Supplemental materials for PESP’s March 25, 2025 testimony to the House Healthcare Committee at the Vermont State Legislature

The Private Equity Stakeholder Project (PESP) argues that private equity's business model in the US healthcare sector—characterized by high leverage, sale-leasebacks, and dividend recapitalizations—prioritizes short-term investor returns over patient care. The document details how these strategies lead to increased healthcare costs, reduced staffing, and hospital bankruptcies, citing case studies of Prospect Medical Holdings, Steward Health Care, and Apollo Global Management's Lifepoint and ScionHealth. PESP advocates for state-level policy solutions including robust merger reviews, financial transparency requirements, and bans on debt-funded dividends to protect healthcare infrastructure.

• Private equity firms utilize specific financial tactics to extract value from healthcare providers, including leveraged buyouts that load debt onto the acquired company, sale-leasebacks of real estate to generate immediate cash, and dividend recapitalizations where companies take on new debt to pay cash payouts to owners.
• Private equity ownership is linked to increased healthcare costs and spending. Studies indicate that PE-acquired hospitals often have higher charge-to-cost ratios and operating margins, while PE-acquired physician practices in dermatology, gastroenterology, and ophthalmology are associated with increased healthcare spending and utilization.
• The private equity model frequently leads to financial instability and bankruptcy in the healthcare sector. In 2024, 21% of healthcare bankruptcies involved PE-owned companies, and 88% of the largest bankruptcies (liabilities over $500 million) were at companies with a history of PE ownership.
• Private equity firms increasingly use joint ventures with non-profit health systems to expand their market reach and potentially evade antitrust scrutiny. For example, Apollo Global Management's Lifepoint Health has joint venture arrangements involving at least 26 health systems as of November 2024.
• In the physician staffing sector, PE-backed firms have been accused of anticompetitive 'roll-up' schemes. The FTC reached a settlement with Welsh, Carson, Anderson, and Stowe regarding its portfolio company U.S. Anesthesia Partners (USAP), which allegedly suppressed competition to drive up prices for anesthesiology services in Texas and Colorado.
• Private equity has significantly penetrated specialty care, including behavioral health, dental care, and home health. PE firms have been involved in 60% of behavioral health acquisitions since 2018, and PE affiliation with dental practices nearly doubled from 6.6% in 2015 to 12.8% in 2021.
• Case studies of Prospect Medical Holdings and Steward Health Care illustrate the risks of extractive PE ownership. Leonard Green & Partners extracted at least $658 million from Prospect despite operating challenges, while Cerberus Capital Management reportedly made at least $800 million from Steward, which later filed for bankruptcy with over $9 billion in liabilities.
• Extractive financial practices are linked to degraded patient care and facility closures. At Steward hospitals, understaffing and equipment issues between 2019 and 2024 resulted in at least 15 patient deaths. Similarly, Apollo-owned Lifepoint facilities have faced 'immediate jeopardy' designations and high readmission rates.
• PESP proposes several state-level policy solutions to mitigate PE risks, including requiring full financial transparency for investors, banning debt-funded dividends, limiting management fees, and implementing robust merger reviews that consider community access to care.

APA

Fenne, M. (2025). Supplemental materials for PESP’s March 25, 2025 testimony to the House Healthcare Committee at the Vermont State Legislature. Private Equity Stakeholder Project. https://pestakeholder.org/wp-content/uploads/2025/06/03-25-25-PESP-materials-for-House-Health-Care-Committee-1.pdf

Chicago

Fenne, Michael. Supplemental materials for PESP’s March 25, 2025 testimony to the House Healthcare Committee at the Vermont State Legislature. Private Equity Stakeholder Project, 2025. https://pestakeholder.org/wp-content/uploads/2025/06/03-25-25-PESP-materials-for-House-Health-Care-Committee-1.pdf.

Wikipedia

{{cite report |last1=Fenne |first1=Michael |title=Supplemental materials for PESP’s March 25, 2025 testimony to the House Healthcare Committee at the Vermont State Legislature |publisher=Private Equity Stakeholder Project |date=25 March 2025 |url=https://pestakeholder.org/wp-content/uploads/2025/06/03-25-25-PESP-materials-for-House-Health-Care-Committee-1.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{fenne2025supplemental, author = {Fenne, Michael}, title = {{Supplemental materials for PESP’s March 25, 2025 testimony to the House Healthcare Committee at the Vermont State Legislature}}, institution = {Private Equity Stakeholder Project}, year = {2025}, month = mar, url = {https://pestakeholder.org/wp-content/uploads/2025/06/03-25-25-PESP-materials-for-House-Health-Care-Committee-1.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }