Panelists Call For More Private Equity Regulation In Healthcare, Special Education

by Jamil Ragland CTNewsJunkie

HARTFORD, CT — As private equity continues to purchase more and more assets in Connecticut, a broad coalition is calling for more regulation of what it calls the “parasitic” industry.

At the Private Equity in Connecticut Legislative Forum at the Legislative Office Building Thursday, legislators, workers, residents and advocates shared information and firsthand experience with the spread of private equity investment across multiple sectors in the state, including education, health care and housing.

“I will go so far as to say that it’s fairly parasitic,” said Rep. Kara Rochelle, D-Ansonia. “What it does is latch onto a host, extracts funding, or extracts funds for profit. And it’s services that suffer for real people in our communities, whether it is special education costs rising at exorbitant rates, or quality of health care.”

Much of the focus of the forum was on the negative effects that private equity ownership of hospitals, nursing homes and other healthcare facilities has on patient care. Aashka Shah, researcher and resident at Yale School of Medicine, shared her research into private equity ownership. 

Shah said she and others found private equity takeover of hospitals translated into longer wait times, higher rates of infections and falls, short staffing in critical staffing-sensitive areas like the ICU and the emergency department, and other shortfalls. 

“Healthcare requires continuity. It requires investment in relationships, in workforce stability, in quality improvement, and community trust,” she said. “These are not assets that can be easily optimized on a quarterly timeline with a portfolio manager calling the shots from miles away.”

Marylin Anthony, a nurse, said she worked at Waterbury Hospital for 24 years, including the years the hospital was owned by private equity-backed Prospect Medical Holdings. She described how things changed when the company took over. 

“Our ownership started with an email requiring us to refer to our patients as ‘customers’ because they were consumers of healthcare,” she said. “They started counting and rationing our linen. We had a directive to change the linen every third day unless visibly soiled.”

Keynote speaker for the forum was Megan Greenwell, a contributing writer at Bloomberg Business Week, who authored a book about how private equity acquisitions upended the lives of four Americans. She spoke about the loss of labor and delivery wards, using the case of a rural doctor in Wyoming after his hospital, Riverton Memorial Hospital, was purchased by Apollo Global Management, a private equity firm, in 2018.

“Fewer than half of rural hospitals now have obstetrics departments, and that number drops further every year because there are more and more private equity acquisitions every year,” she said. “As financial firms have swallowed up a growing swath of the American healthcare industry, maternity care has become a privilege and one that a growing number of people cannot access.” 

Connecticut has had its own challenges with maintaining rural birth centers, as three have asked for permission to close this decade.

The reach of private equity goes into the education world, too. State Rep. Maryam Khan, D-Windsor, spoke about how private equity firms have been drawn to special education service providers, cutting resources to cash in on the fact that Connecticut has the highest out-of-district placement for special education students in the nation. Khan said 25 of the state’s 88 approved special education programs are owned by private equity.

When legislation was introduced to ban private equity-owned special education programs in the Education Committee this session, Khan said she was surprised to see nonprofit programs also lobbying against it.

“When I asked the question of why are nonprofits lobbying against this, I was told it’s because if they do take private equity, if they have either impact funds or other forms of capital through private equity that would then not allow them to be eligible,” she said.

Housing has been dramatically impacted by private equity, and multiple forum participants described those impacts as negative. Ebony Glover is a resident of Concierge Apartments in Rocky Hill, which was purchased by JRK Holdings out of Los Angeles in 2013. She says the problems in her complex started long before the burst pipes and frozen sprinklers that led to an investigation by Attorney General William Tong’s office.

“The problem started with maintenance, or really with the lack of it,” she said. “I had water leaking up from underneath my bathroom floor for months. I submitted multiple maintenance requests, and they were often closed out as fixed. But nothing had actually been repaired, or no one had come to my apartment to do the repairs. Over time, the conditions got worse. At one point, I had mushrooms growing in my bathroom because of the moisture.”

The housing issues extend beyond rental properties. Dave Delohery, president of the CT Manufactured Home Owners Alliance, said private equity firms and other out of state corporate interests have increasingly targeted manufactured home parks, and that they now control 40% of the parks in Connecticut. While individuals may own their manufactured home, they often still must lease the land the home sits on.

He said the residents of manufactured homes are often elderly, disabled, veterans and people living on fixed incomes who can least afford the massive rent increases private equity imposes after acquiring properties. While people think owners of manufactured homes can simply leave when rent becomes too high, the cost of moving to a new park can range anywhere between $5,000 to $20,000, he said.

“I believe the park owners look at (tenants) every year and say, well, how much can we squeeze out of them this year?” he said. “It affects the affordability of mobile homes for people with modest means and is an ongoing problem. We know residents are being forced to pay these rents, so they’re turning to food pantries increasingly, rent and fuel subsidies, or they cut back on medications.”

State Sen. Matt Lesser, D-Middletown, said while the industries impacted by the encroachment of private equity are different, they’re all facing the same problem. And, he said, if action isn’t taken to regulate and oversee private equity, then their failures would become everyone’s problem.

“When these things go wrong, and we saw it in (Waterbury Hospital), we saw it in some of these nursing home cases, we saw it in Concierge, when private equity fails the public, the law in Connecticut is if residents are displaced because of cold weather or burst pipes from a property, 

the town, the taxpayers have to pick up the tab,” he said. “And same thing when a nursing home fails. The taxpayers have to pick up the tab. So if we don’t tackle this issue, we are putting taxpayer funds at risk.”