Complex ownership arrangements can obscure the flow of profit to private equity firms. Some states are trying to change that.
Some private investors gravitate toward purchasing hospitals and physician practices, and state lawmakers have taken notice.
The problem, some lawmakers say, is that private investors push for short-term profits, which can lead to lower quality of care at higher prices.
Also, the ownership stake of private equity in a hospital and physician practices can be difficult to determine, leaving lawmakers in the dark as to who’s profiting from a large chunk of their state’s expenditures.
“Private equity has figured out there’s a lot of money in health care,” said Julie McGuire, a Republican state representative in Indiana.
She said Indiana will devote one-fifth of its 2025 spending to Medicaid payments alone.
“That’s 20 percent of our tax dollars, and we have no idea who’s getting it,” she told The Epoch Times.
Indiana is one of 15 states that have passed laws to create transparency in the ownership structure of hospitals.
What Is Private Equity?
Private equity firms, often simply called private equity, raise money from high-net-worth individuals and institutions such as pension funds. The firms then use the money to buy a private company, manage it for a few years, and sell it at a profit.
Across the United States, about 488 hospitals are now owned by private equity, according to watchdog group Private Equity Stakeholder Project. That’s about 1 of every 12 private hospitals.
Private equity firms have averaged a 10.5 percent return over the first two decades of this century, compared to 5.9 percent for the S&P 500, according to Investopedia.
Yet there are indications that prices go up and quality goes down after private equity moves in.
