Senate investigating whether ER care has been harmed by growing role of private-equity firms

A Senate committee has asked three major private-equity firms for information on how they run or staff hospital emergency departments to see if private equity’s management of a large share of the nation’s ERs has harmed patients, NBC News exclusively reports.

Led by its chairman, Sen. Gary Peters, D.-Mich., the inquiry by the Homeland Security and Governmental Affairs Committee centers on three of the nation’s largest private-equity firms: Apollo Global Management, the Blackstone Group and KKR. According to the information requests, Peters’ staff conducted interviews with over 40 emergency department physicians who expressed “significant concerns” about patient safety and care resulting from the aggressive practices of private-equity firms in the arena. Those practices include improper billing, retaliation and anti-competitive activities, the committee’s letters to the companies said.

Recipients of the letters, which were sent Monday, were asked to provide documents and information by April 17, and to arrange a meeting with the committee no later than May 3.

NBC News recently estimated that 40% of U.S. hospital emergency departments were overseen, staffed or managed by companies owned by private-equity firms.

The Homeland Security Committee inquiry is the second Senate investigation focused on private equity’s impact on patient care. In December, the Budget Committee launched a bipartisan investigation into two hospital systems associated with private-equity firms, seeking to assess the profits they have generated in their deals and whether those transactions harmed patients and clinicians. Sens. Sheldon Whitehouse, D.-R.I., who chairs the committee, and Chuck Grassley of Iowa, the ranking Republican, are leading that examination.

The new letters from the Homeland Security Committee requesting information about emergency department operations also went to four companies backed by the private-equity firms. Three are hospital staffing companies: U.S. Acute Care Solutions, which is financed by Apollo; Envision Healthcare, formerly owned by KKR; and TeamHealth, a Blackstone company. The other recipient is LifePoint Health, owned by Apollo, which operates 62 acute care hospitals in 16 states and runs the largest chain of rural hospitals in the U.S. Apollo and LifePoint Health are also subjects of the Senate Budget Committee investigation.

In recent years, private-equity firms have invested $1 trillion and become significant players in many sectors of the health care industry, including hospitals, nursing homes, physician practices, mental health facilities and emergency department staffing companies. To finance their health care takeovers, private-equity owners typically burden the companies they buy with debt, then slash company costs to increase earnings and appeal to new buyers in a few years.

These cost-saving practices are central to the new Senate inquiry, Peters said in a statement. “I am concerned that our nation’s largest emergency medicine staffing companies may be engaging in cost-saving measures at the expense of patient safety and care, which could put our nation’s emergency preparedness at risk,” Peters’ statement said. “I am pressing these companies and their private equity owners for needed transparency so that we better understand how their business practices could be affecting patient safety, quality care, and physicians’ abilities to exercise independent judgment in providing patient care.”

In a statement, a spokesperson for Apollo said, "We continue to welcome all discussions with the senators regarding our funds’ investing track record in the healthcare space.” A spokesperson for Envision said, “Envision intends to work transparently with Senator Peters on his request. Our clinicians care for patients and communities in their greatest time of need. Our number one priority is always the well-being of our clinicians and the patients they serve.” A spokesperson for Lifepoint said the company "looks forward to responding to Chairman Peters’ inquiry received today and to furthering any conversations with Senators who have an interest in our operations and commitment to our communities."

KKR and Blackstone declined to comment.

As interest rates have risen recently, the costs associated with some of these companies’ debt loads have become onerous, creating financial difficulties. Last year, for example, Envision Healthcare, the staffing company formerly owned by KKR, filed for bankruptcy. It continued operating while in bankruptcy and emerged having restructured. Another emergency department staffing company collapsed last year — American Physician Partners — leaving hospitals it had served scrambling for replacement staffing.

Academic studies show that private-equity firms’ involvement in health care is associated with significant cost increases for patients and payers, such as Medicare. A lower quality of care has also been associated with the firms’ investments in health care, including 10% higher mortality rates at nursing homes owned by private equity. A study last year showed patients at private equity-owned hospitals fell more often and contracted more infections.

A TeamHealth spokesman said the company is reviewing the letter from Peters. “The top priority for TeamHealth and our clinicians is always delivering high-quality, safe patient care,” he added in a statement. “We look forward to engaging with the Committee and demonstrating our uncompromised commitment to our clinicians and communities."

Private-equity firms’ health care deals are also under the microscope at the Federal Trade Commission, which overseas corporate mergers for potential anti-competitive activities. Last fall, the FTC sued U.S. Anesthesia Partners Inc., one of the country’s top anesthesia staffing companies, and its private-equity backer, Welsh, Carson, Anderson & Stowe, accusing the entities of scheming for over a decade to acquire anesthesia practices in Texas, monopolize the market, drive up prices for patients and generate profits. Both companies are fighting the suit, contending it is “misguided” and “meritless.”

Mitchell Li is one of the emergency physicians interviewed by investigators at the Homeland Security Committee. Founder of Take Medicine Back, an organization pushing to take the profession of medicine back from corporate control, Li said in an interview, “The emergency department is the canary in the coal mine for the whole U.S. health care system. We are the first to see the breaking point and we are beyond that. Private equity and the corporate practice of medicine puts our nations’ ability to respond to disaster at risk.”

This story first appeared on NBCNews.com. More from NBC News:

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