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The House Committee on Financial Services in November discussed whether we need new rules to contend with the growing role private equity firms and private investors play in the U.S. economy.
CBS News reports that a memo prepared by staff for the committee found that investors looking to score big profits managed as much as $7 trillion in assets at the end of 2018, up from $1 trillion 10 years earlier. The committee is considering proposed legislation that would hold private equity funds and their investors liable for debts incurred by the companies they acquire.
The impact of private equity fund investments on the economy is vast, from retail stores and hospitals to private fire departments. However, some criticize their operations that put profits first, regardless of what happens to the business or its employees.
One case is the recent closure of the 171-year-old Hahnemann University Hospital in Philadelphia. “They didn’t lift a finger to do anything to turn around a troubled hospital,” Eileen Applebaum, co-director of the Center for Economic and Policy Research, told lawmakers. In July, CBS News reported that the hospital closed less than two years after private equity firm Paladin Healthcare bought it.
In the article, nurse Sue Bowes said she had high hopes when the firm bought the hospital, but then the hospital went through a series of layoffs, bankruptcy and closure so it could be redeveloped as luxury condos.
Bowes says she learned that private equity firms are focused on profit goals that don’t always align with the mission of a hospital, especially one that primarily serves low-income communities like Hahnemann. The hospital’s sale was not an isolated incident either. Private equity players spent a total of $10.4 billion in 2018 to purchase hospitals and clinics, up from $250 million in 2009, as reported by CBS News.
“Health care is a major area of investment for private equity,” Appelbaum said in the article. “They look at health care the way they used to look at supermarkets. They said, ‘People have to eat, so this is a safe investment.’ Now they are saying that about health care.”
In Hahnemann’s case, Applebaum said, it appears the hospital was bought for the value of its real estate, not for its mission to provide care to low-income Philadelphians.
Have you noticed changes in services provided by your local hospital or business after it was purchased by a private equity firm? Share your story with Voices for Affordable Health.