Rural Hospitals Struggle Under Private Equity Ownership

Original article on Electronic Health Reporter

By David L. Schreiner, Ph.D., FACHE

Private equity ownership of rural hospitals is growing, but so are concerns about the effects private equity firms can have on quality of care in small, community hospitals.

A new study reveals that care is riskier for patients at hospitals that are owned by private equity firms. Patients are more likely to fall, get new infections, or experience other forms of harm during their stay at a hospital acquired by a private equity firm. Researchers in the aforementioned study found the findings were alarming because they indicated an inference that financial incentives were deemed more important than patient care. There are at least 130 rural hospitals under the ownership of private equity.

Financial factors

Private equity ownership prioritizes short-term financial returns over long-term community needs. This can threaten services like obstetrics that lose money but are important to access.

When private equity-owned imaging centers and ambulatory surgery centers open near rural hospitals, it creates financial challenges. Private equity may restrict the number of Medicaid patients they accept, taking those patients with commercial insurance away from rural hospitals that accept all patients regardless of insurance status or ability to pay. This is problematic for rural hospitals, as Medicaid patients make up around 30% of their patient population. Examples include outpatient imaging centers and ambulatory surgery centers.

Studies have also found that patients experience worse clinical outcomes at hospitals owned by private equity. This could be due to reduced staffing levels that occur under private equity ownership. Private equity firms are known to cut costs through measures like decreasing nurse-to-patient ratios. For rural hospitals, which already operate on thin margins, competition for talented staff can be challenging.

The value of local relationships

Healthcare, like politics, is local. While many hospitals offer similar services, these offerings are tailored to the local population they serve based on various factors, including religion, culture, key employers and, yes, even weather. And the smaller the hospital and its service area (imagine a map of a rural hospital’s primary service area), the more tailored services are for the population they serve.

The rural hospital where I work, Katherine Shaw Bethea Hospital in Dixon, Ill., prioritizes keeping physicians and providers local. Having doctors and nurses who live in the community allows for personalized care tailored to each patient’s individual needs. This level of personal attention may be lost at larger hospitals with absentee ownership.

Rural patients value the relationships and familiarity they have with providers who are their neighbors. In rural areas, we know our patients on a more personal level. Team members in our clinics often know that Mrs. Smith is a talker and needs a 20-minute appointment, while Mrs. Jones wants to be in and out as quickly as possible. This knowledge might also have a clinical impact when providers see behaviors atypical for that individual.

Independent rural hospitals as economic drivers

Local ownership is often the largest economic driver in the community. Rural hospitals provide jobs and support local businesses, leading to improved living conditions for many in the region.

While private equity can provide needed capital for facility upgrades, I’m concerned about rural hospital independence being threatened. Two U.S. senators have launched investigations finding private equity ownership leads to workforce cuts and reduced quality. Ensuring transparency and accountability is also more difficult with private firms not required to meet the same disclosure standards as non-profit hospitals.

For the future of rural healthcare, fundamental reforms are needed to support small, independent community hospitals financially. I hope policymakers will address how to best care for the “tweener” rural hospitals left out of many conversations. Without changes, more hospitals may be forced to turn to private equity, and the impacts on local access to care could be significant.

The leader of Katherine Shaw Bethea Hospital shares how some implemented ideas have fared.

Orginally posted by HealthLeaders

BY Jay Asser, January 30, 2024

Many rural hospital CEOs are searching for answers in their mission to keep the doors open in the face of financial turmoil.

For David Schreiner, CEO of Katherine Shaw Bethea Hospital, not every strategy his facility has applied has been a home run, but the ideas that didn’t pan out served as lessons learned.

Understanding what has and hasn’t worked has allowed the Dixon, Illinois-based hospital to remain independent and stave off some of the crippling perils that have plagued so many rural operators across the country.

Watch Schreiner describe what’s been successful and not-so-successful during his time at the helm in the video below.

Jay Asser is the contributing editor for strategy at HealthLeaders. 


Original post on HealthLeaders

By Jay Asser, January 26,2024

When it comes to patient care, the choice is clear, says David Schreiner.


In the United States, at least 386 hospitals have been acquired by private equity firms, with 34% of all private equity-owned hospitals serving rural areas, according to the Private Equity Stakeholder Project.

A study published in JAMA uncovered that private equity-owned hospitals was associated with increased hospital-acquired adverse events despite having patients that were at lower risk.

Quality of patient care is a major reason why David Schreiner, CEO of Katherine Shaw Bethea Hospital in Dixon, Illinois, is a proponent of staving off private equity ownership in rural communities.

Private equity’s influence in healthcare has grown over time for a reason, but the question of how much it’s helping some of hospitals’ biggest problems remains up for debate.

As more rural hospitals collapse under the weight of financial struggles, private equity firms are stepping in with the aim of turning around these floundering facilities. While investment in rural healthcare is much needed, David Schreiner, CEO of Katherine Shaw Bethea Hospital in Dixon, Illinois, believes locally owned hospitals have the advantage over private equity in the type and quality of care they provide patients.

“The thing that I look at when we look at private equity is the decisions that are made that impact patient care and impact staff,” Schreiner told HealthLeaders. “It’s the financial prioritization versus community health needs.”

A recent study published in JAMA examined that dynamic by investigating how quality of care and patient outcomes change after private equity acquisition of hospitals. Researchers used Medicare claims for more than 4 million hospitalizations between 2009 and 2019 to compare hospital stays at 51 private equity-acquired hospitals against those at 249 non-acquired hospitals.

The findings revealed that private equity acquisition was associated with a 25.4% increase in hospital-acquired conditions, driven by falls and central line-associated bloodstream infections. These results were observed despite the private equity hospitals having a likely lower-risk pool of admitted Medicare beneficiaries, implying worse quality of inpatient care.

According to the Private Equity Stakeholder Project, at least 386 hospitals in the country are owned by private equity firms, which represents 9% of all private hospitals. More than a third (34%) of all private equity-owned hospitals serve rural populations and there’s little reason to believe that won’t continue to grow.

While Schreiner acknowledges the financial hardships rural healthcare is facing, he feels locally-owned hospitals can operate differently when they’re not bound by maximizing profits at every turn.

“We’re an independent rural hospital. We have no ownership, no one is receiving dividends or investment returns from our organization,” he said. “So we’re motivated to meet the needs of the community and we often perform services and have service lines that are intentionally not profitable.”

Schreiner pointed to obstetrical services being abandoned by many rural facilities due to lack of available personnel or diminishing financial returns. Yet there are still those rural hospitals that provide it, even at little to no financial gain.

“PE firms are going to make those decisions very quickly because that’s what they do and that presents a more positive bottom line,” Schreiner said. “Many community hospitals are willing to have a lower compromised bottom line and continue providing services.”

So long as the “financial prioritization” outweighs everything else, patient care will be at risk in rural settings where private equity strengthens its grip.

Jay Asser is the contributing editor for strategy at HealthLeaders. 

Assessing the impact of private equity ownership on rural hospitals

Originally published on DOTmed HealthCare Business News

by Gus Iversen, Editor in Chief, January 25, 2024

For better or worse, private equity investment is playing an increasingly central role in healthcare. Dr. David L. Schreiner president of Katherine Shaw Bethea Hospital in Dixon, IL, and author of Be the Best Part of Their Day: Supercharging Communication with Values-Driven Leadership, has had a front row seat to observe how private equity is impacting rural providers.

Having spent most of his life in small towns and working in small communities, Schreiner is a passionate advocate for rural hospitals. He sat down with HealthCare Business News to talk through some of the ways private equity investment is shaping care.

HCB News:Private equity investment is a huge trend in healthcare. How have your own experiences in healthcare been shaped by private equity?
Dr. David Schreiner: Our area has not had the introduction of private equity in acute-care hospitals. However, an outpatient imaging center has been added to our service area within the last year. This center disproportionately accepts paying patients, leaving Medicaid patients to area hospitals.

HCB News: What are some of the overlooked risks associated with private equity investment for healthcare providers?
DS: PE firms may be focused on short-term financial returns that could be misaligned with the health needs of the region. At KSB Hospital, we work through three-year strategic plans that evaluate the needs of the population we serve and adjust our business plans accordingly. If PE firms aggressively seek high margins for their investors, this could come through decreased staffing levels, resulting in additional adverse hospital events, such as those described in the article. If PE ownership results in the closing of service lines (like obstetrics or inpatient behavioral health) or even the merger of facilities, this logically increases travel times for patients and extends the time to seek crucial services. Think of the “golden hour” from the onset of a cardiac event or stroke. If patients have to travel further, crucial minutes are lost.

A focus by PE firms on efficiency and cost-cutting may lead to staff reductions and increased workloads for those team members left behind, potentially affecting the quality of care. Loss of talent in our organizations during the current war for talent is disruptive to patient care and might lead to a downward spiral in a facility’s ability to offer a wide-range of services.

HCB News: Advocates for private equity investment often point to the financial boost it can provide. Would you agree the financial backing can be a life saver for a facility on the verge of shutting down?
DS: Many rural hospitals, and ours is no exception, are struggling to maintain daily cash, and this limits our ability to recapitalize. We have gone from investing $7M annually on capital projects to a break-fix mentality. PE can provide an infusion of much-needed capital into our organizations.

HCB News: From a big picture, do we know *why* private equity investors are so drawn to healthcare?
DS: Rural populations represent a target demographic for PE firms. While trending older, these patients are loyal to their hospitals and doctors. The ability to cross-sell other products is enticing. PE firms may feel as if their proven business practices can “correct” the sins independent hospitals have made. With the renewed efficiency, a financially struggling rural hospital might prove to be a good PE play.

HCB News: For hospitals struggling financially, what are alternatives to private equity that may boost their viability?
DS: Partnerships with other NFPs and even geographically near competitors might be an alternative to PE investment and control for rural hospitals. Anything rural hospitals can do to spread costs among a greater service area, such as partnerships with home care providers, wound care centers, and urgent care clinics, might increase the financial viability of rural hospitals.

HCB News: Are there any other important aspects to private equity in healthcare we haven’t discussed?
DS: The economic ripple effects of a community losing its rural hospital or undergoing a change of ownership can be extreme. Rural hospitals are often the largest employer in their community, and when hospitals close or downsize, including losing jobs, the economic downturn for the entire community is significant. A prime example of a community losing its hospital and the subsequent impact on the area can be seen in Fr. Scott, Kansas.

The current reimbursement model for independent “tweener” hospitals, defined as those systems bigger than critical access hospitals and smaller than academic medical centers, is unsustainable. Federal and State elected officials need to reinvent how health care is paid for in smaller, remote communities.

The Impact of Private Equity Firms on Rural Hospitals: A Call for Reform

Originally published on Medriva

By Mason Walker

Recent studies have sparked discussions around the role of private equity firms in the acquisition of hospitals and the subsequent impact on patient outcomes. These findings have particularly underscored the potential threat to the independence of rural hospitals and their ability to provide meaningful patient care. The president and CEO of Katherine Shaw Bethea Hospital, Dr. David Schreiner, has expressed significant concerns about the situation, emphasizing the need for fundamental reform in supporting these rural hospitals.

Private Equity Acquisition and Adverse Patient Outcomes

Several news articles and studies have been shedding light on the consequences of hospital acquisition by private equity firms. A major study found an alarming increase in serious medical complications when hospitals were bought by investors. Specifically, there was a 25 percent increase in adverse events among Medicare patients, including surgical infections, bed sores, central line infections, and falls. The same study, published in JAMA, compared the data from hundreds of thousands of hospitalizations at private equity-owned hospitals to millions of hospitalizations at non-private equity-owned control hospitals from 2009 to 2019.

Rising Concerns: Reduced Care Quality and Workforce Cuts

These findings have intensified concerns about the impact of private equity firms on healthcare delivery. The data suggests that patients receiving care at private equity-owned hospitals are more susceptible to hospital-acquired adverse events than patients at hospitals not owned by private equity firms. This has led to apprehensions about reduced care quality and potential workforce cuts. Private equity firms currently own at least 130 hospitals in the country’s rural areas.

The Debate: Access to Capital vs Personal Attention

While private equity firms do provide access to capital, a critical factor in sustaining and expanding healthcare services, there are increasing worries about the impact on personal attention and patient experience. Many believe that private equity-owned hospitals prioritize profit over provider retention and patient safety. In contrast, some argue that private equity investments improve care and expand access to it, especially in low-income, rural communities.

Steps Towards Reform

In the wake of these findings, a Senate investigation has been launched to examine the effects of private equity hospital ownership. The Biden administration has also moved to cut down on private equity’s consolidation in the healthcare industry, announcing initiatives aimed at scrutinizing acquisitions and increasing transparency. However, the conversation around the role of private equity in healthcare is far from over.

The Importance of Local Healthcare

Dr. David Schreiner has particularly emphasized the importance of local healthcare and the role of rural hospitals as economic drivers in their communities. He stresses that rural hospitals must retain their independence to continue providing meaningful care to patients. With the potential threat posed by private equity firms in the form of reduced care quality and workforce cuts, there is a clear need for fundamental reform to support rural hospitals.

The challenges faced by rural hospitals in considering acquisition by private equity companies highlight the pressing need for a balanced approach, one that ensures the sustainability and quality of healthcare services while preserving the vital role of rural hospitals in their communities.