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Senate Report Blasts Private Equity’s Role in Healthcare
Bipartisan investigation says asset managers Apollo and Leonard Green likely weakened hospitals they controlled
By Chris Cumming, WSJ
Jan. 8, 2025 3:36 pm ET|WSJ Pro
A U.S. Senate committee accused private-equity healthcare investors of choosing profits over patient care, adding a prominent voice to those claiming Wall Street is putting the medical system at risk.
The Senate Budget Committee’s bipartisan report released Tuesday said private equity’s profit-minded management strategies are likely a bad fit for the healthcare sector, and questioned whether buyout firms should own hospitals.
The report stems from an investigation launched in 2023 by Sens. Sheldon Whitehouse, the Rhode Island Democrat and budget committee chairman, and Republican Chuck Grassley of Iowa, focusing on hospital investments of Leonard Green & Partners and Apollo Global Management, two prominent investment firms.
The probe revealed private equity is “putting their own profits over patients, leading to health and safety violations, chronic understaffing, and hospital closures,” Whitehouse said Tuesday.
The 170-page report focuses on Prospect Medical Holdings, a formerly Leonard Green-owned hospital operator that recently ran into severe financial challenges, and Apollo-owned Lifepoint Health, which in 2022 faced a scandal over sexual abuse by a nurse at a hospital in Iowa.
In both cases, the Senate committee concluded the private-equity owners likely exacerbated the problems. The report was based on thousands of internal documents from the two firms, many of which were made public with the report.
“The findings of the investigation call into question the compatibility of private equity’s profit-driven model with the essential role hospitals play in public health,” the report said.
Leonard Green and Apollo contested the report’s conclusions, saying their investments supported the hospitals rather than weakening them.
The report is likely to fan controversy over private equity’s role in the healthcare sector, which faces intense criticism from federal and state lawmakers and regulators, as well as many doctors and patients.
On Wednesday, Massachusetts Gov. Maura Healey, a Democrat, signed into law new state-level disclosure requirements for private-equity healthcare investors, which she said were motivated by the collapse of Steward Health Care. The formerly private equity-owned hospital operator declared bankruptcy last year, leading to hospital closures in the state.
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Healey said the new law will discourage “bad actors” from exploiting legal loopholes. “This law will subject for-profit hospital providers to the same transparency rules as everyone else,” she added.
The Senate Budget Committee’s investigation is one of several recent federal probes into private equity’s role in the U.S. medical system. Antitrust regulators have been investigating buyout-firm profiteering in medicine since last year, while the Senate Committee on Homeland Security and Government Affairs last April began looking into private equity’s involvement in emergency medicine.
The American Investment Council, an industry lobbying group, last year said private equity has become a scapegoat for deeper problems in the U.S. medical system, and care is improved by the billions of dollars the private-equity industry invests in the healthcare sector.
Leonard Green’s ownership of Prospect Medical, which operates 16 hospitals and more than 150 other clinics and medical centers, has become a key example for critics of private equity.
The Senate Budget Committee’s report said Leonard Green took $424 million in dividends and preferred stock redemptions as well as more than $13 million in fees from Los Angeles-based Prospect. These payments saddled Prospect with excessive debt it defaulted on, causing cutbacks and hospital closures, after Leonard Green sold the business in 2021, the report added.
A spokesman said Leonard Green “respectfully disagrees” with the report. The firm’s backing “enabled Prospect to invest in previously closed or failing hospitals, ensuring healthcare access for the underserved, and to invest over $750 million in its hospitals and provide $900 million in charity care,” he said.
Prospect “was in strong financial condition with access to over $500 million to support its operations” when Leonard Green sold it, the spokesman said.
A Prospect spokesman said the company is “disappointed” by the report’s “false conclusions and apparent omissions of key facts,” such as the positive effect Prospect has on its communities, the quality of its care, and the dire economic impact of the Covid-19 pandemic.
“Nearly all the hospitals Prospect acquired were cash-starved, neglected, in disrepair and on the verge of closure or bankruptcy,” the spokesman said, adding the company “invested more than $750 million in its hospitals and provided more than $900 million in charity and uncompensated care to patients. That is the exact opposite of putting profits above patients.”
The Senate report also ties private equity to troubles at the Ottumwa Regional Health Center in Iowa, owned by Apollo’s Lifepoint. In 2022, after a nurse practitioner at the hospital fatally overdosed, it came to light he had sexually assaulted nine female patients over the previous two years.
The Senate committee’s report blamed underinvestment by the hospital’s ownership, which “resulted in declining conditions and quality of care that allowed egregious events to occur.” The report said Brentwood, Tenn.-based Lifepoint currently pays Apollo more than $9 million in fees annually, and Apollo declined to tell the committee how much it has collected in fees from the company during its ownership.
An Apollo spokesman said billions of dollars invested in Lifepoint were used to “improve facilities, expand local healthcare services, recruit care providers, build new centers of care and upgrade technology across Lifepoint’s network,” adding that quality of care has improved according to third-party assessments.
“At a time when many rural hospitals are under pressure and at risk of closing, Lifepoint has not had to close a single hospital and is committed to providing critical services in underserved areas,” the spokesman added.
Write to Chris Cumming at chris.cumming@wsj.com
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