Dr. Kate Rubey will never forget the “Help!” screamed as a car rushed towards Crozer-Chester Medical Center’s empty ambulance bay. Dr. Rubey was outside the shuttered hospital for a press conference with Governor Shapiro and some paramedics in the wake of Crozer’s closure, when a driver arrived with a pale, unresponsive five-month-old.
A week beforehand, Crozer’s Emergency Department and Neonatology teams could have called a code pink and admitted the baby. That morning, however, they were incredibly lucky to be able to revive and transport her to the closest pediatric emergency care center, 20 minutes away. It was a miracle among deadly tragedies.
Since its private equity firm owners closed the Delaware County hospital, victims of nearby car accidents, gunshot wounds, and other emergent situations have died in transport to farther away trauma centers. This happened because private equity saw Crozer-Chester Medical Center not as a sanctuary for the vulnerable, but as a line item on a spreadsheet.
As doctors, researchers, and Philadelphians, we are hopeful that Pennsylvania House Bill 1460 and companion Senate Bill 322 will protect Pennsylvanians from similar occurrences through increased oversight of hospital and healthcare center purchases by private equity.
But what is private equity? And why should we care if they own hospitals?
How PA hospitals got here
Private equity firms use debt and outside investments (such as large pension funds) to purchase companies to resell for profit. Sometimes the companies these firms buy are hospitals which tend to own for three to seven years before reselling. Private equity firms’ hospital-based profits come about by cutting less lucrative but undeniably essential healthcare services, such as baby delivery and mental health care, and by laying off employees.
These firms often sell off the assets of the hospital itself, including the land which they then lease back to the hospital with unfavorable terms. This is known as a “sale-leaseback,” and its dividends go to the firm’s shareholders while further indebting the hospital.
Our region can’t stand to lose another hospital. Pennsylvania needs to act now before it’s too late. We can’t afford to get fooled again.
In Chester, private equity firm Prospect Medical Holdings required Crozer to be responsible for monthly rent, and to pay for property maintenance, real estate taxes, and property insurance — significant financial pressure for an already burdened system whose primary responsibility was caring for patients. In Chester as elsewhere, if a hospital cannot meet these added obligations, the hospital must close, its land sold to recoup losses.
Why does the private equity model matter to patients?
Private equity hospital ownership has been associated with worse care, including an increase in blood and surgical infections, reduced access to pediatric and infant care, increased patient costs, and, not surprisingly, unsatisfactory patience experience.
Whereas private equity offers the promise of optimizing companies — and, sometimes, this is a successful strategy — hospitals are a different business entirely, not about profit-making, but about health-making. Hospitals are a public good that need protection. While the closure of a single private-equity-owned business in a community may be tolerable, closing key emergency and maternal hospital services threatens the community as a whole.
Philadelphians experienced this first hand when Crozer Health discontinued services this May, Delaware County lost not only essential emergency and maternity care, but also 2,600 healthcare jobs. This was a repeat of Hahnemann Hospital’s 2021 closure, when a private equity firm’s oversight resulted in patients losing care, healthcare workers losing jobs, and remaining Philadelphia hospitals, already operating at capacity, being left to pick up the slack. Stressed hospitals caused worse care for everyone.
In both cases, leaders in healthcare and government undertook extraordinary efforts to save these struggling institutions. The Commonwealth of PA, Delaware County, and the Foundation for Delaware County contributed a total of $40 million toward saving the essential services offered at Crozer Health. But, just as with Hahnemann, these measures were not enough to keep Crozer open.
Clearly, something must be done about this. We can’t just lose our hospitals because outside interests are able to make money off of dissembling them.
Support stronger guardrails to protect PA hospitals
Without stronger guardrails, private equity ownership will continue to eliminate essential medical centers — not just hospitals, but also mental healthcare facilities and nursing homes — from our communities. Pennsylvania House Bill 1460 and companion SB322 would prevent sale-leaseback schemes — and give the Attorney General authority to review and block healthcare acquisitions that put communities at risk.
For those of us in healthcare, and for communities who’ve lost or are at risk of losing their medical centers, this legislation seems like more than commonsense — a bipartisan slam dunk. But last year, the PA Senate failed to pass a similar bill that would have increased oversight of hospital purchases.
House Bill 1460 and companion SB322 protect key community resources, like safety-net hospitals and less profitable services, like care for women and babies.
While some may worry such a bill would be governmental overreach and stifle innovation, this legislation is incredibly moderate, creating a reasonable pathway for private equity ownership, provided they align with the community interests. This is not just a PA problem. As private equity ownership of healthcare centers proliferates, other states — Massachusetts, Indiana, Washington, Oregon and New Mexico — are finding similar legislation effective.
Our region can’t stand to lose another hospital. Pennsylvania needs to act now before it’s too late. We can’t afford to get fooled again.
Kate Rubey, MD, Elizabeth Salazar, MD MSHP, Nicolas Goldstein Novick MD PhD and Scott Lorch MD MSCE, are neonatologists and researchers in Philadelphia, focused on the role of private equity in perinatal care. They are affiliated with the Leonard Davis Institute of Health Economics.
The Citizen welcomes guest commentary from community members who represent that it is their own work and their own opinion based on true facts that they know firsthand.
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