and Deerfield Management
Pipeline Health is an operator of safety net hospitals in
California and Texas, and previously in Illinois. It is backed by
private equity and investment firms Stanton Road Capital, Davidson
Kempner Capital Management, and Deerfield Management.
In 2019, Pipeline broke promises to state regulators when it
purchased, and then promptly moved to close, a safety net hospital that
served a predominantly Black and Latino population near Chicago. The
hospital chain purchased Westlake Hospital in Melrose Park, IL before
announcing its intentions of shutting down the hospital mere weeks
after its acquisition. Pipeline and its private equity owners bought
Westlake, alongside two other Chicago-area hospitals in 2019 for a mere
$5 million. After the bankruptcy and closure of Westlake, they were
able to then sell the remaining two hospitals for a monumental $92
million--over 18 times what they paid for all three hospitals.
In regulatory filings before the purchase of Westlake, Pipeline had
committed to keeping the hospital open for at least 2 years. The local
community fought back with a legal challenge to save Westlake after
Pipeline received regulatory approval to close it, but Pipeline was
able to close the hospital by having the hospital's holding company
declare bankruptcy. In the following bankruptcy proceedings, it was
revealed that the hospital's closure had been a condition of Pipeline's
acquisition agreement with the seller.
Pipeline's activities in Chicago resulted in the bankruptcy and
closure of a safety net hospital, mass layoffs of over 500 workers, and
the sale of property zoned for hospital use to be converted into luxury
housing despite heavy opposition. Through its use of over two dozen
subsidiaries and holding companies, Pipeline's investors were able to
hide in the shadows and protect their assets from losses.
Pipeline continues to own and operate five hospitals in Texas and
California. Pipeline's investors also have faced, to date, few
consequences for their business practices that shuttered a safety net
hospital and harmed communities.
For more information on Pipeline Health, see our report: ``How
private equity raided safety net hospitals: Volume 2--Pipeline Health''
(July 2023).
Additional Information
Private equity in wheelchairs and other DME
Private equity firms have increasingly bought up durable medical
equipment (DME) manufacturers and suppliers and consolidated them. DME
includes wheelchairs and other mobility aids, respiratory equipment,
infusion pumps and supplies, and other equipment used to manage
disabilities.
Through aggressive debt-funded growth strategies, a handful of
private equity-owned DME companies have grown from nonexistence to
industry giants over the last decade. The resulting companies are
highly indebted, and are now seeking ways to cut costs to achieve the
outsized returns demanded by their private equity owners.
This profit seeking has been linked to cuts to staffing that
exacerbates long delays for repairs and billing practices that have
resulted in Federal lawsuits.
The two largest suppliers of customized (manual and motorized)
wheelchairs are owned by private equity firms. Cost cutting at these
companies has been linked to slow response times for repairs that harm
wheelchair users.
For more information, see the report we co-authored with the
National Disability Rights Network: ``How Private Equity Profits Off of
Disabled and Chronically Ill Americans'' (November 2023)
Private equity and healthcare fraud
There is substantial overlap between the risks associated with
private equity ownership of healthcare companies and the activities
targeted by the False Claims Act (FCA), a Federal law that establishes
liability for individuals or companies that defraud governmental
programs.
The FCA is commonly used to prosecute healthcare companies that
defraud Medicaid, Medicare, and related programs by submitting false
claims for a variety of activities. Fraudulent activities may include
providing substandard care, providing medically unnecessary services,
receiving kick-backs for services provided, filing claims for services
not provided, and providing services by unlicensed or improperly
licensed providers.
In an effort to achieve the high returns often expected by private
equity investors, companies' aggressive profit-seeking may result in
fraudulent activity.
See our report ``Money for Nothing: How private equity has
defrauded government health programs'' (February 2021)
Private equity in behavioral health and disability services
Private equity firms made significant investments in the behavioral
health and disability services industries, including mental health,
addiction treatment, services for people with intellectual and
developmental disabilities, and therapeutic foster care.
See our reports:
``The Kids Are Not Alright: How Private Equity Profits Off of
Behavioral Health Services for Vulnerable and At-Risk Youth'' (February
2022)
``Understaffed, Unlicensed, and Untrained: Behavioral Health Under
Private Equity'' (September 2020)
Private equity in dentistry
In recent years, private equity has increasingly carved out a
substantial portion of the U.S. dental industry, primarily through
ownership of Dental Services Organizations (DSOs). DSOs are companies
that handle the business side of dental practices, such as
administrative, marketing, bookkeeping, and financial services.
While DSO-affiliated practices currently make up a relatively small
portion of the broader dental industry, the number is rapidly
increasing. As of 2021, private equity firms have near-complete control
of the DSO market. Nine of the top 10 DSOs are owned by private equity
firms, and 27 of the top 30 DSOs are private-equity-owned. This amounts
to approximately 84 percent of practice locations that contract with
the top 30 DSOs.
See our report ``Deceptive Marketing, Medicaid Fraud, and
Unnecessary Root Canals on Babies: Private Equity Drills into the
Dental Care Industry'' (July 2021)
Conclusion
Many of the tactics used to strip wealth out of the hospital
systems profiled above are common among private equity ownership of
healthcare providers: high levels of debt, extracting dividends and
fees, and selling off the real estate to lease it back all come
straight from the typical private equity playbook. There are no laws
prohibiting these kinds of financial maneuvers, even in a sector as
critical as healthcare.
It is thus essential to pursue policies at the state and Federal
level that prevent this kind of looting of healthcare companies from
occurring again--through expanding regulatory oversight of for-profit
hospital mergers and acquisitions, prevention of exploitative real
estate plays and extractive fees and dividends, and protections for
workers against mass layoffs.
______
Senator Markey. Thank you so much for your--thank you so
much for your testimony. Next, we are going to hear from Hannah
Drummond. Ms. Drummond has been a registered nurse for over a
decade and currently works in the emergency department at
Mission Hospital in Asheville, North Carolina.
Ms. Drummond currently serves as Chief Nurse Representative
for the National Nurses Organizing Committee and the National
Nurses United. She organized her colleagues to the largest
union victory at any nonunion hospital in the South in almost
50 years. Ms. Drummond, thank you for being here today. You may
proceed with your testimony.
STATEMENT OF HANNAH DRUMMOND, RN, EMERGENCY DEPARTMENT, MISSION
HOSPITAL, NATIONAL NURSES ORGANIZING COMMITTEE (NNOC), NATIONAL
NURSES UNITED (NNU), ASHEVILLE, NC
[Technical problems.]
Senator Markey. Can you turn on your microphone, please.
Ms. Drummond. Good morning, Chairman Markey and Senator
Warren. Thank you for inviting me to testify at today's
important hearing.
My name is Hannah Drummond, and I am a registered nurse in
the emergency department at Mission Hospital in Asheville,
North Carolina. I have been a nurse for over a decade, and I am
the chief nurse rep at Mission for National Nurses Organizing
Committee, an affiliate of National Nurses United, the largest
union and professional association of registered nurses in the
country, representing 225,000 registered nurses.
My reason for becoming a nurse is not unique. I want to
heal people and provide quality health care to my community. I
joined Mission because it was known for providing excellent
care to residents of Asheville and considered the health care
hub for Western North Carolina, which includes the rural
Appalachian region.
In the same year, our entire hospital system was bought out
by HCA Healthcare, the largest health care corporation in the
country. I quickly began seeing concerning changes in our
hospital after HCA's purpose--purchase. Every time I went into
the supply closet, there were shoddy supplies that often didn't
work.
Hospital managers began cutting staff, including short
staffing registered nurses to unsafe levels. When we brought
these concerns to management, we were ignored. So, we decided
to organize our workplace to help protect our community.
When we began our union organizing drive, we were met with
an onslaught of union busting tactics from hospital management.
This was happening in the midst of the COVID pandemic. The
hospital was more focused on fighting the union than fighting
COVID and protecting our workers.
We had to fight to get the appropriate PPE and the
Federally required fit testing to ensure N95 respirators
adequately protect individuals wearing them. Due to
management's failure to provide fit test to every health care
worker, one of my nurse colleagues died.
The pandemic exacerbated the issues nurses have been facing
for decades, but the severe nurse staffing crisis we are
experiencing now is due to the intentional policies and neglect
of hospital management. Nurses are constantly directed to care
for more patients with higher acuity and less staff and
resources.
Management's intentional short staffing is so pervasive
that they refuse to staff the sterile processing department at
Mission, which often means nurses and doctors in the operating
room struggle to find sterile and safe equipment for surgery.
There are decades of evidence to confirm that when
registered nurses are forced to care for too many patients at
one time, patients are at a higher risk of preventable medical
errors, avoidable complications, falls and injuries, and death.
I have seen patients die because they didn't receive the
care they needed and deserved. HCA staffing cuts have
particularly impacted the emergency and oncology departments at
Mission. And due to the closures of labor and delivery
departments across the Mission hospital system, anyone who
needs to deliver their baby has to travel to Asheville, a drive
upwards of 2 hours for some rural communities.
My experience at Mission is representative of the decisions
being made at HCA owned hospitals across the country, which are
being stripped of staff and essential services like nurseries,
behavioral health and trauma centers, leaving vulnerable
communities without access to critical health services. This
isn't just happening at HCA.
Ascension, one of the Nation's largest Catholic, nonprofit
health care systems, is using its market dominance to shut down
its labor and delivery units. There are countless examples
across the country that I could point to. Our profit driven
health care system is broken. Nurses know that you cannot serve
the interests of profits and patients at the same time.
Health care should not be a business. That is why nurses
across this country support a single payer, Medicare for all
system that will transform our profit driven health care system
into one that prioritizes patient care.
On behalf of the 225,000 registered nurses represented by
National Nurses United, we urge the Subcommittee to work with
us to rein in profit driven hospital corporations and private
equity investors, and build a sustainable, guaranteed health
care system for all.
Doing so is critical to improve working conditions in
hospitals and the quality of patient care across the country.
[The prepared statement of Ms. Drummond follows.]
prepared statement of hannah drummond
Good morning and thank you, Chairman Markey, Senator Warren, and
Members of the Subcommittee, for giving me the opportunity to testify
here today. My name is Hannah Drummond, and I am a registered nurse in
the Emergency Department at Mission Hospital in Asheville, North
Carolina. I have been a nurse for over a decade, and I am the Chief
Nurse Representative at Mission Hospital for National Nurses Organizing
Committee, an affiliate of National Nurses United.
National Nurses United is the largest union and professional
association of registered nurses (RNs) in the United States,
representing nearly 225,000 nurses across the country. Nurses witness
in real time the repercussions that our flawed for-profit health care
system gives rise to, including the severe nurse staffing crisis the
United States is facing today and the negative impact on patient care.
In my testimony today, I will be illustrating the impacts of poor
hospital conditions, including understaffing of nurses and other
hospital staff, the reduction of essential health care services, and
the role that hospital management plays in perpetuating these issues
through profit-driven decisions.
I started working at Mission Hospital in Asheville, North Carolina,
in 2019 as a travel nurse, and I loved it so much I decided to join the
full-time staff. Mission Health was formerly a non-profit community
hospital system and considered the hub for the entire Western half of
the state to access health care, including the rural Appalachian
region. In the same year I joined Mission, our six-hospital system,
with nearly 12,000 workers, was bought out by Healthcare Corporation of
America (HCA) Healthcare. \1\
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\1\ Citizen Times. ``Today's the day: Asheville's Mission Health,
HCA Healthcare finalize $1.5B deal.'' Published Feb. 1, 2019. Accessed
Mar. 28, 2024: https://www.citizen-times.com/story/news/local/2019/02/
01/ashevilles-mission-health-hca-healthcare-finalize-1-5-billion-deal/
2721743002/.
HCA Healthcare is the largest health care corporation in the United
States, which as of 2020 operates 186 hospitals in twenty-one states.
\2\ HCA has consistently acquired more hospitals, clinics, and other
health facilities across the country. Before the acquisition was
approved by regulatory authorities, an asset purchase agreement was
negotiated by the North Carolina Attorney General to include safeguards
surrounding the health care services HCA would be required to provide
to the community, including maintaining services offered in Mission's
rural hospitals for five-to-ten years. \3\
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\2\ HCA Healthcare Fact sheet. June 30, 2020. Available at:
https://hcahealthcare.com/util/forms/press-kit/2020-healthcare-fact-
sheet-a.pdf.
\3\ Amended and Restated Asset Purchase Agreement. Available at:
https://searchwnc.files.wordpress.com/2020/02/amended-and-restated-apa-
main-text-public.pdf.
However, I quickly began to see concerning changes in our hospital
after HCA's purchase, which were validated by the frustrations shared
with me from other nurses. I started to notice a decrease in the
quality of supplies--every time I went into the supply closet, there
were shoddier supplies that often did not work. As time went on,
hospital managers began cutting staff. For registered nurses, our
staffing levels were reduced to unsafe levels, and we noticed cuts in
other hospital staff, including translators and security personnel.
When we brought these concerns to management, they ignored us. It
became clear that HCA management would interact with health care
---------------------------------------------------------------------------
workers in a way that ignored our clinical education and expertise.
As nurses, we quickly understood the danger our community faced
after HCA Healthcare, a for-profit health care conglomerate, bought our
hospital system. That prompted our decision to organize our workplace
and join a union just weeks before the onset of the Covid-19 pandemic.
When we began our union organizing drive, we were met with an
onslaught of union-busting tactics from hospital management. Meanwhile,
the working conditions and patient care in our hospital continued to
deteriorate because management refused to address critical issues.
Despite a global pandemic demonstrating the need for health care
systems to invest resources in better equipping hospitals to protect
patients and health care workers, HCA management continued to cut
staff, services, and supplies at Mission. We had to fight tooth and
nail to get the appropriate Personal Protective Equipment (PPE) and for
management to provide the federally required fit testing to ensure N95
respirators adequately fit and protect individuals wearing them. As
registered nurses, we are at high risk for Covid exposure and illness.
Due to management's failure to provide fit tests to every health care
worker, one of my nurse colleagues died. The Occupational Safety and
Health Administration (OSHA) of North Carolina Department of Labor
(DOL) cited and penalized HCA Mission Hospital nearly $30,000 for
failing to conduct annual fit tests and failing to notify the DOL of
the death of an employee due to Covid-19 in a timely manner. \4\
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\4\ National Nurses United. Press Release, ``HCA's Mission
Hospital penalized nearly $30,000 for failing to protect nurses and
other health care workers from Covid-19.'' Available at: https://
www.nationalnursesunited.org/press/hca-mission-hospital-penalized-for-
failing-to-protect-nurses.
We have consistently had a crisis in our nurse staffing levels
since HCA purchased our hospitals. Nurses are constantly directed to
care for more patients with higher acuity. The levels of available
staff and clinical resources are consistently decreasing. Management
has moved and expanded units without increasing the number of nurses
working on those units. Management's intentional short staffing is so
pervasive that they refuse to staff the sterile processing department,
which often means nurses and doctors in the operating room struggle to
---------------------------------------------------------------------------
find sterile and safe equipment for surgery.
There are decades of scientific evidence confirming that when
registered nurses are forced to care for too many patients at one time,
patients are at higher risk of preventable medical errors, avoidable
complications, falls and injuries, \5\ pressure ulcers, \6\ increased
length of hospital stay, higher numbers of hospital readmissions, and
death. \7\ Because of HCA's intentional decisions to short staff our
hospital, I have watched patients die because they did not receive the
care they needed and deserved. As a nurse, we experience deep moral
injury when we are not able to provide that care that we are trained to
provide because we are stretched too thin by hospital management. It is
devastating.
---------------------------------------------------------------------------
\5\ Kim J, Lee E, Jung Y, Kwon H, Lee S. Patient-level and
organizational-level factors influencing in-hospital falls. J Adv Nurs.
2022. Nov;78(11):3641-3651. doi: 10.1111/jan.15254. Epub 2022 Apr 20.
PMID: 35441709; PMCID: PMC9790490.
\6\ Kim J, Lee JY, Lee E. Risk factors for newly acquired pressure
ulcer and the impact of nurse staffing on pressure ulcer incidence. J
Nurs Manag. 2022 Jul;30(5):O1-O9. doi: 10.1111/jonm.12928. Epub 2020
Feb 25. PMID: 31811735; PMCID: PMC9545092.
\7\ Increased LOS, Mortality and Readmission: Dierkes, A. M.,
Aiken, L. H., Sloane, D. M., Cimiotti, J. P., Riman, K. A., and McHugh,
M. D. (2022). Hospital nurse staffing and sepsis protocol compliance
and outcomes among patients with sepsis in the USA: a multistate cross-
sectional analysis. BMJ Open, 12(3), e056802. https://doi.org/10.1136/
bmjopen-2021-056802.
HCA's staffing cuts have particularly impacted the emergency
department and the oncology department at our hospital, and labor and
delivery departments in the other Mission hospitals. \8\, \9\, \10\ As
a result of the Labor and Delivery department closures across the
Mission hospital system, anyone who needs to deliver their baby has to
travel to Asheville, a drive upwards of 2 hours for some rural
communities.
---------------------------------------------------------------------------
\8\ NC Health News. ``Mountain Maternity Wards Closing, WNC
Women's Lives on the Line.'' Published Sept. 29, 2017. Accessed Apr. 1,
2024. Available at Mountain Maternity Wards Closing, WNC Women's Lives
on the Line.
\9\ ABC News. ``Mission Health votes to close Blue Ridge
Hospital's labor and delivery department.'' Published Jun. 5, 2017.
Accessed Apr. 1, 2024. Available at https://wlos.com/news/local/
protesters-rally-to-save-labor-and-delivery-at-blue-ridge-hospital.
\10\ The Transylvania Times. ``Hospital Closing Birthing Unit-
Brevard NC.'' Published Feb. 4, 2015. Accessed Apr. 1, 2024. Available
at https://www.transylvaniatimes.com/news/hospital-closing-birthing-
unit-brevard-nc/article-2725dc6c-9c83-5e0e-9a6c-f33ee3f2e144.html.
With our union, nurses began to blow the whistle on the dangerous
working conditions at Mission and to report the many actions HCA
Healthcare had taken to reduce essential services. On December 14,
2023, North Carolina's Attorney General Josh Stein filed a lawsuit
against HCA Healthcare for violating its contractual agreement to
maintain essential services effectively at the same levels. \11\ Our
reports to the Department of Health and Human Services (HHS) and the
legal action by Attorney General Stein led to a Centers for Medicare
and Medicaid Services (CMS) investigation that resulted in CMS issuing
HCA Healthcare a notice on February 6th, 2024, that Mission hospital
was in ``immediate jeopardy'' related to deficiencies in care, which
posed a risk to patients' health and safety. HCA was given twenty-four
days to rectify those issues or lose Federal funding. \12\
---------------------------------------------------------------------------
\11\ Stein v. HCA Management Services, (North Carolina Superior
Court). https://ncdoj.sharefile.com/share/view/
s7aa4a4b30bc34a168b691be7b053f932.
\12\ NC health News. ``Feds cite Asheville's Mission Hospital for
`immediate jeopardy,' HCA division president tells staff.'' Published
Feb. 6, 2024. Available at: https://www.northcarolinahealthnews.org/
2024/02/06/feds-cite-ashevilles-mission-hospital-for-immediate-
jeopardy-hca-division-president-tells-staff/.
HCA Healthcare has since been removed from immediate jeopardy
status after announcing ``a plan of correction'' to address issues.
That plan was developed without the input of Mission's health care
workers and fails to address the severe understaffing throughout the
---------------------------------------------------------------------------
hospital.
My experiences at Mission Hospital are just one example of how HCA
Healthcare, the largest for-profit hospital system in the world, harms
patients and workers by prioritizing its profits at the expense of
people. HCA-owned hospitals across the country are being stripped of
staff and essential services like labor and delivery units, nurseries,
behavioral health, and trauma centers are being closed, leaving
vulnerable communities without access to critical health services. In
Live Oak, Florida, HCA Healthcare bought two hospitals just to close
them down and turn them into urgent care centers, \13\ and similarly,
HCA purchased Cypress Fairbanks Medical Center in the suburbs of
Houston, Texas, only to lay off nearly 600 workers and convert the
building into a free-standing emergency center. \14\ From trauma and
stroke centers in San Jose, California, \15\ to nurseries that serve a
large number of high-risk patients in Osceola, Florida, \16\ and more,
\17\ HCA is attempting to shutdown lifelines for our communities.
---------------------------------------------------------------------------
\13\ First Coast ABC News. ``Hospitals in Live Oak, Starke
shutting down inpatient, non-emergency services.'' Feb. 28, 2020.
Accessed Mar. 31, 2024. https://www.firstcoastnews.com/article/news/
local/hospitals-in-live-oak-starke-shutting-down-inpatient-non-
emergency-services/77-8a96fbd4-0bf2-4a5d-93db-1a5908e6461a.
\14\ Houston Chronicle. ``Hundreds laid off or reassigned as
Cypress Fairbanks Med Center converts to free-standing ER.'' Mar. 28,
2019. Accessed Mar. 31, 2024. https://www.houstonchronicle.com/
business/article/Hundreds-laid-off-or-reassigned-as-Cypress-
13722031.php.
\15\ National Nurses United. Press Release, ``RNs rally to demand
HCA maintain life-saving trauma, stroke, and heart attack services at
Regional Medical Center.'' March 25, 2024. Available at: https://
www.nationalnursesunited.org/press/rmc-rns-rally-to-demand-hca-
maintain-life-saving-trauma-stroke-and-heart-attack-services.
\16\ National Nurses United. National Nurse Magazine, Oct, Nov,
Dec 2022 Issue. ``RNs at HCA Florida Osceola Hospital protest
shutdown.'' Available at: https://www.nationalnursesunited.org/article/
nurses-condemn-closure-of-nursery-unit.
\17\ National Nurses United. Press Release, ``Trinity nurses to
hold press conference condemning behavioral health unit shutdown.''
Available at: https://www.nationalnursesunited.org/press/trinity-
nurses-to-hold-press-conference-condemning-behavioral-health-unit-
shutdown.
It is not just HCA that is prioritizing profits over patients. This
is a national problem with countless hospital systems actively harming
---------------------------------------------------------------------------
communities by closing critical hospitals and hospital units.
Hospital consolidation has skyrocketed over the past two decades.
More than 67 percent of hospitals belong to a larger system, compared
to just 45 percent of hospitals in 2000. \18\ We have seen large health
care corporations and their private equity investors buy up local
community hospitals across the country, drastically reducing the number
of public community hospitals operating today.
---------------------------------------------------------------------------
\18\ National Nurses United Report, ``Dangerous Descent: How
Ascension Betrays its Mission by Gutting Care for Pregnant Patients and
Babies.'' January 2024. Available at: https://
www.nationalnursesunited.org/sites/default/files/nnu/documents/1223--
AscensionSeton--Obstetrics-DangerousDescent-Report.pdf.
There has been a dangerous trend in which profit-driven health care
corporations have reduced services, cut staffing levels, refuse to
purchase essential medical supplies and equipment, closed departments
or units within a hospital, or have fully closed hospitals in critical
access areas, leaving patients, the community, and workers to deal with
the consequences. These health care disruptions often follow decisions
to sell the hospital's physical property and other assets to the
highest bidder and pleas to the Federal or state governments for
financial assistance, citing that a critical access hospital is in
---------------------------------------------------------------------------
financial distress.
Hospital corporations consistently make these decisions because
their main goal is to cut costs to maximize revenue for hospital
executives and investors, without regard for the impact on the quality
of care patients in the community receive. Numerous studies have found
highly consolidated health care markets lead to an increase in prices
and worse patient care outcomes. The elimination of obstetric services,
the branch of medicine that provides care during pregnancy and
childbirth, has emerged as a major casualty of hospitals in highly
concentrated markets that want to cut costs. \19\
---------------------------------------------------------------------------
\19\ Ibid.
For example, Ascension, one of the Nation's largest Catholic,
nonprofit health care systems with 140 hospitals in 19 states, is using
its market dominance to shut down its labor and delivery units, forcing
patients to travel further for obstetrics care. \20\ A report released
by National Nurses United in January 2024 showed that Ascension is
closing obstetrics services at higher rates than the national average
and that closures are disproportionately in Black and Latino
communities, counties with higher infant mortality rates than the
national average, and in low-income neighborhoods reliant on Medicaid.
\21\ Ascension also has a partnership worth approximately $1 billion
with Towerbrook Partners, a private equity firm. \22\
---------------------------------------------------------------------------
\20\ Obstetrics refers to a wide range of units and services for
pregnant patients, while labor and delivery refers to a patient in
labor and who gives birth. We use obstetrics and labor and delivery
interchangeably in this report.
\21\ National Nurses United Report, ``Dangerous Descent: How
Ascension Betrays its Mission by Gutting Care for Pregnant Patients and
Babies.'' January 2024. Available at: https://
www.nationalnursesunited.org/sites/default/files/nnu/documents/1223-
AscensionSeton-Obstetrics-DangerousDescent-Report.pdf.
\22\ Ibid.
In southern California, union nurses at Hazel Hawkins Memorial
Hospital have been fighting the hospital's attempts to close its
intensive care unit and claim bankruptcy, despite the fact that the
hospital's own financial reports show them to be in a strong financial
position. \23\ Union nurses in the California Nurses Association worked
tirelessly to alert their community to the false claims Hazel Hawkins
management was presenting before the bankruptcy courts. On March 21,
2024, the U.S. Bankruptcy Court for Northern California District of
California agreed with nurses and dismissed the case. \24\
---------------------------------------------------------------------------
\23\ National Nurses United. Press Release, ``Hazel Hawkins nurses
to host town hall meeting following hospital's bankruptcy filing and
RNs no confidence vote in the health district.'' Available at: https://
www.nationalnursesunited.org/press/hazel-hawkins-nurses-host-town-hall-
meeting-following-hospitals-bankruptcy-filing.
\24\ National Nurses United. Press Release, ``Registered nurses
are deeply gratified after court dismisses Hazel Hawkins bankruptcy
claim.'' Available at: https://www.nationalnursesunited.org/press/rns-
are-deeply-gratified-after-court-dismisses-hazel-hawkins-bankruptcy-
claim.
Across the country, nurses have been taking collective action
through their unions, both at the bargaining table and through
legislative advocacy, to improve staffing levels in their hospitals and
prevent reduction of services or hospital closures. But we should not
have to spend this amount of time and energy fighting greedy health
---------------------------------------------------------------------------
care organizations to provide the care our community needs.
Our profit-driven health care system is deeply broken, and it
endangers patients and health care workers. It prioritizes short-term
financial returns rather than long-term investments in our health.
Health care should not be a business; it is a human right. The
resulting problems can only be addressed by removing the profit motive
from health care. That is why nurses across this country support a
single-payer Medicare for All system that will transform our profit-
driven health care system into a health care system that prioritizes
patient care and, by extension, the nursing profession.
On behalf of the 225,000 registered nurses represented by National
Nurses United, we look forward to working with your Subcommittee to
improve patient care, protect the health and safety of nurses, improve
staffing levels and nurse retention, and build a sustainable public
health care system for all. Congress must take action to reign in
profit-driven hospital corporations and private equity investors. Doing
so is critical to improve hospital working conditions and the quality
of patient care across the country.
ATTACHMENTS
1.National Nurses United Report, ``Dangerous Descent: How Ascension
Betrays its Mission by Gutting Care for Pregnant Patients and Babies.''
January 2024. Available at: https://www.nationalnursesunited.org/sites/
default/files/nnu/documents/1223-AscensionSeton-Obstetrics-
DangerousDescent-Report.pdf.
2. National Nurses United. Press Release, ``Hazel Hawkins nurses to
host town hall meeting following hospital's bankruptcy filing and RNs
no confidence vote in the health district.'' Available at: https://
www.nationalnursesunited.org/press/hazel-hawkins-nurses-host-town-hall-
meeting-following-hospitals-bankruptcy-filing.
3. National Nurses United. Press Release, ``Registered nurses are
deeply gratified after court dismisses Hazel Hawkins bankruptcy
claim.'' Available at: https://www.nationalnursesunited.org/press/rns-
are-deeply-gratified-after-court-dismisses-hazel-hawkins-bankruptcy-
claim.
4. National Nurses United. Press Release, ``RNs rally to demand HCA
maintain life-saving trauma, stroke, and heart attack services at
Regional Medical Center.'' March 25, 2024. Available at: https://
www.nationalnursesunited.org/press/rmc-rns-rally-to-demand-hca-
maintain-life-saving-trauma-stroke-and-heart-attack-services.
5. National Nurses United. National Nurse Magazine, Oct, Nov, Dec
2022 Issue. ``RNs at HCA Florida Osceola Hospital protest shutdown.''
Available at: https://www.nationalnursesunited.org/article/nurses-
condemn-closure-of-nursery-unit.
6. National Nurses United. Press Release, ``Trinity nurses to hold
press conference condemning behavioral health unit shutdown.''
Available at: https://www.nationalnursesunited.org/press/trinity-
nurses-to-hold-press-conference-condemning-behavioral-health-unit-
shutdown.
______
Senator Markey. Thank you, Ms. Drummond, very much. And our
final witness is Dr. Donald Berwick. Dr. Berwick is President
Emeritus, Co-Founder, and Senior Fellow at the Institute for
Health Care Improvement.
Dr. Berwick served as President Obama's Administrator for
the Centers for Medicare and Medicaid Services under President
Obama, and on President Clinton's Advisory Commission on
Consumer Protection and Quality in the Health Care Industry.
Dr. Berwick serves as a lecturer at Harvard's Medical
School Department of Health Care Policy, and he has served on
the staffs of Boston Children's Hospital Medical Center, Mass
General Hospital, and the Brigham and Women's Hospital.
He brings a wealth of knowledge in our home state as to
what is happening. So, we thank you, Dr. Berwick, for being
here. Whenever you are comfortable, please begin.
STATEMENT OF DONALD M. BERWICK, M.D., MPP, PRESIDENT EMERITUS
AND SENIOR FELLOW, INSTITUTE FOR HEALTHCARE IMPROVEMENT,
NEWTON, MA
Dr. Berwick. Thank you, Senator Markey and Senator Warren.
It is really an honor to be with you and I am very grateful. I
would like to request that the full text of my remarks be on
the record.
Senator Markey. Without objection, so ordered.
Dr. Berwick. I really want to speak first as a physician, a
pediatrician. I trained for 7 years to become a doctor, and one
message was drilled into me every single day of my professional
formation. That message is that the needs of the patient come
first. I was taught to be proud of that commitment and to let
it become part of me, and it did.
My career has wandered far from the bedside, but that
imprint has never--has never left me. And I think that
principle, the needs of the patient come first, should apply to
and be enforced by law in every single agent in the world of
care, not just clinicians, but also organizations, payers,
entrepreneurs, and investors.
At the moment we are dropping that ball. The patient today,
as you have heard from my colleagues on the panel, is at risk
as never before in my memory. At risk of being demoted,
forgotten, and harmed. And always, as always in America, it is
people of disadvantage, marginalized, poor, who are at greatest
risk.
But make no mistake, the threat affects us all. We ranked
69th among all nations in the world in our health and health
care system performance, despite spending twice as much on
health care as anyone else. That is an astonishing failure. The
causes are many, but I think the cause we are focusing on today
is a main one.
It is this, we are allowing the accumulation of wealth, not
health, to become the aim and that is causing harm at a
phenomenal cost. Unchecked, and this is mostly unchecked so
far, greed is going to cause disastrous, and I think
irreversible harm.
The Steward debacle is born of unleashing gaming and
profiteering and greed among private equity investors whose aim
is to accumulate wealth, and whose method is to layer
vulnerable health care organizations with debt and rental
burdens too great to bear no matter what happens to patients
and communities.
The needs of the patient, far from coming first, are
nowhere in sight. Steward is by no means alone in this. Putting
money above the healing mission, we see the unmoderated pursuit
of wealth in drug prices, in hospital consolidation, and in
Medicare Advantage, my own recent interest, where annual
overpayments now amount to over $80 billion a year.
Pointedly today we see it in the behaviors of the majority
of private equity investors whose sole aim is return on equity.
They care little if that return comes from peanut butter or
health care. For them, it is the needs of the investor come
first. And the evidence is accumulating.
As you have heard that private equity and private
enterprise more generally, ownership of health care delivery
brings harms to patient. We see it in autism care, with
significant declines in staffing and increases in use of cookie
cutter care for kids that need customized care. Private equity
ownership of nursing homes is associated with a 10 percent
increase in mortality, 10 percent, lower patient mobility, and
11 percent increase in costs.
After PE purchase of hospitals, avoidable patient injuries
like falls and infections increased 25 percent. The power of
money in politics makes it difficult to rein in this wealth
accumulation, like in the Steward case, because wealth has the
power to stop statutory attempts to rein in wealth
accumulation.
It is a vicious cycle that requires exceptional political
courage to reverse. If that courage were available, and you see
it in this room in Senator Markey and Senator Warren, then we
know at least where to begin to prevent other Steward like
disasters and to restore patients' needs to the forefront of
our priorities.
We need statutory changes that allow, they have to allow
private sources of capital to support authentic innovation in
health and health care. We have to have capital formation, but
that--we have to preclude private equity entities and private
enterprise, I think, from non-value added ownership of health
care delivery, where they have typically relied on raising
prices and decreasing costs, threatening adequacy and quality
of care.
We should forbid the typical private equity approach of
loading health care organizations with debt, extracting
capital, and leaving stripped down organizations in bankruptcy
or worse. Personally, I would forbid private equity firms from
owning or controlling health care delivery.
No matter what, an entirely new level of transparency is
called for, much as is kind of plated in Senator Markey's
Health Not Wealth draft bill. That transparency must extend to
real estate investment trusts that the private equity firms use
to extract--to free up cash for them to pocket.
I would favor strengthening corporate practice of medicine
restrictions. I commend Senator Warren for her proposed Stop
Wall Street Looting Act, which would close many of the
loopholes used in the private equity--by the private equity
players, including unfair tax advantages.
I would recommend that--governance requirements change. I
think 50 percent of directors of for profit entities in health
care should be unrelated to the investors and representative of
patients and communities. Board meetings should be public.
I took oath as a physician, and I believe those oaths
should extend by law to organizations and investors who want to
get involved in health care. The needs of the patient have to
come first. Thank you.
[The prepared statement of Dr. Berwick follows.]
prepared statement of donald berwick
My name is Donald Mark Berwick. I am President Emeritus and Senior
Fellow at the Institute for Healthcare Improvement, a Boston-based non-
profit that I co-founded in 1991. I served as Administrator of the
Centers for Medicare and Medicaid Services under President Obama in
2010 and 2011. I am a pediatrician by training, practicing at the
Harvard Community Health Plan for 19 years.
It is first as a physician that I wish to share my thoughts with
you. I trained for 7 years to become a doctor, and one message was
drilled into me every day of my professional formation. It is this:
``The needs of the patient come first.'' Day after day, night after
night, I was schooled to show up, invest every iota of my mind and
skill, accompany the patient through their journey, however harrowing.
I was taught to be proud of that commitment, and to let it become part
of me. It did.
My career has wandered far from the bedside, but that imprint has
never left me. Nor, I believe, should it leave any aspect of our health
care system as--not just ``a'' guiding principle--but as ``the''
guiding principle for action, policy, investment, accountability, and
system design. I believe that principle--``the needs of the patient
come first''--should apply to and be enforced in every single agent in
the world of care--not just clinicians, but also organizations, payers,
entrepreneurs, and investors. What does not help patients and community
health, we should not do.
At the moment, we are dropping that ball. The patient today is at
risk as never before in my memory. At risk of being demoted, forgotten,
and harmed. As always in America, it is people at disadvantage,
marginalized, poor, who are at greatest risk, but the threat is even
bigger than that. It affects us all. We rank 69th among all nations on
the planet in our health and health system performance, despite
spending twice as much per capita as anyone else. That is an
astonishing failure, and we owe it to ourselves to find and correct the
causes.
Some of the threats are global--climate change, future pandemics,
violence among people and among nations; but the threat we are focused
on at this hearing is of a special nature--it is the threat of greed,
profiteering, and financialization of health care in America. We are
allowing the accumulation of wealth, not health, to become the aim, and
that is causing harm, and at a phenomenal cost. Unchecked--and it is
mostly unchecked so far--greed will cause disastrous and irreversible
harm.
The Steward debacle is borne of unleashed gaming and profiteering--
greed--among private equity investors, interested only in accumulating
wealth and layering vulnerable health care organizations with debt and
rental burdens too great to bear, no mater what the consequences for
patients and communities. The needs of the patient, far from coming
first, are nowhere in sight.
The Steward architects are by no means alone in this--putting money
above the healing mission. We see the unmoderated pursuit of wealth in
the confiscatory pricing of far too many pharmaceuticals. We see it in
the consolidation of hospitals allowing them to jack up their prices.
We see it in the behavior of the majority of large insurance companies,
most especially in the world of Medicare Advantage, where the Medicare
Payment Advisory Commission recently estimated that annual overpayments
now total over $80 billion a year. And, pointedly today, we see it in
the behaviors of the majority of private equity investors whose sole
aim is return on equity, who seem to care little if that return comes
from peanut butter or health care, and for whom the pledge, ``The needs
of the patient come first,'' has no meaning at all. Instead, the needs
of the investor come first.
We have allowed American health care to become too much the servant
of the profit motive, and we have too much lost the trail of duty to
health care--excellent health care--equitable health care--as a human
right. To overstate only slightly, the unmoderated pursuit of profit
has only two fundamental mechanisms: charge as much as you can and
spend as little as you can. That hurts patients. And it hurts the
morale and effectiveness of clinicians who care for parents. \1\
---------------------------------------------------------------------------
\1\ htps://www.youtube.com/watch?v=8KZkEv1CHgE.
Academic evidence is accumulating about the types and degree of
harm that private equity ownership of health care delivery brings to
patients. Recent studies of private equity acquisitions of autism care
programs show significant declines in staffing and increases in the use
of ``cookie cuter'' care, rather than customizing care to individual
patients' need. \2\ The result is worse quality of care. Similarly,
private equity ownership of nursing homes is associated with a 10
percent increase in mortality, lower patient mobility, and an 11
percent increase in costs. \3\ An important study by colleagues at
Harvard last year comparing patient safety before and after private
equity acquisition of hospitals showed major increases in important
forms of avoidable and serious patient injuries. After PE purchase of
hospitals, avoidable patient injuries increased 25.4 percent compared
with hospitals not bought by PE. \4\ For example, patient falls rose by
27.3 percent, central intravenous line infections rose by 37.7 percent,
and surgical infections doubled, from 10.8 per 10,000 hospitalizations
to 21.6. And, anecdotally, my email inbox is full of disturbing reports
from physicians and other clinicians about the changing circumstances
of their practices as profit-seeking overtakes patient protection.
---------------------------------------------------------------------------
\2\ Bat R, Appelbaum E, Nguyen QT. Pocketing money meant for kids:
private equity in autism services. 2023 (Jun 21) Center for Economic
and Policy Research: Washington, DC.
\3\ Gupta A, Howell ST, Yannelis C, Gupta A. Does private equity
investment in healthcare benefit patents? Evidence from nursing homes.
Working Paper 2021-20. 2021(Feb); Becker Friedman Institute: Chicago,
IL.
\4\ Kannan S, Bruch JD, Song Z. Changes in hospital adverse events
and patient outcomes associated with private equity acquisition. JAMA.
2023; 330(24): 2365-2375.
I am not a lawyer, but I believe that the vast majority of these
wealth-seeking practices, though morally offensive and harmful to
patients and communities, are not illegal. And therein lies our failure
and our opportunity. The power of money in politics makes it difficult
to rein in wealth accumulation, like that in the Steward case, because
wealth has the power to stop statutory attempts to rein in wealth
accumulation. It is a vicious cycle that requires exception political
courage to reverse. If that courage were available--and I think you see
it in this room in Senator Markey and Senator Warren--then we know at
least where to begin to prevent other Steward-like disasters and to
---------------------------------------------------------------------------
restore patients' needs to the front of our priorities.
We need statutory changes that continue to allow private sources of
capital to support authentic innovation in health and health care, but
that preclude private equity entities from non-value-added ownership of
health care delivery, where they have typically relied on raising
prices and decreasing costs to the point of threatening the adequacy
and quality of care. We should forbid the typical private equity
approach of buying health care organizations, loading those health care
entities with debt, extracting capital, and ultimately leaving stripped
down organizations at the verge of bankruptcy or worse.
To be clear, I would forbid private equity firms from owning or
controlling health care delivery. To the extent that private equity
does own health care delivery, an entirely new level of transparency is
called for, much as contemplated in Senator Markey's ``Health, Not
Wealth'' draft bill. That transparency should extend to the Real Estate
Investment Trusts that private equity firms use to free cash up for
them to pocket. Reporting should include leading indicators from the
owned health care entities to reveal staffing levels, access levels,
care program changes, and patient experiences. I would favor
strengthening Corporate Practice of Medicine restrictions, as counseled
by Professor Erin Fuse Brown in her March 25, 2024, testimony to the
Massachusetts Joint Committee on Health Care Financing and in a recent
New England Journal of Medicine publication. \5\ I commend Senator
Warren for her proposed ``Stop Wall Street Looting Act,'' which would
close many of the loopholes used by the private equity players,
including unfair tax advantage.
---------------------------------------------------------------------------
\5\ Zhu JM, Rooke-Ley H, Brown EF. A Doctrine in Name Only:
Strengthening Prohibitions Against the Corporate Practice of Medicine.
2023 N Engl J Med 389(11); 965-968.
It would be my recommendation that governance requirements change,
such that at least 50 percent of Directors of for-profit entities be
unrelated to the investors, and representative of patients and
---------------------------------------------------------------------------
community members. Board meetings should be required to be public.
In 2023, Professors Naomi Oreskes and Eric Conway published a
landmark book called, ``The Big Myth,'' which I think should be
required reading among health care policymakers. \6\ The myth of which
they speak is that markets and competition, not government action,
provide the best solutions to meeting social needs. They trace the
history of that myth, which was sold to us by big business and which
took over the American zeitgeist in the last century despite the
overwhelming evidence that it is not true. Their exploration of its
consequences ranges largely in maters outside health care--into climate
change, smoking, poverty alleviation, and more. But in seeking a case
study of the failure of competition and pursuit of private self-
interest to meet dire social needs, they could not have done better
than to study the Steward debacle to show how the unmitigated pursuit
of wealth enriches a few and makes our community far worse off. As I
see the trends, I am coming to believe that the pursuit of profit ought
to have, at most, a very, very limited role to play in navigating our
way to the health and health care system we need and can afford, where
the patient truly comes first.
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\6\ Conway EM, Oreskes N. The Big Myth: How American Business
Taught Us to Loathe Government and Love the Free Market. (New York:
Bloomsbury Publishing, 2023.)
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Senator Markey. Thank you, Dr. Berwick, so much. And,
adding to the list, we are joined by Representative Kate
Donaghue, Representative Sam Montano, Representative Chris
Worrell, Representative Estela Reyes, Representative Francisco
Paulino, Representative Joan Meschino, Representative Paul
DiNardo, Representative Dawn Shand, Representative Dylan
Fernandez. Thank you all for being here.
Thank you for your leadership on these issues. Now we will
turn to a round of questions. We will have a minimum of three
rounds of questions for the panel. So, I have heard from health
care workers at Steward hospitals that they don't have tubes to
draw blood or seeing their patients surgeries canceled because
of unpaid vendors or understaffing.
According to the Center of Medicare and Medicaid Services,
from 2022 to 2023, compared to the state average, more patients
visiting Steward hospitals in Massachusetts left emergency
departments without care. Patients in need of mental health or
psychiatric care stayed at the emergency department for 172
minutes, nearly 3 hours longer than the state average.
At HCA Mission, patients in the emergency departments are
waiting for 16 hours. There are reports of a cancer patient
waiting over 30 hours in the emergency department waiting for
hospital admission.
Dr. Stinson, what is the emotional impact of trying to
provide care without the staff or the supplies that you need,
knowing that corporate greed played a big role in the
conditions that made it difficult to provide the care?
Dr. Stinson. As you have probably heard from my other
colleagues, we go into this profession to care for people. We
all take an oath to do no harm. When we are stripped of all of
our resources and our ability to provide the care that we have
been trained to provide, it is a huge moral injury that a lot
of my colleagues, including myself, have to bear.
Seeing patients die in front of us with not having the
proper equipment, seeing people in the waiting room having
heart attacks where we can't get access to them quickly is a
challenge, and it strips us from our ability to practice at the
top of our license. And these are traumas and injuries that
live with us forever.
Senator Markey. Ms. Drummond, how does that resonate with
your experience in the hospitals that you have worked?
Ms. Drummond. It really closely reflects Dr. Stinson's
experience. At my hospital specifically, we have seen a loss of
our senior staff in both our physicians and our registered
nurses. And when you get into the medical field, when I was a
new nurse 10 years ago, it was so key to me to have my mentors
to look forward to help process what was happening and to ask
questions when I ran across something that I didn't have the
knowledge to do on my own yet.
What we see is high attrition rates across the board. We
have seen nurses leave after just a year in the profession
because they are being pushed out of their training faster and
then they are being put in charge of training other new nurses
when they don't even have a year of experience yet under their
belt. And it is not humanly possible to do that. And like Dr.
Stinson said, it leads to moral injury.
Senator Markey. Okay. Thank you. And Dr. Stinson, could you
expand on how these for profit hospitals interfere in--
operationally with the delivery of equity and justice,
especially for Black and Brown and immigrant communities that
are most in need of health care?
Dr. Stinson. It is a complex question. But there is so many
different ways. I think the first thing that come--that the
first thing I think about when I hear that question is the
removal of access to basic services, especially here in Boston
how the city is set up.
Once a specialty or service leaves a neighborhood, it is
oftentimes challenging for people within a community to get the
transportation to another facility that they can seek the care.
So, it oftentimes delays care in like cancer care or nephrology
care or various specialties if they don't have it in their
certain community or neighborhoods.
One, delayed care, which leads to poor outcomes and widens
those gaps and health disparities that I mentioned earlier. So,
communities of color typically are already disenfranchised, and
these facilities worsen those access to care and quality care
issues.
Senator Markey. Thank you. And, Dr. Berwick, could you talk
about that frame where there is pressure to extract revenues
out of for profit hospitals that we have seen in the Steward
case, then ultimately wind up harming those who are the most
vulnerable in the community.
Dr. Berwick. Well, the for profit plan is charge as much as
you can and spend as little as you can. And when clinicians are
forced to practice in conditions in which the resources are not
there to support what they want in their hearts to do, it
produces demoralization and has all sorts of cascade effects,
in terms of longevity, the relationships between doctors and
patients.
One other thing I will mention is that there is another
cascade, and that is to the not for profit sector. When private
equity and for profit are establishing behaviors around costs
and profit that change the dynamics in a market, the not for
profits are hurt.
They have--in fact, they have to follow suit. And so, we
are distorting the, I think the goodwill of not for profits to
actually do--to perform their mission.
Senator Markey. Okay. And let's just expand upon that for a
second. When Saint Elizabeth's and Carney are in trouble in
Boston, if they don't have the revenues to provide the
services, that then impacts the remaining hospitals within the
greater Boston area.
Dr. Berwick. Absolutely. It is one system, and those
patients end up going somewhere. But also, when Steward changes
the rules, when they act in ways, in cutting costs, for
example, by reducing staff, that changes the market so that now
you have the not for profits in a market where they have to
compete against those kinds of behaviors. And it hurts their--
it hurts their commitment to patients also.
I also must say in governance, in health care generally in
the country, if you look at the makeup of governance, for
profit or not for profit, a recent study showed only 14 percent
of the members of boards of large systems in this country have
any--have had anything to do with patient care.
They have never been near a patient. 14 percent have been
near a patient. Who else is sitting in those seats? Guess what,
private equity investors, real estate investors. So, we are
changing the whole game here through these behaviors and it has
got to stop.
Senator Markey. Instead of health care experts, you do have
wealth care experts.
Dr. Berwick. Yes. They seek their mission, and they are
good hearted people, but they think the mission is to
accumulate. And that is not the mission. The mission is to do
whatever it takes to help patients. And so, something has got
to change.
Senator Markey. Thank you, doctor.
Senator Warren.
Senator Warren. Thank you, Senator Markey. So, I want to
focus on another part of the--what is unfolding right now. Last
week, after weeks of radio silence on Steward space, the news
broke that UnitedHealth Group subsidiary Optum plans to acquire
Steward's physician group, which is called Stewardship Health.
Now, as far as anyone can tell, that is the last asset of
any value left at Steward. The sale has been spun as a way out
of the financial crisis for Steward's Massachusetts hospitals,
but I would like to take a closer look at that, if we can.
The deal is likely valued at hundreds of millions of
dollars. So, Dr. Berwick, is there anything in the deal as
reported so far that requires Steward to put that money back
into the Massachusetts hospitals?
Dr. Berwick. I don't know for sure, but not to my
knowledge. They will be--it is another way to line their
pockets, including the purchase of the--by Optum, another for
profit, aggressive for profit company, worries me a lot. I
don't know what is going to happen to the culture of
physicians.
Senator Warren. Okay. So, we are talking about potentially
millions of dollars going into Steward's hands, but the money
may not actually go into the hospitals. It could just roll
right back out to another group of investors like Dr. De La
Torre before, right?
Dr. Berwick. That is my fear.
Senator Warren. Okay. Is there anything in this deal, Dr.
Berwick, that would require Steward to keep its Massachusetts
hospitals open if the deal goes through?
Dr. Berwick. I don't know the content of the deal, but my
guess is no. And let me--one of--the thing here is a lot of
this we don't know, because both Steward and Optum operate
under conditions of lack of transparency that make it very,
very difficult to know what is going on.
Senator Warren. I am going to put it this way, I think if
it were beneficial for the hospitals or beneficial for the
people of the Commonwealth, we would hear about all of those
elements. Instead, what we are hearing is that Steward gets
hundreds of millions of dollars, full stop, without any
additional guarantee that a single penny of this money goes to
the hospitals that need it and nothing to ensure that the
hospitals stay open, if this deal goes through.
Once again, without oversight, this means the money can
just flow out the door to the likes of Dr. De La Torre. Second,
I want to focus on another part of this though, and that is
pause to think why a company would offer to pay hundreds of
millions of dollars for the Steward doctor practice group. One
answer is that UnitedHealth is coming to town hunting for
profits, not trying to figure out high quality care.
How do they think they are going to make tens of millions,
hundreds of millions of dollars in return on their investment?
Remember, earlier, the first private equity group that came in
paid $246 million, evidently to the dioceses, and reaped a
benefit of $800 million.
How are they planning to make money, tens of millions or
hundreds of millions more, from the medical services that are
already owned by the--that are already practiced by the Steward
doctors? Dr. Berwick.
Dr. Berwick. Again, transparency is a problem. We don't
know the answer to that question because we lack access to
information on what is going on in Optum. My guess is they will
raise prices--they will increase physician fees and----
Senator Warren. Drive up the costs. They are going to
charge everybody who comes in the door more, which means either
the taxpayers, the insurance companies, or private individuals,
right?
Dr. Berwick. Medicare. They are absolutely the world's
experts on up-coding. So, they actually own companies for the
purpose of upcoding. That is Optum.
Senator Warren. Just so everyone understands, upcoding
means charging more, right?
Dr. Berwick. Charging more in that case to Medicare, the
Government, and to beneficiaries. And they have done that all
over the country, and I suspect we are going to see costs rise.
Senator Warren. All right. So, part of it is going to be
that they are going to raise the cost of health care for
everybody in the Commonwealth. I want to ask you about another
part, and that is the vertical integration.
Optum is not a company just off on its own. It is related
to another set of companies that are all trying to make
profits. Can you talk to us a little bit about that, Dr.
Berwick?
Dr. Berwick. Well, Optum is--I don't know, Optum's plan
inside, but they are buying up a lot of different components of
health care, ambulatory surgery centers, physician practices.
And so, they are----
Senator Warren. Billing practices, insurance companies.
Dr. Berwick. Yes. So, they are playing the whole game, and
they are experts, again, in pricing and upcoding pricing.
Senator Warren. Why does it matter when you have this kind
of vertical integration? Why is that important?
Dr. Berwick. Well, you lose--first of all you don't have
any market really at work. You have deep concentration. So,
they are not accountable to anyone.
Senator Warren. Every patient, every doctor who refers a
patient to the hospital is already effectively tied to an
entire group, right. So that everything has to stay in sync to
maximize profits for the entire group. Is that a fair
description, Dr. Berwick?
Dr. Berwick. It could be. I must say, and honestly, I don't
really know what the deal is, whether they are requiring that
kind of in-network behavior.
Senator Warren. Okay, but you have got the opportunity here
of creating in-network control.
Dr. Berwick. Yes. They are the largest employer of doctors
in the Nation. I think it is--they are probably approaching
100,000 now with this purchase at Steward. That is a tremendous
amount of heft in a market, so they kind of can call the shots.
Senator Warren. There is the problem, right? It is a huge
conglomerate that will have even more market power if it is
able to buy the Steward doctor practice. We have a real problem
with Steward hospitals, but we need a solution, not an
opportunity to make things worse.
We need to keep the doors open. We need to protect workers.
And we need to provide quality care for our communities. A
quick sale to another outside investor could do more harm here
than good. Regulators led the original sale to private equity
investors go through and permitted a nonprofit hospital that--
to become a for profit corporation that answered to investors
that were hungry for profits.
Regulators put conditions on the sale, but the private
equity firm found the loopholes, and we had a confluence of
failures. As the Globe put it last week, regulators lacked the
legal tools to hold Steward to account and were handcuffed by a
fragmented oversight system and a lack of political will to
take a tougher approach.
They stood by as more than $1 billion in assets were
quietly stripped out of the hospital system. Federal and state
regulators should think once and think twice, and think three
times, before they let another corporate investor suck more
money out of the Steward system. Thank you.
Senator Markey. Let me turn to you, Ms. O'Grady. The
Private Equity Stakeholder Project has done several reports of
instances of private equity firms hollowing out healthcare for
profit.
Please describe how these firms exploit a lack of
transparency and complicated financial schemes to extract the
maximum profit for their investors, but at the expense of the
health care then provided at those hospitals.
Can you walk through the scheme, walk through the play,
which is happening here in Massachusetts, but as you have
studied it across the country?
Ms. O'Grady. Yes. There is very little transparency for
private equity firms, and particularly for the companies they
own and their finances. As I mentioned in my testimony, private
equity firms have, for example, extracted debt funded dividends
and fees from the companies they own, and in most cases, they
don't have to report that anywhere, especially to the public.
In my own research, I have been able to track down some of
this information, but on a really piecemeal basis. So, for
example, one of the ways that I have been able to dig into
these finances is when private equity firms load their
companies with debt, they have to report that to the lenders
and what they are going to use that debt for. Credit rating
agencies will then rate that debt.
I am able to at least get a glimpse into these companies'
finances because they have to report this to another financial
institution, the banks. So really, the only disclosures that I
end up seeing are only available to me because they are meant
to protect the banks. You mentioned in your opening statement
another hospital company, Pipeline Health, outside of Chicago.
It was only revealed after Pipeline closed the hospital and
filed for bankruptcy. In the bankruptcy filings, it was
disclosed that it was owned by a group of private equity
investors. And to make matters worse, they had been intending
to close the hospital since before they purchased it.
That was only available in the bankruptcy filings. So, we,
in a sort of perverse sense, got lucky that we were able to see
that, but it was all post-mortem, too late to do anything about
it.
Senator Markey. Right. So going in, they would want you to
think that if anything went wrong, it was because of benign
neglect. We didn't want to really harm it one way or the other.
But what you are saying is the plan is actually designed
neglect.
It is an actual financial plan to go in to strip out needed
revenues to provide services, to privatize that wealth, and
then to leave these institutions without the revenues, without
the resources they need in order to provide services.
It is an actual plan that you can put on a three by five
card out of business school in terms of what you should do. And
it is one thing to do it to a widget company, or a coffee
company, or to a muffler change company across the country. It
is another thing to do it to a hospital that is central to the
well-being of a community.
From your perspective, what is their mentality? Is it, as
Dr. Berwick said, to just turn this entire area into one for
financial profit without any real regard for what the impact is
on hundreds and thousands and millions of families across our
Country?
Ms. O'Grady. Yes. And like you said, health care over
wealth care. But I think more broadly, it is important to
understand that these aren't--I don't think that these
investors are setting out to drive these companies into
bankruptcy. Is that their interests are misaligned, and it is a
broken business model that fully relies on extracting profit
out of these hospital systems. They have everything to gain and
very little to lose.
Senator Markey. Yes. And thank you, Ms. O'Grady. And I saw
you nodding your head, Dr. Berwick. And in response to Senator
Warren's questions, you were saying, well, I can't be exactly
specific because I don't know all the details as to what is
going on.
Can we really have accountability of corporate greed
without greater transparency in this one sector, the health
care sector, that affects every family in our Country?
Dr. Berwick. I don't think we can. I served on the
Massachusetts Health Policy Commission. Steward refused to give
the health information to the agency, the information. They
just refused with no consequences that I could see.
I don't know if that has changed since I was on the
commission, but it had no requirements to actually open, to
turn on the lights. Later, when Optum bought HS Health, I felt
there were some risks in that. And as a Commissioner, I asked
that we do a far deeper investigation to predict what would
happen.
We didn't. We couldn't. There was no information available,
even on the national effects of Optum purchase of physician
practices. So, this is a system that operates in the dark. And
so, we--our hands are tied.
Senator Markey. They kept the State of Massachusetts in the
dark. They refused to provide the information necessary for the
state to be able to make----
Dr. Berwick. Yes. Again, I don't know what has happened----
Senator Markey [continuing]. A determination as to the
financial condition of Steward.
Dr. Berwick. Yes. It just was, no we won't. What has
happened since I left the Commission, I can't say, but that was
the situation then.
Senator Markey. No, I think it is all part of designed
neglect. I think it is all part of a plan for them to be able
to continue to loot, continue to drain the revenues out of the
health care system, the Steward system, for personal gain. And
meanwhile, to hide their shenanigans, to hide the plot, to hide
the scam which they have put in place.
That is really what we are confronted with right now
because of the lack of transparency, because of the lack of
records that the state can have early on in order to prevent
that cascading impact on the entire medical system.
Dr. Berwick. That is my belief. Greed thrives in the dark.
And turning on the lights will help.
Senator Markey. Do you agree with that, Ms. O'Grady?
Ms. O'Grady. Absolutely.
Senator Markey. Absolutely. Thank you. Let me turn again to
Senator Warren for another round of questions.
Senator Warren. Thank you, Senator Markey. So, let's spend
some time talking about how we got here. Dr. Ralph De La Torre,
the CEO of Steward Healthcare, was invited to today's hearing
as the head of the hospital system since 2006.
Dr. De La Torre has been involved in every major decision
made by the company to sell off assets and leave behind a
zombie hospital system. He is the No. 1 person who needs to
show up and account for what he has done. Failure to appear is
cowardice. I appreciate our witnesses coming today. I hope we
can unravel as much of this as possible, given that the
hospital system has been opaque and refused to follow the law
in terms of its disclosures.
But let's focus on a critical moment that brought us to
today's crisis. It occurred in 2016, when Steward's private
equity owner, Cerberus, sold the land under its hospitals and
its hospital buildings to a real estate investment trust, MPT.
MPT paid $1.25 billion to buy those buildings, that land,
the nurseries, the operating rooms, the parking lots, the whole
thing. Dr. Stinson, you used to work at Carney Hospital, one of
the Steward owned properties.
When Cerberus sold Carney's hospital building, they got
$260 million for that particular hospital's real estate. So,
did the workers get a raise and pay? Did working conditions
improve? What benefits came to the hospital from that $260
billion--million dollars that they received?
Dr. Stinson. I did not receive any increase in pay other
than what I negotiated, so no. I can only speak for the
emergency department. There were no infrastructure things that
I saw going on. I know the emergency department may be got five
extra ER rooms, but that was about it.
Senator Warren. All right, so you got five rooms. With the
curtains, right?
Dr. Stinson. These had doors. We got doors this time. We
got doors.
Senator Warren. You got doors. I stand corrected. Okay.
$260 million and you got five rooms, but no better working
conditions for the staff. And the patients, did you see any
evidence that Cerberus was reinvesting this money back in
Carney and patient care?
Dr. Stinson. Not that I saw, no.
Senator Warren. Okay. So, Cerberus sells, or Steward sells
its hospital buildings for a total, for all of them they sold
more than $1.25 billion, and yet none of the money, or very
little of the money, seems to have been used to support the
doctors, the nurses, the other workers, patient care. Ms.
O'Grady, if Cerberus didn't use this windfall to increase wages
or invest money back into Steward's hospitals, where did it go?
It is a lot of money.
Ms. O'Grady. It went to Cerberus. Almost $500 million went
straight to Cerberus and its investors.
Senator Warren. Straight through.
Ms. O'Grady. Yes. The rest of it was used to fund a rapid,
massive expansion strategy by Steward.
Senator Warren. Okay. So, it goes to investors basically--
it is where the money goes. And once the deal goes through and
service is sold off Steward's buildings and land, MPT, where
does that leave a hospital that doesn't own its own operating
room and nursery and gift shop?
Ms. O'Grady. The hospitals were stuck with really hefty
rent payments. They no longer had their most valuable asset.
They were beholden to a corporate hospital landlord. By 2020,
they were reporting on almost $400 million net loss. By the
time Steward was ready to exit--or Cerberus was ready to exit
Steward, they had made around $800 million in profits.
Senator Warren. In profits. That means they got--their
money back----
Ms. O'Grady. In profit. No, they quadrupled their
investment on Steward. Fast forward to today, Steward hospitals
are in dire straits.
Senator Warren. This is a prime example of the danger of
private equity. The private equity firms walk away with
hundreds of millions of dollars. They leave behind the shell of
a business that often fails.
There is a lot of conversation right now about people
saying, well, but the hospitals were in trouble when they were
first bought. Remember, the whole idea was Cerberus was going
to come in and be a rescuer. However we evaluate what had
happened to the hospitals back then, keep in mind, they had
$1.25 billion drained out of them, and still managed to keep
providing patient care.
If that money had stayed in the hospitals, if they had not
had to pay the kind of rent that they had to pay after they
lost access to all of their real estate, the financial
condition of the Steward hospitals today would be very
different.
We need to hold these executives accountable. We need to
rein in private equity's influence over the health care system,
and we need to make sure that we are providing the people who
deliver health care with the resources they need to deliver
that care for our patients. Thank you--thank you.
Senator Markey. Did you ever, Dr. Stinson, in the hospitals
in which you worked, ever see corporate executives held
accountable for reducing health access at safety net hospitals?
Dr. Stinson. I never saw or witnessed that at all, no.
Senator Markey. Yes. And I think that no resounds
throughout the room in terms of this balance of power at the
corporate boards. Is there anything stopping Ms. O'Grady,
medical properties trusts from continuing to buy hospital
property or Cerberus from buying another hospital?
Ms. O'Grady. No, not yet anyway. But I think at a more
positive note, we are seeing states across the country starting
to consider legislation that would put more oversight over
these kinds of transactions. And I think us being here today
and your agenda will also be a critical step at the Federal
level.
Senator Markey. Yes. Thank you. Ms. Drummond, did private
equity exiting HCA stop them from understaffing the hospital
and restricting access to trauma or cancer care?
Ms. Drummond. Absolutely not. I have only worked for HCA
since they have been a publicly traded company. And at the end
of the day, their No. 1 priority is their shareholders and
their profits, which is in direct, direct conflict with patient
care.
We are the second most profitable hospital system in HCA
across the country, and yet they refuse to staff us properly
and give us the resources we need. And ultimately, patients
suffer, and they die.
Senator Markey. Dr. Berwick, this is a practice the private
equity has that can be extended over to any part of the health
care system, over to hospice care, nursing home care, over to
fertility care, over to behavioral health care.
Can you expand upon what your greatest concerns are in
terms of what this practice is today, but what it portends for
the future if equity--if private equity goes unchecked?
Dr. Berwick. I think serious, serious damage to the mission
and capability of health care systems. I defer to Ms. O'Grady
for the particulars, but you are absolutely right. Private
equity--and remember, private equity is only one form of
private investment in health care.
We should be extending our view more toward private
entrepreneurship as the--as an area of inquiry. But we know
what happens. Nursing homes are now owned 70 percent by
private--for profit forces. The private equity share in nursing
home has gone down. It was 11 percent a few years ago.
Now at 7 percent. But that doesn't mean the for profit
motive has left nursing. On the contrary, we have absolute
clear scientific data showing deterioration in care with
private ownership of nursing homes. They underperform in
staffing. They underperform in patient outcomes and higher
costs. The same is true, as I have said in autism care.
I think it is--I think, and check me on it, it is over 90
percent of autism care is now privately owned, and it is all
migrating toward decreasing staffing. Autism care depends a lot
on customized, intensive intervention with kids, which does
work. When private equity gets control of autism care, that
goes down.
You name the sector, and I don't personally have a single
example of private equity ownership of any component of health
care where the health care gets better. It just doesn't seem to
be what happens.
Senator Markey. Yes. So, I think--what we have got on our
hands right now is something that is only going to grow as the
years go by. Massachusetts is largely a nonprofit system, but
Steward is the--is the beginning of something here in
Massachusetts, but also across the whole country. It is an
example that we have to learn from, because ultimately their
collapse impacts the nonprofit health care system.
As they attempt to expand into other areas in the health
care sector, it clearly would ultimately wind up harming the
nonprofit sector that provides the very same services. So,
corporate executives, they make profit, but when COVID hit,
Massachusetts provided $54 million to Steward during the COVID-
19 pandemic.
Pennsylvania provided $8 million to Steward to prevent
Eastern Hospital from closing. And when for profit hospitals
drown, surrounding hospitals and community health centers have
to pick up the slack.
Dr. Stinson, what would it mean for the patients you served
at Steward Carney in Dorchester if that hospital cannot make it
without--additional revenues that go into it? What would it
mean for those people?
Dr. Stinson. I think this would be devastating. I know
there are a lot of hospitals around the city, but I think
having easy access to care is critical to maintaining health of
communities for generations.
When you remove a facility from a community, they no longer
will maintain that ability to live prosperous lives, be able to
contribute to the economy, continue to be driving economic
force in the Commonwealth.
But in addition to that, it also would reduce employment
opportunities for so many that live in the communities as well.
Steward is a huge employer here. And I think a lot of people
that work in these communities, in Dorchester and in Brockton,
would also lose employment and then also contribute in other
ways that I don't think we have fully realized.
Senator Markey. Okay. Ms. Drummond, what would it mean for
the hospitals that you have worked in?
Ms. Drummond. As I stated in my testimony, Mission is the
hub for Western North Carolina, so it would wreak havoc on our
community. We are the only health system in Western North
Carolina. There is a couple of other smaller hospitals, but as
far as cardiac, neuro, and trauma emergencies, Mission's
hospital campus is it. We are the only option.
If we close our doors, there is nowhere for people to go,
nowhere.
Senator Markey. Dr. Berwick, I will give you the final word
on that subject, the impact on patients.
Dr. Berwick. It is a cascade of effects as you have heard
described. The--I knew Mission, and Mission was an amazing
health care organization 20 years ago, so this is a real loss
of a community asset, and I think we can see that repeated over
and over again. And one final comment on the not for profit.
You are right, we are a not for profit system. But if there
is a Steward in town and they are cutting nurse ratios and they
are cutting resources and lowering their production costs, and
you are a not for profit, you have got to compete against that,
which deteriorates--causes your own care to deteriorate.
We are one system, and so you can't damage one component of
it without seeing damage downstream.
Senator Markey. No, thank you. Thank you, doctor. And we
are also joined by Representative Andy Vargas, Representative
Jessica Giannino, Representative Marjorie Decker,
Representative Ryan Hamilton. Thank you all so much for your
participation and your leadership. Let me turn again to Senator
Warren.
Senator Warren. Thank you very much. And Ms. Drummond, I
just want to say, you really hit it exactly right when you
said, there is nowhere else to go. We need these hospitals, and
we need them to be open and functioning, and functioning at a
high level. People need this care.
Thank you for the work you do. Thank you for the work that
all of our health care professionals do. Let's talk for just a
minute as we wrap this up about changes we could make in the
laws, so this doesn't happen again. The first one I want to
start with is I got a general, law to deal with private equity.
It is called the Stop Wall Street Looting Act, and it is the
most comprehensive legislation to fundamentally reform the
private equity industry.
It would make private equity funds liable for the debt that
they settle on portfolio companies. It would ban dividends to
investors after a firm is acquired. And it would protect
workers in the bankruptcy process if the target company
eventually fails.
It also deals with some of the tax breaks right now where
taxpayers are subsidizing private equity, which is a terrible
mistake. But tell me, Ms. O'Grady, how might the Steward crisis
have turned out differently if these provisions had been
enacted?
Ms. O'Grady. I think it would have been completely
different. I mean, one of the things that you mentioned was the
concept of joint liability. So right now, private equity funds
are structured in a way that they are completely protected from
the liabilities of the companies they own, which makes them
take on incredible risks that they don't have to pay the price
for.
They get away with so much with impunity because they are
not liable for the companies they own. And so, I think just by
one example, the Stop Wall Street Looting Act's joint liability
provisions would create actual accountability for that kind of
corporate profiteering.
Senator Warren. Okay. So, this is not a case where we just
have to throw up our hands and say, there is nothing we can do
about this. We can change the rules. We can put some
regulations in place and stop this kind of looting. I would
argue, though, that it is not enough just to do it across the
board.
We need special protections in health care because we are
literally talking about life and death. We are talking about
hospitals that we cannot let close. So, let's talk about that
for just a second. Steward is in shambles, but its private
equity owners walked away with hundreds of millions of dollars
in profits, $400 million from the sale lease back alone.
Dr. De La Torre refuses to tell us how much he has made off
the deal, but at least it was enough to support a couple of
yachts.
Ms. O'Grady, does the Federal Government have any authority
to claw back the profits Dr. De La Torre or the private equity
executives made from selling Steward hospitals' assets out from
underneath them and then hollowing out the hospitals while they
ran away with the profits?
Ms. O'Grady. No, not that I know of, but it should.
Senator Warren. But it should. And that is really the point
here. So, I am also introducing new legislation to change that.
I want to make the point there are two things that would
do. It would ban health entities that receive Federal funding
from selling or mortgaging their assets to real estate
investment trusts, so that Wall Street investors can no longer
strip hospitals of their land and property and operating rooms
and nurseries.
We need to put an end to that, and we can. And second, it
would give the Federal Government new authority to claw back
compensation from both the health care executives and Wall
Street investors, whose predatory financial engineering
endangers the viability of a hospital.
The potential collapse of Steward Healthcare threatens
access to health care for communities all across our
Commonwealth. The first thing we need to do is to keep those
hospitals open and able to deliver high quality care.
We also need to hold these executives accountable though,
because failure to do so now just invites them to come back and
do this to another part of the health care system, and another
part of the health care system, and another part of the health
care system.
The fact that this happens is because of choices that we
have made. We have failed to step up and change the law to
protect the delivery of health care system in America. It is
now on us to make those changes. Thank you all for being here
today. Thank you.
Senator Markey. Do you have any other questions?
[Technical problems.]
Senator Markey. Do you have a concluding statement?
Beautiful. So, thank you. And, thanks to everyone who has
joined us today. We heard clearly that the Steward Healthcare
crisis is the rule and not the exception.
Whatever the financial strategy or company type, patients
and communities suffer when companies freely put corporate
greed over community needs. Frustratingly, our system allows,
even rewards this strategy. Private equity companies across the
country are quietly making profits while infiltrating
everything from fertility care to hospice care.
HCA Healthcare made $65 billion, billion, in revenues last
year. Cerberus walked away from Steward with over $800 million
in profit. Medical Property Trust CEO reported in February that
the land they owned from Steward would start making them money
again soon, but that money will not be going to the health care
system.
Meanwhile, it is communities that continue to experience
the consequences. And without reform, we simply risk creating
one problem for another. Instead of private equity cutting
deals, we have Optum exerting its potentially monopolistic
power over our health care system by buying Steward's physician
practice group. Like the hydra, cut one for profit company's
head off and more will take its place.
We need to change our strategy, and that is what I am
proposing in a path forward. We need a health care system for
everyone, supported by Medicare for all and the Green New Deal.
The Green New Deal for our health care. We need to continue
aggressive oversight on corporate greed. I was on the Committee
in 2009. We fought, we fought, but we could not get the votes
for a single payer system.
But we know that ultimately, that was the flaw in the
Affordable Care Act, that we did not have in that provision.
And we need the Health Over Wealth Act to require protections
for patients and providers, transparency from corporate
executives, and accountability from companies that put their
wealth over America's health.
The discussion draft for that bill that I am introducing is
posted at markey.senate.gov/healthoverwealth. Fighting against
corporate greed is going to be an uphill battle, but it is what
Senator Warren, and I are promising you here today that we are
going to conduct on a national basis. And it is what we have
seen in the face of the Steward crisis that is uniting people
in the face of the greed which we can see here in our home
state.
Doctors, nurses, lab techs, hospital administrators,
professors, advocates, and elected officials are all saying
clearly it is long past time to make sure patient health comes
before shareholder wealth in Massachusetts and across our
Country.
Before we close, I would like to thank the many
stakeholders and experts who have contributed to this hearing,
the Massachusetts Health Policy Commission, the Center for
Health Information and Analysis, Dr. Zirui Song, Rosemary Bach,
public citizen, the American Federation of Teachers, Americans
for Financial Reform, National Nurses United, Mass Care, and
the many, many Massachusetts elected leaders, health providers,
and experts who have made their voices heard through
conversations with me, with my staff, and through written
testimony, which will all be put into the Senate permanent
record.
On that note, I ask unanimous consent to enter into the
record 23 statements from stakeholders outlining priorities
regarding reducing the harms of for-profit entities, including
private equity in our health care system. Without objection, so
ordered.
[The following information can be found on page 45 in
Additional Material:]
Senator Markey. Finally, we want to thank our esteemed
witnesses today. You did a fantastic job. Your testimony----
[Technical problems.]
Senator Markey. Your testimony today and the events at
Steward and HCA facilities that necessitated your participation
are a stark reminder that we owe it to our patients in
Massachusetts and across the country to not only learn from
you, but to act.
We will leave the record open for any other Senators who
wish to ask questions. The record would be open until April
17th of this year. We thank you. We thank everyone who has
participated in this.
We--failure is not an option. We have to fix the system. We
have to protect it against the predators who are looking at
this, our health care system as just another way of making
themselves more wealthy, but again, it will come at the expense
of the health of ordinary families. We thank all of you for
your participation today.
With that, this hearing is adjourned. Thank you all so
much.
ADDITIONAL MATERIAL
My name is Tamara Bedard and I am a RN that has practiced in the
field of nursing for over 30 years. My nursing career has included work
at large, city trauma hospitals, small community hospitals, outpatient
city clinics, home health care and, for the last 18 years, community
and public health at a local regional health department. I have lived
in North Central, MA my entire life, raised my family here, worked in
these and surrounding communities, have mentored and precepted nursing
students from various local colleges, and have cared for its residents
passionately. Clearly, I have both personal and professional interest
in the state of health care here.
I have always been proud to be a nurse, and especially a nurse in
Massachusetts. Massachusetts is not only known for its extraordinary
medical providers and cutting-edge health care technology, it also
hosts some of the best hospitals, colleges and universities to support
the very best minds and healthcare artistry in the field throughout the
world. At least, I always thought so.
Words cannot truly express my devastation over the state of
healthcare at all levels today. As a nurse primarily working with and
advocating for the underserved and at-risk populations in our region, I
am frequently appalled by the poor quality of the healthcare
interactions people are now forced to have. It is a Sisyphean task to
secure healthcare for those in need every day, and I am repeatedly
faced with the complete and utter lack of access people have to basic
health care needs.
Dramatic increases in medication and insurance costs are massive
barriers to good health, but even when `adequate' insurance support is
present, there are not enough facilities or providers available to
administer care. Given this increased social awareness and our mass of
brilliant minds and dedicated clinicians acknowledging the increased
need for services, I truly don't understand how health care agencies
and hospitals are closing. Consider the recent examples of the
Leominster Hospital's Birthing Center and, even a branch of my own non-
profit, public agency, the Nashoba Nursing Service Home Health and
Hospice that had been taking care of this community since 1966! Now,
with the impending Steward Health Care closings, our region is directly
impacted again.
These hospital/agency closings are a symptom of greater health care
system failures (including privatization/for-profit models) that are
traumatizing not only the health of our individuals and communities,
but also the dedicated healthcare workers that are trying to survive
this storm. It has to stop. Efforts should be focused on recruitment,
retention and support for clinicians AND their practice environments to
increase health care access/services. Yet, many providers, like myself,
feel betrayed because we are not supported, on any level, to continue
practicing nursing, medicine, psychiatry, social work, etc. with
competence, compassion, professionalism, and integrity within this
broken healthcare system. In addition to more providers, we need MORE
facilities to improve equity and access, NOT less. Our healthcare
system needs life support in the form of excellent stewardship and
better accountability to preserve and grow the amazing resources
Massachusetts and its citizens have to offer.
Your very tired and heartbroken neighborhood nurse,
Tamara Bedard,
RN.
______
AFSCME Council 93,
April 1, 2024.
Hon. Ed Markey, Chairman,
U.S. Senate Subcommittee on Primary Health and Retirement Security,
Washington, DC.
RE: Impact of Private Equity Ownership of Hospitals
On behalf of the more than 45,000 public and private sector workers
represented by AFSCME Council 93, I am writing to express our concerns
regarding the increasing trend of private equity (PE) ownership of
hospitals and its potential impacts on workers, patient care, and the
cost of health care.
I thank you for the opportunity to present our views at the field
hearing entitled ``When Health Care Becomes Wealth Care: How Corporate
Greed Puts Patient Care and Health Care Workers at Risk.'' Please
include this testimony in the record for the field hearing scheduled on
April 3.
As you are aware, private equity acquisitions in health care have
grown rapidly over the past decade, and hospitals are no exception. As
of January 2024, at least 460 hospitals are now owned by private equity
firms, comprising 30 percent of for-profit hospitals in the U.S.
Evidence increasingly suggests there are far-reaching dangers
associated with private equity PE takeovers of hospitals, nursing homes
and other health care facilities. A notable example is Steward Health
Care, a for-profit health care system previously under PE ownership,
which is currently in the process of selling nine hospitals in
Massachusetts due to financial insufficiency in managing these
facilities.
As a union representing front-line health care workers who are
committed to high quality patient care, we are deeply concerned that
there is strong evidence indicating that patient care suffers when PE
takes over a hospital. A 2023 study conducted by Harvard Medical School
found a decline in patient care at hospitals acquired by PE. This study
revealed that after a hospital is bought by a PE firm, admitted
Medicare patients had a 25 percent increase in hospital-acquired
complications, compared with patients admitted before acquisition.
Patients also had 27 percent more falls and 38 percent more bloodstream
infections. Researchers argue that patient care is jeopardized due to
the private equity business model's emphasis on short-term objectives
geared toward maximizing profitability and investment returns. PE often
utilizes cost-cutting measures such as layoffs, wage freezes, replacing
higher paid and higher skilled workers with less skilled workers, and
benefit reductions for health care workers. These measures exacerbate
workforce challenges in an already strained health care system and have
a direct impact on quality of patient care.
Additionally, there are direct linkages between PE ownership and
higher health care costs. Research suggests that PE-owned hospitals
tend to charge higher prices for services compared to their nonprofit
counterparts, leading to increased health care expenditures for
patients and insurers alike. This financial burden disproportionately
affects vulnerable populations and undermines efforts to achieve
equitable access to health care.
With the strong support of Council 93, AFSCME International has
consistently advocated for Federal policies to make health care more
affordable and accessible with the passage of the Affordable Care Act
(ACA) and more recently, the passage of the prescription drug reforms
under the Inflation Reduction Act (IRA). These legislative victories
are crucial steps toward addressing the systemic issues contributing to
rising health care costs and ensuring that all individuals have access
to quality care without undue financial strain. By and large, private
equity acquisition of health care facilities leads to higher prices for
patients and other stakeholders, which goes against the principles of
equity, access and affordability that AFSCME stands for.
As a union that provides health care to vulnerable populations in a
range of health care settings, we are also alarmed about PE's
acquisition of nursing homes. A widely referenced study examining
nursing homes acquired by PE owners revealed a 10 percent rise in
mortality among Medicare patients. This same study also cited higher
patient mortality rates, fewer caregivers, higher management fees, and
a decline in patient mobility when PE acquires elder home facilities.
In summary, we are pleased that the Committee is delving into the
matters surrounding private equity acquisitions of health care
facilities. Drawing from the experience of Steward Health Systems in
Massachusetts and insights gleaned from thorough research, we strongly
encourage the Committee to enact measures aimed at protecting the
welfare of patients, health care professionals and the wider community.
This may include measures to increase transparency and accountability
in health care financing, strengthen regulations governing PE
investments in health care, and promote alternative models of hospital
ownership that prioritize patient care and community needs.
Thank you for your attention to this important issue. We look
forward to your leadership in addressing the challenges posed by PE
ownership of hospitals and advancing policies that promote affordable,
high-quality health care for all Americans.
James Durkin,
Legislative Director,
AFSCME Council 93.
______
My name is Barbara Pearson. I live in Amherst, and am addressing
you as an active member of One Payer States, Mass-Care, and the Poor
People's Campaign.
Thank you, Senator Markey, for stepping up to champion the state-
based Universal Health Care Act, SBUHCA (or ``suh-boo-kuh''). It is not
a sexy bill, and doesn't reduce easily to a sound bite. But it will
provide a firmer foundation for going forward, allowing us to be
proactive in a larger context. In this case, the context is the bills
to establish Single Payer/Medicare for All in our Commonwealth, the
Green New Deal for Health, and other state-based efforts to address the
Social Determinants of Health.
With the theme of this hearing, ``Health Care, Not Wealth Care,''
you are helping us connect the dots between procedural health policy
and our lives. Thank you for highlighting the consequences of using
money set aside for health care to create profit for investors instead
of healing and keeping us well: Wealth over Health. While peer
countries were developing successful non-profit universal healthcare,
the U.S., with the HMO (Health Maintenance Organization) Act of 1973,
opened the door to the Corporate Practice of Medicine (despite laws
against it). Now under the guise of a ``free market,'' profit-seekers
are running roughshod over our health care infrastructure and we are
suffering the consequences.
The free market is no match for financial engineers with dark money
who operate outside our regulatory constraints and who see nothing
immoral or illegal in leveraging hospital assets for yachts and leaving
patients without an emergency room, or foregoing maintenance and safety
standards in our operating rooms (LaFrance, Applebaum, 2021). Companies
like Steward Health (and Welsh-Carson) have stifled competition and
doubled prices throughout whole specialties in a region, bringing care
out of reach for even larger numbers of Americans (FTC). Yet another
Private Equity game-plan involves people on kidney dialysis, a truly
captive and vulnerable audience (Stoller).
With these forces dominant in our health care, is it any surprise
that Poverty is the 4th leading cause of death (Brady). Our health care
is broken. Corporate greed continues to break it. We need to break
corporate greed.
The SBUHCA bill will help states be laboratories for democracy, as
the PSA ``Un-breaking America'' from RepresentUS shows. Progressive
reforms at the state level--like Women getting the vote or interracial
marriage--provide a model for other states to follow. Together, states
build up the pressure for change from below.
Senator Markey, throughout your career, you have worked to make
government serve the common good. Such contributions to build the
welfare of the Commonwealth from the bottom up do more to stimulate
economic growth than giving to billionaires or corporations, who buy
back their own stock rather than create jobs and build communities.
I hope the Joint Committee on Health Care Financing in our state
legislature is paying attention to what you are proposing. The
Committee's own hearing last month (3/25/24) also shone a light on the
excesses of Steward Health. Their experts offered several feasible
solutions: among them, Unified Health Planning, laws to increase
transparency, laws to hold wrong-doers accountable, and mechanisms for
public input and public oversight. They were describing Single Payer/
Medicare for All but no one made the connection to the bills we have
(and which the committee just let die in committee, again). Your bill
helps us make that connection.
We have the framework; now to find the political will. Markey and
Khanna's bills (to ensure the continuance of Federal money already
flowing into the state) would give Massachusetts the chance to lead the
country again in health care. The bills offer us a path to bring state-
based universal health care within reach--a way to achieve the
solutions our experts are recommending, Unified Health Planning to
shield against the excesses of corporate power, and using existing
laws, currently not being enforced, to bring us back from corporate
disasters. How bad do the corporations have to behave before we take
the business of health care back from them. It's time to Take Medicine
Back. Thank you, Senator Markey, for giving us a powerful tool for the
job.
Barbara Pearson,
Amherst MA.
One Payer States, MassCare.
Poor People's Campaign, Outreach Volunteer.
References: (Most are hyperlinked in the text, but I list the URLS
in case they don't open.)
La France, A., Batt, R. and Appelbaum, E. Hospital Ownership and
Financial Stability: A Matched Case Comparison of a Nonprofit Health
System and a Private Equity-Owned Health System. Advances in health
care management 2021 (20), 173-220.
FTC: https://www.ftc.gov/system/files/ftc--gov/pdf/
2010031usapcomplaintpublic.pdf.
Stoller: https://www.thebignewsletter.com/p/the-dirty-business-of-
clean-blood.
Brady: https://www.vox.com/future-perfect/23792854/poverty-
mortality-study-public-health-antipoverty-america-deaths-poor-life-
expectancy.
https://represent.us/unbreaking-america/.
Hearing: https://malegislature.gov/Events/Hearings/Detail/4903.
https://www.takemedicineback.org/.
______
Dear Ms. Wilson and Ms. Bravo.
I want to express my gratitude for Sen. Markey's plan to introduce
a companion bill in the Senate to Rep. Khanna's State Based Universal
Health Care Act, his co-authoring the Green New Deal and the Green New
Deal for Health. I have received a ticket and am excited to attend the
hearing on the 3rd. As a volunteer and member of several organizations
(see below) I have been advocating for transformational health care
reform, grounded in the belief that the universal right to health is
fundamental to the ability for human beings to enjoy all other rights,
for 22 years.
The hearing's focus ``When Health Care Becomes Wealth Care''
addresses one of the key threats to health and impediments to
fundamental reform--relying on the provision of health care as a
wealth-generating investment ultimately means that the investor's
financial interests take precedence over the health of the individual
patient and the health of the public. By its very nature it sets up a
conflict of interests. This even occurs when non-profit healthcare
systems grow to dominate a market and, sometimes, develop an integrated
monopoly structure that includes hospitals, physician practices, and
insurance subsidiaries. Too much centralized power corrupts.
The result includes the hollowing out of our public health
infrastructure, primary care doctors burning out and leaving the field,
even well insured patients having difficulty obtaining primary care,
patients held in hallways because ER's are overwhelmed when admitting
beds are unavailable due to other patients awaiting discharge to a
nursing home that doesn't have capacity because it, in turn, is short-
staffed, and short-staffed nursing homes having unsafe conditions, etc.
I have witnessed a number of these situations as a professional
social worker, have heard from colleagues about these problems, and
have family members who have suffered due to these issues.
An Expanded and Improved Medicare for All system, which SBUHCA
would support, won't solve all of these problems, but would go a long
way to addressing them. I count on the Senator's years of congressional
experience and stature in moving this legislation to the forefront.
Please let me know how I, in turn, can support him in this effort.
Regards,
Bob Mason,
Clinical Social Worker (ret.)
Member: Mass-Care. National Association of Social Workers--MA
Chapter. One Payer States, Naumkeag/Beverly, MA.
______
Dear Senator Markey and Staff:
I am writing to urge you to take immediate action on the Steward
Healthcare crisis so that healthcare access can be maintained for
thousands of Massachusetts residents and physicians and healthcare
employees can be protected. For-profit and private equity healthcare
models that sell off local hospital assets to real estate investment
trusts and then hollow out and destroy the institutions that
communities rely on for healthcare is a local and national travesty.
Private equity has been plundering The United States for years, and
nowhere is this more damaging than in the healthcare field. The
corporate practice of medicine puts profits before people. America is
the No. 1 country in the world for medical bankruptcies many are driven
by greed. Steward currently owns the hospitals and the physician groups
of the previous Caritas Christi group. They do not own the land as that
was sold to the real estate investment trust MPT (Medical Properties
Trust), another part of this Ponzi scheme to siphon off value and line
the pockets of these self-serving individuals. The current proposal to
help ameliorate the financial issues with Steward is to sell the
Steward physician group to Optum.
This is a terrible idea.
Optum is currently engaging in the corporate practice of corporate
medicine, driving down quality, harming patients and causing moral
injury for physicians and other healthcare providers as they struggle
to take care of patients, but are put in difficult to untenable
positions trying to do so under the auspices of Optum.
Massachusetts has always been a leader in medicine. It's time for
us to retake that mantle and take bold steps to stop the corporate
practice of medicine, which extracts value from healthcare delivery in
our communities while providing substandard care.
The Commonwealth must take immediate action including oversight of
Steward hospitals, not only forcing Steward to pay its bills but making
sure that state regulators or other overseers guarantee that Steward
still provides care until they can be transitioned to reliable
owner(s). They must be placed into receivership and a plan must be
formulated that all of their holdings are parceled out to reliable
healthcare systems who can operate these hospitals for the good of the
community. Additionally Steward cannot be allowed to sell physicians
practices to an entity that engages in the corporate practice of
medicine. The Commonwealth also needs to take the land that these
hospitals sit on and was sold to the real estate investment trust MPT
and needs to do so by eminent domain. Again this is another part of
this Ponzi scheme and these other entities have already been made more
than whole by the value that they've stolen from the land and from the
hospitals and the healthcare professionals who work in them. The cost
has been to the care and safety of the local communities. This is no
time for half measures, there is no question who has the moral high
ground here and what the right path forward is, the Commonwealth of
Massachusetts simply needs to take it.
Brad Judson MD,
Massachusetts Emergency Medicine physician,
Founding Member Take Medicine Back.
______
Coalition for Patient-Centered Care,
April 3, 2024.
Hon. Ed Markey, Chairman,
Hon. Roger Marshall, MD, Ranking Member,
U.S. Senate Subcommittee on Primary Health and Retirement Security,
Washington, DC.
Dear Chairman Markey and Ranking Member Marshall:
The Coalition of Patient-Centered Care (CPCC) appreciates the
Committee holding this hearing about how corporate greed negatively
affects patient care and health workers. We strongly believe that any
discussion about patient care and health workers' well-being must
consider the harmful impact of private equity firms' acquisitions of
physicians and other healthcare providers.
The CPCC represents a diverse group of healthcare industry
stakeholders who stand together in opposition to private equity's
acquisition and influence over independent physicians that can result
in an emphasis on profits and revenue growth over patient interests.
The CPCC is comprised of over 5,000 physicians from across the
country who are on the front lines of providing patient-centered care.
Our membership has first-hand experience with the negative impact of
these deals. Overall, our members have observed that often, after a
private equity firm takes over an independent physician group, the
quality of care for patients goes down, the cost of care to public and
private payors goes up, and employee working conditions worsen. The
bottom line is that private equity interferes with the social contract
between a doctor and their patient.
Impact of Private Equity Acquisitions of Independent Healthcare
Providers
We believe that everyone benefits when physicians have the freedom
to exercise their best judgment as to the delivery of care and can work
directly with their patients to make medical decisions and deliver
patient-centered care. Private equity firms do not share this ideal.
They seem to be more concerned with maximizing investor profits than
advocating for patients. Unfortunately, current U.S. tax law
incentivizes private equity firms to acquire healthcare providers and
gives them an advantage over other would-be acquisition partners by
providing the firms with substantial tax breaks.
Private equity firms have been particularly active in acquiring
independent physician groups. More than half of all specialists in
several U.S. markets are owned by private equity firms, according to a
recent study by the American Antitrust Institute, the Petris Center at
the University of California, Berkeley, and the Washington Center for
Equitable Growth. \1\ As the New York Times summarized, the study found
that ``[i]n more than a quarter of local markets--in places like
Tucson, Arizona; Columbus, Ohio; and Providence, R.I.--a single private
equity firm owned more than 30 percent of practices in a given
specialty in 2021.'' \2\ The article added, ``In 13 percent of the
markets, the firms owned groups employing more than half the local
specialists.'' \3\
---------------------------------------------------------------------------
\1\ Richard M. Scheffler et al., Monetizing Medicine: Private
Equity and Competition in Physician Practice Markets (July 10, 2023),
https://www.antitrustinstitute.org/wp-content/uploads/2023/07/AAI-UCB-
EG-Private-Equity-I-Physician-Practice-Report-FINAL.pdf.
\2\ Reed Abelson and Margot Sanger-Katz, Who Employs Your Doctor?
Increasingly, a Private Equity Firm., The New York Times (July 10,
2023), https://www.nytimes.com/2023/07/10/upshot/private-equity-
doctors-offices.html?auth=login-google1tap.
\3\ Id.
CPCC members' experience--consistent with independent research,
public reports, and even a recent investigation by the Federal Trade
Commission (FTC) \4\--is that, after a private equity firm takes over
an independent physician group, there are generally adverse effects.
These effects often include decreased quality of care for patients,
increased cost of care for public and private payors, and deteriorating
working conditions for employees.
---------------------------------------------------------------------------
\4\ Press Release, Federal Trade Commission, FTC Challenges
Private Equity Firm's Scheme to Suppress Competition in Anesthesiology
Practices Across Texas (Sept. 21, 2023), https://www.ftc.gov/news-
events/news/press-releases/2023/09/ftc-challenges-private-equity-firms-
scheme-suppress-competition-anesthesiology-practices-across.
Regarding higher costs, there is significant evidence that private
equity acquisitions of healthcare providers result in higher prices
without any evidence of an increase in quality or access to care. For
example, a recent study concluded that, after hospital outpatient
departments and ambulatory surgery centers contracted with a physician
management company (PMC), prices paid to anesthesiologists increased,
and were substantially higher if the PMC received private equity
investment. \5\ Consistent with the study's findings, the FTC recently
brought a lawsuit against private equity firm Welsh Carson,
highlighting the harmful price effects of private equity acquisitions
of independent physician groups. According to FTC Chair Lina Khan,
``private equity firm Welsh Carson spearheaded a roll-up strategy and
created [U.S. Anesthesia Partners (USAP)] to buy out nearly every large
anesthesiology practice in Texas. . . . [T]hese tactics enabled USAP
and Welsh Carson to raise prices for anesthesia services-raking in tens
of millions of extra dollars for these executives at the expense of
Texas patients and businesses.'' \6\
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\5\ Ambar La Forgia et al., Association of Physician Management
Companies and Private Equity Investment With Commercial Health Care
Prices Paid to Anesthesia Practitioners, 182 JAMA Intern Med. 396,
(2022), https://jamanetwork.com/journals/jamainternalmedicine/
fullarticle/2789280.
\6\ Federal Trade Commission, supra note 4.
As for decreased quality and access to care, while there are many
examples, the 2021 sale of an independent physician group at Dartmouth
College to private equity backed One Medical, is instructive. In 2012,
Dartmouth Health Connect, a primary care physicians office, was opened
by the college in connection with Boston startup Iora Health. The
office was originally intended to offer accessible and affordable
healthcare to college students and the surrounding area. It began with
two full-time physicians, a nurse, and other health professionals.
After the private equity-backed takeover of the group, however, all
that remains is one physician assistant with responsibility for
approximately 1,300 patients. \7\ In our experience, aggressive cuts in
staff-to-patient ratios result in decreased quality of and access to
care for patients. Furthermore, they result in job losses and increase
stress for healthcare sector workers, contributing to burnout, among
other negative impacts.
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\7\ Douglas Farrago, The Metamorphosis and Transformation of a
DINO, DPC News (Oct. 6, 2023), https://dpcnews.com/uncategorized/the-
metamorphosis-and-transformation-of-a-dino/.
Steward Health Care's downfall is a powerful example of how private
equity owners of healthcare providers often abrogate the inherent
responsibility such businesses have to their patients, their employees,
and their communities. In the case of Steward Health, the consequences
of private equity putting profits above all else are nothing short of
tragic. Senators Markey and Warren described the current situation in
their March letter to Steward Health Care CEO Ralph de la Torre as
follows: ``[A]s a result of years of failures by you and the private
equity ownership at Steward, access to health care is at risk for
Massachusetts communities, and thousands of health care workers' jobs
could be lost.'' \8\ The CPCC strongly agrees that this case highlights
"the perils of private equity investment and corporate greed.'' \9\
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\8\ See Letter, Elizabeth Warren, Senator, Warren, Markey to
Steward Health CEO: Years of Mismanagement, Scheming, and Profiteering
Now Pose Urgent Threat to Hospitals in Massachusetts (March 7, 2024),
https://www.warren.senate.gov/imo/media/doc/
2024.03.06%20Letter%20to%20Steward%20CEO.pdf.
\9\ Id.
We commend the Committee for holding this important hearing and
urge you to continue to work on addressing these critical policy issues
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related to the cost and quality of patient care.
Sincerely,
The Coalition for Patient-Centered Care
______
Massachusetts Emergency Nurses Association,
Quincy MA.,
April 3rd, 2024.
Chairman Sanders, Ranking Member Cassidy, Senator Markey, and
Members of the Committee and those taking part in the Subcommittee
hearing today. Thank you for holding this critically important hearing
and allowing me to submit this testimony. My name is Dan Nadworny and I
am the President of the Massachusetts Emergency Nurses Association
(ENA). I have been involved with emergency nursing for over 20 years,
working in large academic and community hospitals during that time. In
my role in the ENA, I come with collective concerns regarding the
accessibility of emergency care in the region from our members. The
actions taken to date from the Steward system have already harmed our
communities and furthering a prioritizing of profits over care will
undoubtedly cause more harm.
Access to emergency care is a vital link in the healthcare system.
From the serious events of trauma, cardiac arrest, and stroke care to
the needs of mental health and emotionally dysregulated patients our
emergency departments must be an option for our communities. The demand
for emergency care is driven by several reasons such as lack of access
to primary care providers, the inability of patients to obtain follow-
up care, and cultural changes demanding immediate resolutions to
concerns. Regarding the cause, the number of emergency care visits has
risen over 60 percent since 1997. Those additional visits have only
added to the burden of boarding and crowding that is seen across the
Nation and here in Massachusetts. When emergency departments are
overcrowded it is more than an inconvenience. Increased ED crowding is
associated with negative patient outcomes including increased patient
mortality and morbidity; delayed or missed care opportunities such as
antibiotic and pain control as well as increased rates of patients
leaving without being seen.
The high risk to patient safety associated with hospital crowding
is recognized by the state with the continued classification of regions
3, 4, and 5 to Tier 3 capacity alert. That level on the 0-4 scale
expects significant delays in care. Recent articles have shown that
Massachusetts has the 2nd highest average wait times for emergency care
in the country. These delays in emergency care will only increase if
there are service impacts with any further dysfunction of the Steward
healthcare systems even without full closures. According to the
Massachusetts Hospital Association patient care data, the 8 emergency
departments (not including Norwood) see over 260,000 patients annually
(according to 2023 plans). To distribute those patients within the
regions that are already saturated could lead to catastrophic impacts
on healthcare in Metro Boston and the region.
The impacts are not only directly to our patients and communities
but also indirect with EMS access. In early 2024 Good Samaritan
Hospital had increased wait times for EMS to offload their patients.
During this time, EMS agencies including Norfolk Fire Control published
the delays on social media and open-source radio traffic. The result
was EMS diverted patients away from the hospital, resulting in an
unofficial diversion to EMS. By all accounts, the hospital is having
substantial dysfunction in the organization and the leaders are
allowing that dysfunction to directly impact the region's ability to
have adequate access to emergency care.
While the state must have a response, there is a disproportionate
impact on the population of Norfolk County and the rest of Region 4 and
5 compared to the rest of the state. This region is still recovering
from the losses of Quincy, and Norwood, New England Sinani, and the
temporary closure of Brockton Hospitals over the last 4 years. Any
further loss of healthcare settings will only further the issues
described above leading to increased boarding and crowding and an
unfortunate reality of likely harm to our patients.
This hearing is called to look at the role of private equity in
healthcare, but the focus of the hearing should be as much on the
impact on the health of our communities. Massachusetts healthcare
functions in a hub and spoke structure with community hospitals
providing first-level care to triage and escalate to the tertiary care
centers as needed. However, over the last 3 years, this goal has not
been a reality, and often community hospitals are left with no option
for transfer to the State's Tertiary care centers at Capacity daily.
Any group working in the state must be responsible to the communities
they serve. That responsibility includes understanding the consequences
of choices such as hospital service reductions, closures, or failure to
ensure safe environments for patients and staff. If the leadership of
for-profit agencies cannot recognize the impacts, then there is a role
for stronger oversight with accountability for these groups.
In closing it is the position of the Massachusetts ENA that either
the reduction or closure of any emergency care centers will harm the
overall health status of the state. There is a need for oversight,
planning, and risk reduction on the local, state, and Federal levels to
ensure timely access to emergency care for all.
Thank you for the time and attention to this matter.
Daniel Nadworny RN, DNP, FAEN,
President,
Massachusetts Emergency Nurses Association,
Quincy MA.
______
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
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[Whereupon, at 12:43 p.m., the hearing was adjourned.]
[all]