Critical coverage of private equity firms — which buy companies and restructure their operations in order to quickly sell them for a profit— has been picking up.
In the last six months:
- Kaiser Health News (KHN) added eight stories and a video primer to its investigative series, “Patients for Profit: How Private Equity Hijacked Health Care.”
- STAT News and Fortune showed how private equity’s move into autism therapy short-changes kids.
- The New Yorker described how staff reductions following a private equity takeover imperiled residents of a nursing home in Virginia.
- CBS News reported on the shutdowns of five hospitals following their purchase by a private equity firm.
They add to many other examples of notable coverage in recent years.
Unlike public corporations, private equity “lives in a darkly curtained world, protected from external scrutiny,” Laura Katz Olson, a political science professor at Lehigh University in Bethlehem, Pa., wrote in her book, “Ethically Challenged: Private Equity Storms U.S. Health Care.”
Private equity firms claim to enhance access to care and reduce costs, but Olson contends that their need for short-term profits clashes with safe and appropriate care. (For details on how private equity firms make money, see this ProPublica article.)
The idea that private equity is ill-suited to health care was echoed in a report by researchers at the nonprofit American Antitrust Institute and the University of California, Berkeley.
In an interview, Olson discussed the role of journalists in holding private equity firms accountable. Here are excerpts, which have been edited for clarity and brevity.
How long has private equity been in health care?
Private equity has dabbled in health care since the 1990s, but it has not taken a serious interest in the various subfields until around 2015, 2016 or in some areas 2018. The Affordable Care Act and government mandates of coverage for certain kinds of treatments added to the flow of money, combined with the fact that private equity has so much money to invest.
Why is private equity such a threat to patient safety?
Companies have to cut less profitable services whether they’re needed or not. They have to add profitable services whether they’re needed or not. They limit technological innovations such as equipment and research and development. They have fewer people taking care of you, and these people are paid less and have less training.
What challenges do journalists encounter in reporting on private equity?
Physicians who sell their practices to private equity firms have to sign non-disclosure and non-disparagement clauses, so it’s very challenging to interview anybody.
It’s very hard to know the ownership of these places. For example, my husband just took my dog to a vet, and I wanted to check whether it was a private equity vet, but I had no way of finding out.
Do you have general advice for journalists trying to tackle this subject?
Include the larger issue of private equity because this is not about the egregious practices of one company.
Are there stories that journalists have missed?
The role of politicians gets very little coverage. Just one example would be the carried interest loophole, which is basically a giveaway. (The loophole gives a tax advantage to private equity managers over other workers.) Everybody agrees that this is unacceptable, and every time they try to get rid of it, the measure gets killed.
Is this a topic that local journalists can tackle?
Some of the best reporting has been done at the state and local levels. (In the 2000s, local media organizations first exposed shocking unnecessary procedures at Small Smiles, a dental chain that served children on Medicaid.) They’ll pick out a local problem, and the people who read it are interested because it’s in their community.