WHY ONE RURAL HOSPITAL CEO ADVOCATES FOR LOCAL OWNERSHIP OVER PRIVATE EQUITY

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Original post on HealthLeaders

By Jay Asser, January 26,2024

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


KEY TAKEAWAYS

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. 

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