Patients deserve to know whether private equity owns their health care

Americans should be able to know who controls their health care choices. The American health care system is littered with different for-profit entities trying to make as much money as possible, often at the expense of people’s well-being. As private equity firms gobble up health care providers, it is increasingly important for patients to have the ability to spot the worst actors and make informed choices about their own care.

Fortunately, the Centers for Medicare and Medicaid Services (CMS) finalized a rule in November 2023 which will increase transparency for millions of Americans, namely seniors. The rule requires that all health care providers that enroll with Medicare —  that is, all providers that want to receive taxpayer money from the Medicare program —  have to disclose if they are owned by a private equity company (PEC). 

CMS subtly slipped this provision in after the original proposed rule required private equity disclosure only for skilled nursing facilities, noting that PECs had been buying up nursing facilities leading to higher costs and lower quality. At the same time, CMS recognized that the issue of PECs damaging health care is far more widespread than just nursing facilities. By May, CMS proposed extending the requirement to report PEC ownership to all providers and suppliers that enroll with Medicare. This covers rural hospitals, skilled nursing facilities, home health agencies, hospice providers and more. This proposal culminated in the final rule.

CMS is right about the widespread nature of private equity ownership in health care. Since the 2010s, private equity companies have bought up and consolidated areas across the health care system, including nursing homes, hospitals, emergency rooms, independent physicians practices, behavioral health companies and much more.

Private equity buys up companies, typically seeking to generate as much profit as possible in a 3-7 year window before selling off the company. They claim to do so by increasing efficiency and eliminating waste to allow companies to reach their fullest potential. In health care, this means operating health care like a profit-maximizing business rather than according to the primary mission of making Americans healthier.

Along with not producing particularly good returns for investors, private equity companies loot American health care to the detriment of Americans’ health. Residents of private equity-owned nursing homes have an increased risk of dying, are more likely to visit an emergency room and be hospitalized, and face significantly higher costs. Higher costs and worse outcomes exist with private equity ownership across American health care.

Take the case of hospice: Medicare pays hospice providers a flat fee per day for each patient. Hospices “profit” by keeping the difference between what they receive and what they spend. Private equity-owned hospices target patients who either don’t need hospice or need less intensive care (example: dementia patients) to take as much taxpayer money as possible. They then cut costs by decreasing the quality of care, such as providing fewer nursing visits even in the last days of life.

Ultimately, the new CMS rule is an important step forward for transparency, allowing the government and researchers to better track and study the effect of private equity ownership across the health care system. However, there are still significant limitations regarding how quickly CMS will collect the information and whether the public will have access.

Providers and suppliers must fill out the relevant form when they initially enroll in Medicare and every five years thereafter. Therefore, it will take up to five years for CMS to catalog all providers owned by private equity. Additionally, CMS has not officially committed to adding PEC data to publicly accessible databases. As CMS did expand its hospice and home health databases just last year to include ownership details, it will hopefully not be a difficult ask to request a full commitment to transparency. 

CMS has the capability to force providers to fill out the form before they are otherwise required to go through “off-cycle revalidations.” In fact, the agency revealed its interest in doing so for skilled nursing facilities specifically in the November finalized rule. As the agency itself extended the PEC disclosure to all providers, it should similarly extend its intent to use off-cycle revalidations to speed up transparency.

Ideally, policymakers would drive private equity out of health care. Indeed, Sens. Sheldon Whitehouse (D-R.I.) and Chuck Grassley (R-Iowa) launched a bipartisan probe into its role in health care. The Federal Trade Commission (FTC) has targeted private equity acquisitions, such as suing Welsh, Carson, Anderson & Stowe for allegedly illegally buying up and consolidating anesthesiology practices in Texas.

As long as private equity remains a significant player in U.S. health care, Americans should have the right to know which hospitals, hospices and other providers are owned by private equity. With this knowledge, people can be better equipped to avoid the wolves in sheeps’ clothing who promise aid only to rob them with little care for their health.

Brandon Novick is a program outreach assistant for the Domestic Team at the Center for Economic and Policy Research in Washington, D.C. Prior to joining CEPR, he conducted policy, communications, and administrative work for nonprofit and political campaign organizations geared towards guaranteeing a decent standard of living.