I remember walking through the aisles of Toys R Us in pure awe, endless aisles filled with limited edition Barbie dolls, model trains, and the newest video games requiring a paper slip to collect at the front, all bringing back a wave of nostalgia. I similarly remember the collective devastation when Toys R Us declared bankruptcy — sending shockwaves through the retail industry, and within children’s hearts.
Most of us, however, don’t know why Toys R Us closed its doors. The answer? Private equity. Their crusade to bankrupt facilities has only gained in strength, however this time, it’s not merely consumers who will be affected, but thousands of vulnerable patients here in Connecticut.Â
Private equity’s aim is clear — to pursue short-term profits at the expense of their target, whether that’s children’s interests, or in the case of hospitals, patient’s lives. In 2023, nearly one in five hospital bankruptcies in the U.S. were private equity owned hospitals. None involved Connecticut –until now.
Connecticut is home to three private equity owned hospitals, Manchester Memorial, Rockville General, and Waterbury Hospital, all of which are owned by Prospect Medical Holdings. Private equity firm Leonard Green & Partners bought a majority stake in the company in 2010 and Prospect Medical is now declaring bankruptcy, leaving the financial viability of these, as well as other hospitals across the country, in the air. If left without a buyer, thousands of residents of northeast Connecticut may have to travel 30+ minutes to reach an acute care hospital.
I currently work as a resident physician at one of those acute care hospitals. My past research has focused on the predatory relationship between private equity and hospitals, and how it relates to access, quality, and cost of care.
Overwhelming research on private equity has shown that it increases healthcare costs, while decreasing quality and access to care. Frequent consolidation and closure of hospitals, many of which are located in underserved areas, leads to a decrease in access, while unsafe staffing ratios and recurrent jeopardy violations directly harm patients. Most strikingly, when I surveyed providers nationally working within these systems, they unanimously stated they would not recommend that a family member receive care at a private equity-owned hospital.
Unfortunately, lack of regulation and transparency around private equity ownership have allowed these firms to fly largely under the radar. Thankfully, multiple bills have been proposed this year in the Connecticut legislative session to combat this problem. SB567 and SB261, aim to increase regulation and limit the ability of private equity to purchase healthcare facilities, while HB6570 goes one step further to altogether prohibit private equity firms from acquiring healthcare facilities.Â
Another bill, SB469, aims to prohibit the practice of sale-leasebacks, which is the single greatest weapon private equity has in its arsenal. These agreements involve private equity selling the real estate on which a hospital is located to a real-estate investment trust, and then forcing the hospital to pay rent on the exact same property they had previously owned.
The private equity firm can essentially extract 100% of a property’s value into working capital to quickly enrich its investors, while simultaneously draining the hospital’s income. Why did Toys R Us file for bankruptcy? Because of a sale-leaseback agreement that cost them millions annually. And it’s the same case for all three hospitals here in Connecticut in addition to hundreds of other hospitals across the country (including Steward Health in Massachusetts and Drexel University College of Medicine’s previous teaching hospital, Hahnemann Hospital in Pennsylvania).
Hospitals serve the public and should not be accessible to private equity’s short-sighted and predatory schemes. Public hearings are being scheduled every day during the current CT legislative session. I urge you all to contact your state legislators today to ask them to prioritize these bills, and persuade the Public Health Committee to schedule these hearings.
Without increased regulation and enforcement, we will continue to witness the potential closure of community hospitals, but now, in our own backyards here in Connecticut.
First it was a toy store, and now it’s hospitals — when will private equity’s destructive reign be stopped?
Aashka Shah MD, MPH is a Resident Physician at Yale New Haven Health.