How Personal Fairness Companies Raided Security Internet Hospitals

What You Ought to Know: 

– A brand new investigation by the Private Equity Stakeholder Project (PESP) reveals, for the primary time, non-public fairness (PE) traders had been behind a security web hospital closure within the Chicago space after making damaged guarantees to regulators.

– The report, “How private equity raided safety net hospitals: Volume 2—Pipeline Health,” written by PESP researcher Mary Bugbee, highlights the pitfalls of personal fairness possession of hospitals, together with the monetization of hospital actual property, speedy enlargement on the expense of firm well being, large-scale layoffs, and hospital closures.

Pipeline’s Enlargement to Chicago Results in Hospital Closure and Bankruptcies

Pipeline Health, a safety-net hospital chain owned by non-public fairness companies Stanton Road Capital, Deerfield Management, and Davidson Kempner Capital Management, broke guarantees to state regulators when it bought, after which promptly moved to shut, a security web hospital that served a predominantly Black and Latino inhabitants in Chicagoland. The healthcare firm bought Westlake Hospital in Melrose Park, IL earlier than asserting its intentions of shutting down the hospital mere weeks after its acquisition. Pipeline and its PE house owners purchased Westlake, alongside two different Chicago-area hospitals, in 2019 for a mere $5 million. After the chapter and closure of Westlake, they had been capable of then promote the remaining two hospitals for a monumental $92 million—over 18 instances what they paid for all three hospitals.

The report additionally identifies, for the primary time, the connections between Joel Freedman, an investor behind the closure of Hahnemann Hospital in Philadelphia, and the traders in Pipeline Well being.

“Sadly, Pipeline’s story is a well-recognized one,” mentioned Mary Bugbee, report writer and PESP healthcare researcher. “Two different security web hospitals owned by non-public fairness traders, together with Hahnemann, closed the identical 12 months that Westlake did.”

In regulatory filings earlier than the acquisition of Westlake, Pipeline had dedicated to holding the hospital open for no less than two years. The area people fought again with a authorized problem to save lots of Westlake after Pipeline obtained regulatory approval to shut it, however Pipeline was capable of shut the hospital by having the hospital’s holding firm declare chapter. Within the following chapter proceedings, it was revealed that the hospital’s closure had been a situation of Pipeline’s acquisition settlement with the vendor.

Pipeline’s actions in Chicago resulted within the chapter and closure of a security web hospital, mass layoffs of over 500 employees, and the sale of property zoned for hospital use to be transformed into luxurious housing regardless of heavy opposition. Via its use of over two dozen subsidiaries and holding firms, Pipeline’s traders have, till now, been capable of cover within the shadows and shield their property from losses, whereas native communities are left to choose up the items in an unsure future. Pipeline continues to personal and function 5 hospitals in Texas and California. Pipeline’s traders even have confronted, up to now, few penalties for his or her enterprise practices that shuttered a security web hospital and harmed communities. 

“We want higher vigilance from lawmakers, regulators, and authorities officers to counter the threats related to non-public fairness possession of security web hospitals,” Bugbee mentioned. “Extra stringent rules paired with higher accountability measures can deter traders hoping to make a fast buck on the expense of communities, in addition to maintain them accountable after they do.”