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The highest Democrat and Republican on a robust Senate committee launched a wide-ranging investigation into personal fairness’s impression on the U.S. well being care system on Wednesday. Democratic Sen. Sheldon Whitehouse of Rhode Island and Republican Sen. Charles Grassley of Iowa despatched letters to a constellation of economic companies looking for details about how their dealings within the healthcare area impression affected person care.
“The American folks deserve to know the function that PE [private equity] companies play — and any potential ensuing adverse monetary or affected person care impacts — within the supply of their well being care,” wrote the senators, who lead the Senate Finances Committee.
As a part of the inquiry, the senators are additionally looking for info associated to sure transactions that had been the main focus of a current CBS Information investigation into the collapse of hospitals serving a few of America’s most weak residents.
“As personal fairness has moved into well being care, we’ve got develop into more and more involved concerning the related adverse outcomes for sufferers,” Whitehouse mentioned in an announcement to CBS Information. “From facility closures to compromised care, it is now a well-recognized story: personal fairness buys out a hospital, saddles it with debt, after which reduces working prices by reducing providers and workers — all whereas traders pocket tens of millions. Earlier than the mud settles, the personal fairness agency sells and leaves city, leaving communities to choose up the items.”
The pair of senators wrote to the heads of two companies — Prospect Medical Holdings and Medical Properties Belief — that CBS Information discovered had siphoned lots of of tens of millions of {dollars} from hospital operations in Pennsylvania and San Antonio, Texas. Drained of funds, crucial care amenities there subsequently shut down. The senators are additionally looking for info from a 3rd firm, Los Angeles-based personal fairness large Leonard Inexperienced and Companions, which they allege was “deeply intertwined” with the opposite two companies.
With funding from Leonard Inexperienced and Companions, Prospect Medical Holdings quickly grew from proudly owning 5 Los Angeles-based hospitals in 2010, to twenty hospitals in six states by 2018. 5 of these hospitals have since closed, together with the century-old Delaware County Memorial Hospital in suburban Philadelphia. Final November, Pennsylvania’s Well being Division shut the hospital down after studying it was inadequately staffed by Prospect Medical Holdings.
Final yr, CBS Information reported on a collection of economic strikes executed by Prospect Medical Holdings’ administration that drove the corporate deep into debt earlier than the closure. The primary was in 2018 when the corporate’s house owners took out a $1.12 billion mortgage and paid themselves a $457 million dividend. The corporate’s then-CEO Sam Lee, who’s now chairman of its board, took dwelling about $90 million.
“It would be like a home-owner going to a financial institution, taking out a $100,000 mortgage, and as an alternative of utilizing it to spend money on their property or pay for his or her children to go to varsity, what they did was they only principally caught it of their pockets as money,” Rhode Island Legal professional Common Peter Neronha informed CBS Information final yr.
After paying themselves the $457 million dividend, the house owners of Prospect Medical Holdings then offered off the land and the buildings of the Pennsylvania well being system that features Delaware County Memorial Hospital to the Birmingham, Alabama-based Medical Properties Belief. The transaction, which known as a sale-leaseback, meant the Pennsylvania well being system owed $35 million a yr in hire to Medical Properties Belief, which has purchased up the actual property of practically 200 U.S. hospitals, usually in low-income communities.
In an announcement to CBS Information following the announcement of the senators’ probe, a spokesperson for Medical Properties Belief mentioned the agency’s “actual property investments have made substantial quantities of capital accessible which may be used to additional spend money on facility enhancements, expertise upgrades and different investments in operations which profit the long-term well being of communities.”
“In some instances, operators have used [Medical Properties Trust’s] actual property capital to accumulate and proceed to function hospitals that in any other case very probably would have closed completely,” the spokesperson mentioned.
But CBS Information discovered at the very least one case the place a hospital’s hire obligations to Medical Properties Belief could have contributed to its closure. In April, the 356-bed Texas Vista Medical Middle in San Antonio shut its doorways for good, leaving town’s majority-Hispanic south aspect and not using a main well being care possibility close by.
“The closest hospital is between 12 to fifteen minutes away from our facility, and should you’re having a stroke or a coronary heart assault, time is of the essence,” respiratory therapist Jessica Carrasco informed CBS Information in April.
For executives at Medical Properties Belief, shopping for hospital actual property has been profitable. In keeping with the corporate’s SEC filings, from 2017 to 2021, wage, bonuses and inventory awards amounted for its CEO, Edward Aldag, totaled about $70 million.
The Senate probe was first reported by NBC Information. A spokesperson for Prospect Medical Holdings did not not instantly reply to a request for remark, nor did a spokesperson for Leonard Inexperienced and Companions, who acknowledged receiving the letter from the senators.
State investigations
In current months, regulators have taken recent steps to rein in Prospect Medical Holdings in states the place it nonetheless operates hospitals.
Neronha, who beforehand blocked Prospect Medical Holdings from promoting off the actual property of their two hospitals in his state, sued the corporate final month for failing to pay its money owed. In keeping with the lawsuit, the hospitals owe greater than $24 million to its distributors, “jeopardizing the monetary well being and stability of the hospitals, and in the end affected person care.”
Pennsylvania’s Legal professional Common agreed in October to droop its personal lawsuit towards Prospect Medical, so long as the corporate offered its well being system there to a nonprofit operator by July. State legislators have launched a invoice that might give the AG’s workplace the ability to manage all main hospital transactions.
“The AG’s workplace can be required to overview gross sales and mergers, after which make a dedication with a purpose to mitigate injury to the general public,” mentioned State Senator Tim Kearney, one of many invoice’s co-sponsors.
And in Connecticut, the place Prospect Medical has been negotiating the sale of its three hospitals to the Yale College’s well being system for greater than a yr, a spokesperson with the legal professional basic’s workplace confirmed to CBS Information an investigation into the corporate’s monetary practices has been launched.
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