Federal report highlights private equity, consolidation concerns

Modern Healthcare – Thursday, January 16, 2025
By Hayley DeSilva 

Three federal agencies on Wednesday said “more effective and vigorous” enforcement is needed to protect patients harmed by healthcare’s continued consolidation.

In a report released just days before a new administration takes over, the Health and Human Services Department, Federal Trade Commission and Justice Department said comments they sought earlier this year on the state of the industry made clear that worries about access to services and costs have intensified as consolidation and private equity’s role have grown.

“It is clear from the commentors that the Agencies’ past actions have not sufficiently addressed the harms inflicted by anti-competitive activity in the health care sector, and more effective and vigorous antitrust enforcement is necessary to stop or reverse the trend of consolidation,” the agencies wrote.

The report stems from the agencies’ request for information in March about how market transactions have affected consolidation, patient safety, affordability, employee wages and safety as well as taxpayer burden. The agencies received comments from more than 2,000 patients, physicians, health systems, insurers, industry associations, labor unions and academic researchers.

Merger and acquisition activity, particularly among hospitals and involving private equity firms, dominated many of the responses. Many hospitals and health systems have turned to mergers and acquisitions, sometimes with private equity firms, to ease financial pressures.

The report noted several areas of concern:

• Private equity’s lack of transparency: Respondents and several real-world events discussed in the report highlighted issues with private equity ownership transparency, prices, care quality, hospital debt, staffing shortages, facility closures and physicians. Private equity’s role has increasingly been under the microscope, particularly since the downfall of Steward Health Care. Earlier this month, a measure became law in Massachusetts that requires more oversight of private equity firms involved in healthcare.
• Provider consolidation: The report noted a dramatic change in industry consolidation, particularly regarding hospitals. In 1990, 65% of Metropolitan Statistical Areas were considered highly concentrated for hospital services. By 2016, the rate rose to 90%. Respondents said the increase in consolidation led to higher costs and made it more difficult for patients to access care.
• Physician skepticism: As physician practices consolidate, more doctors are looking to either private equity or hospitals for employment. While private equity-owned practices or management service organizations can lessen some of the administrative burden, many physicians said they were concerned with the quality of patient care.
• Vertical integration worries: Patient respondents noted continuous issues with being denied access to care. Physicians told the agencies they struggled to provide adequate care, particularly in cases where they were employed by a healthcare provider with an insurance arm.

The comments included suggestions for policy changes, including expanding the Centers for Medicare and Medicaid Services’ nursing home ownership transparency rule, shortening merger and acquisition reporting time windows, increasing regulatory oversight over transactions and promoting policies that encourage competition.

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