CMDA's The Point

Private Equity in Healthcare

December 13, 2021

by Robert E. Cranston, MD, MA (Ethics)

While many people, including healthcare professionals, think that much of medical ethics is highly arbitrary and relativistic, with the single prevailing rule being patient autonomy, there are nonetheless some widely accepted principles within medical ethics. Principlism, which is based on four guides made famous by Beauchamp and Childress, includes patient autonomy, beneficence, non-maleficence and justice. Unfortunately, for many people, these are the only ethical considerations needed to make informed decisions regarding right and wrong regarding patient care. Several other considerations are needed to decide complex issues rightly.

Pellegrino and Thomasma emphasized the importance of virtue in the practicing physicians as they navigate complex decisions. Truth-telling and transparency are also essential to making ethical patient care decisions.

The concept of self-sacrifice runs deeply through medical and nursing training. While caregivers must not ignore their other personal responsibilities, the welfare of the patient must always figure heavily, even to the point of at times inconveniencing or postponing the meeting of obligations to self, family or friends. This includes the concept of being a fiduciary to the patient, making decisions based not on the caregivers’ best interests, but instead those of the patient.

In The Abolition of Man, C. S. Lewis spoke against the concept of relativism, and he also emphasized the fact that many important ethical parameters are not solely Judeo-Christian but have existed throughout millennia among many different cultures. One of the most important and consistently held themes is that of protecting vulnerable people—such as the elderly, infirm, widows, orphans, physically challenged and aliens. While these are recurring themes in Judaism and Christianity, they have been consistently present in some form in all societies.

Once a year, most healthcare professionals within organizations must sign documents that affirm a lack of conflict of interest. We are not at liberty to maintain financial ties to companies or entities which might prejudice our clinical judgment in the care of our patients—which medicines we prescribe, which instruments we purchase for the practice or which diagnostic tools we employ.

A modern maxim, established within the airline industry, is to “put your own oxygen mask on first.” If the able-bodied adult seated next to a small child or less capable adult fails to put their own mask on first, they may forfeit the life of the other person as well as their own. If they save themselves first, they will then be able to assist the less able, allowing both to live. In medical economics, these thoughts have come to be collectively referred to as “No Margin, No Mission.”

These disparate considerations congeal together around an emerging trend in medicine: private equity in healthcare. The following quote is from the introduction to this article:

“Private equity firms have increased their investments in healthcare in recent years. While they focus on maximizing profits, many people worry that this may harm patient wellbeing.

“Private equity firms are companies that make investments in privately owned businesses. While many invest in startups and small businesses, a growing number of firms are backing the healthcare industry.

“Investments in healthcare have more than tripled since 2015. As a result, private equity firms now own about 25% of hospitals in the United States — and this figure will likely continue to grow.

“There is an ongoing debate about the risks and benefits of this. When private equity firms fund or purchase hospitals, medical practices, or health systems, their goal is to streamline operations to produce more profit.

“Critics worry that this may force health systems to make decisions based on profits rather than patients.”

Being aware of the necessity of financial margin to realize the medical mission, and recognizing that American healthcare, per capita, is among the most expensive in the world, and health outcomes lag behind many other countries, we recognize that some things have to change in order for our country to survive medically and financially. The question is, is the corporate model for streamlining care in keeping with our ethical tenets for care of patients?

Ask any practicing healthcare professional today and they will cite stories of staffing shortages, limited formularies or limitation of therapeutic and diagnostic options that they feel threaten patient welfare. The stated aim of private equity is to maximize profit, while the stated aim of traditional medicine is to care for our patients. As Francis Peabody said in 1928, “One of the essential qualities of the clinician is interest in humanity, for the secret of the care of the patient is in caring for the patient.”

In one study quoted in the above review, “A 2021 working paper found that nursing homes owned by private equity firms have 10% higher death rates among patients on Medicare. It also showed a decline in time spent with residents, less staff, and lower quality and training of staff. Despite this lower quality of care, these nursing homes were associated with an increase in taxpayer-funded Medicare spending.”

Some potential benefits of private equity in healthcare include more careful management of finances and staff, closer application of existing safety and quality standards and better insurance reimbursement rates, which some argue may result in greater opportunities to afford and invest in medical innovation. Obvious downsides may include poorer medical outcomes, especially for Medicare patients, incentives to reach financial goals as opposed to patient outcome goals, staffing shortages, a temptation to up-code billing, injury to caregiver morale and increased burnout.

The article continued, “Healthcare regulations and laws are designed to prevent private equity firms from harming patients to earn a profit. This offers some protection — and in some cases, better treatment may actually generate more income.” If all companies and all professionals were truly selfless and there was an innocent absence of conflicts of interest, this might be true. However, given the nature of humanity and our inherent motivation to focus on our own gains, this is an area in which we must maintain vigilant oversight and frequent review.

The medical ethical principles detailed above must drive our planning and implementation of the search for new solutions to our healthcare crisis. While we recognize the necessity of achieving financial viability to fund our care efforts, we must never abandon our ethical framework in a shortsighted attempt to do so.

Robert E. Cranston, MD, MA (Ethics)

About Robert E. Cranston, MD, MA (Ethics)

Robert E. Cranston, MD, MA (Ethics), MSHA, FAAN, CPE, is a board certified neurologist, with additional training and experience in palliative medicine, executive coaching and medical leadership. He recently retired after 30 years serving at Carle Health (formerly Carle Foundation Hospital) in Urbana, Illinois, as an attending neurologist, and (Past Chair—14 years) of the Carle Ethics Committee. He and his wife Tammy are grateful for their five grown children, their daughters- and sons-in-law and their 12 grandchildren.

1 Comment

  1. Avatar Sara Buscher on January 6, 2022 at 4:47 pm

    Hospices are also being bought up by private equity firms. They are offering palliative care programs as “loss leaders” to get more people enrolled in hospice sooner. Once in hospice, they generate revenue at a daily rate. The less spent on the patient, the more money they make. This is very concerning.

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