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Private Equity Takes Aim at Primary Care

June 1, 2022

Summary: If private equity firms have their way, traditional primary care will disappear, replaced by corporate skeletons stripped of financial assets and the most skilled practitioners, with investors sitting on billions in extracted profits. That’s the private equity model, now targeting front-line providers. We must stop them before they destroy our health system.

Ethically Challenged
Private Equity Storms US Health Care

By Laura Katz Olson
Johns Hopkins University Press

The advent of the neoliberal order and its restructuring of the US political economy coincided with the emergence of private equity in its shadow. Financialization took root and surged during the 1980s, and PE has been riding on that wave ever since. Buttressed through eased regulations and preferential tax treatment, the financiers have steadily advanced their tentacles into ever more market sectors, from manufacturing and retail to business and monetary products, energy, and information technology. Eventually, they gravitated toward human services, such as health care, where in some cases they created markets that had not previously existed.

Private equity’s business model can be characterized as a later stage of neoliberalism, one that takes its rationale to greater extremes; it is neoliberalism on steroids. Supersized earnings for PE and its shareholders are front and center, with no pretense otherwise. Nothing else matters. The profit motive guides everything in both word and deed. At a PE conference I (Laura Olson) attended in 2019 hosted by the Wharton School, the entrepreneurs discussed their buyout priorities, value-enhancing strategies, return on investment, and other metrics; not once did anyone mention the impact of their playbook on individuals or society, at least not at the sessions I joined.

The PE industry – capitalism in overdrive – weighs down its health companies with enormous debt while pushing for extra large earnings. Faceless PE shops take an oversized bite into US health dollars, transferring substantial public and private money for medical needs into the pockets of financiers who do not provide any health services per se.

PE firms are on a roll, pushing full steam ahead in the physician practice, urgent care, and medical staffing domains. What will be the next niche? It seems that the indispensable but long-neglected primary care doctors are on their radar, as are other relatively unclaimed health care spaces. If the trend continues – and I’m sure that it will – medical decisions will be less and less between you and your doctor.

Other Resources:
Brief article about / summary of the book.
Interview with Laura Katz Olson.

Comment by: Don McCanne, David Himmelstein, Steffie Woolhandler, Jim Kahn

We have been worried about the injustices of our current health care financing using a fragmented, inequitable system of health insurance, but, behind the scenes, private equity has been taking over the health care system, using various economic tools to divert massive amounts of health care dollars to its own industry. In her book, “Ethically Challenged,” Laura Katz Olson explains the surprising degree to which this has already occurred and how we are losing control of our health care system as a result.

Examples of some of the tools used by private equity include leveraged buyout using other people’s funds, dismissing expensive personnel and using less qualified individuals, establishing creative management fees and newly structured real estate payments for nominally owned facilities, “improving productivity” by slashing benefits for labor, raising prices and reducing product quality, extracting all funds available from the captured entities, pre-planned use of Chapter 11 to dismiss negotiated debts, early selloff of captured enterprises drained of assets in order to achieve maximum return on investment, etc., etc.

Many health care niches have already been occupied by behind-the-scenes private equity entities, and much damage has been done, as Laura Olson explains. If you don’t already know how this is happening, you should read her book or a similar source to understand. Then the reason for the following statement will be clear.

URGENT WARNING: Primary care, the basic infrastructure of health care in America, is about to be taken over by private equity. Although the appearance of having your own health care professionals will continue, your health care will actually be under the control of invisible (to the public) private equity entities whose sole interest in you is to generate more wealth for themselves with absolutely no regard for your personal health, except to avoid blemishes to the market value of your primary care facility.

Again, read “Ethically Challenged” to learn how trillions of dollars are going to be milked out of our compromised health care system, and we will be unable to do much about it once the changes are in place. Single payer Medicare for All won’t be able to help us then. We urgently need to educate ourselves on what is transpiring, and then we urgently need to elect a Congress that understands and will take the appropriate measures.


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