‘The current model doesn’t work’: Illinois hospital CEO on private equity hospital acquisition

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Originally published on Becker’s Hospital Review.

Written By: Madeline Ashley

As more hospitals continue to be picked up by private equity firms, recent studies have tied these acquisitions to adverse patient outcomes. 

“I’m concerned by rural hospitals that are scooped up by anyone that threatens their independence and their ability to continue to treat their patients in a meaningful way,” David Schreiner, PhD, president and CEO of Dixon, Ill.-based Katherine Shaw Bethea Hospital, told Becker’s.  

KSB is an 80-bed independent hospital with 950 employees. The hospital also has a family medicine residency program with the University of Illinois.  

“The thing that I think of is that healthcare is best provided locally,” Dr. Schreiner said. “In many times, the rural hospitals are the economic driver in the communities that we live in. I think that allows us to tailor to patients both broadly and individually. And that’s more difficult to do when you have absentee owners.”

Dr. Schreiner said that while quality of care is important, one positive aspect that comes from private equity firm hospital acquisitions is access to capital. 

“That’s something that I know for our organization and many rural hospitals since the pandemic began. We’ve had a very difficult time capitalizing and that leads to lack of new equipment and even improvement to our existing facilities. PE can help with that,” he said. 

In early December, Sen. Chuck Grassley of Iowa and Sen. Sheldon Whitehouse of Rhode Island, ranking member and chair of the Senate Budget Committee, launched an investigation together into the effects of private equity hospital ownership. The senators argue that many hospitals have experienced reduced care quality and workforce cuts under private equity ownership. 

Even though rural hospitals are under financial duress, Dr. Schreiner said personal attention is more present than in other places run by larger organizations. 

“Several of the business office functions are taken out of the community. I think that also impacts healing, because part of the entire patient experience starts when they decide to see a caregiver, and it ends with the billing process. If they don’t have the ability to call and have personal touch from someone often that lives in their community in rural hospitals, then I think that’s not as positive,” he said.

To combat rural hospitals feeling the pressure to consider being acquired by private equity companies, Dr. Schreiner said there needs to be fundamental reform.

“The current model doesn’t work. I think throughout the United States, we have to look at how we support our rural hospitals. I think many people think about rural hospitals as critical access hospitals. There are many of us that are the tweeners, so to speak. We’re larger than 25 beds and we’re smaller than academic medical centers or academic hospitals. The tweeners need to be taken care of and they often get lost in the conversation. I think private equity can make that worse.”

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