Private equity transactions in the healthcare sector that were disclosed in 2018 surged almost 50 percent to $63.1 billion. And now those providers are slashing services, increasing costs to patients and destroying jobs vital to entire communities.
Sound familiar?
But wait… this is even worse. Bain is blunt about its recommendation to slash jobs, cut services, and raise prices even more aggressively going forward:
“Given current valuation levels, multiples may no longer expand the way they have in the past. Instead, investors must increasingly derive returns from commercial and operational levers.”
Within the sector, hospital and healthcare executives are already panicked: Ninety percent called new revenue streams that would yield returns for their new investors in the next three years “an urgent priority.”
Calls to “hit the pause button” on private equity buyouts are now coming from within the industry. One reason: The outcomes are already evident. Cerberus’ long game with its Steward Healthcare “investment vehicle” was to dismantle the acquired healthcare providers and sell the real estate out from under what remained at a massive profit… which of course, further increased healthcare costs as the providers then began paying rent.
The kicker: We already know to fix the healthcare system. The leading voice on U.S. business strategy and competition, Harvard University’s Michael E. Porter, laid it out 15 years ago:
“We must move away from a supply-driven health care system organized around what physicians do and toward a patient-centered system organized around what patients need. We must shift the focus from the volume and profitability of services provided—physician visits, hospitalizations, procedures, and tests—to the patient outcomes achieved.”
Private equity is the exact opposite of that.
NEW (Updates 12.9.19):
Private equity is now suing patients who can't pay unauthorized, jacked-up emergency room bills.
Private equity's other stake in surprise medical bills.
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