Lawmakers Slam Private Equity ‘Octopus’ for Health-Care Strategy
(Bloomberg) -- Private equity’s control of health-care companies requires greater scrutiny to better assess the impact on the industry, several U.S. lawmakers said Thursday.
Independent industry experts fielded questions from lawmakers at a House Ways and Means subcommittee hearing about private equity’s growing influence and recommended requiring health-care companies to disclose more financial and ownership data.
“Private equity’s influence stretches like an octopus,” said Representative Bill Pascrell, a Democrat of New Jersey, who led the hearing.
Sabrina Howell, an assistant professor of finance at the NYU Stern School of Business, said all companies that accept government money should disclose who their owners are. Howell co-authored a study that found private equity ownership of nursing homes increased the short-term probability of death by 10%.
“The private equity industry is having an overwhelmingly positive impact on health care across America” by lowering costs, improving access, funding cures and delivering more effective treatments, Drew Maloney, president of the American Investment Council, said in a statement Thursday.
Private equity owns a small part of the overall health-care system, including only 9% of nursing homes, according to the AIC.
Nursing home chains should be required to file audited consolidated financial statements, said Ernest Tosh, a trial attorney at Tosh Law Firm PLLC.
Mike Kelly, a Republican representative from Pennsylvania, expressed concern about the business structure of nursing homes.
“I’m really appalled at what I am hearing now because it seems like a lot of these entities are under-capitalized and then they go ahead to cash out to get away from them,” said Kelly. “Are there no requirements at all? Is there no oversight.”
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