Private Equity vs. Public Health with Eileen O’Grady | Crooked Media
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March 07, 2023
America Dissected
Private Equity vs. Public Health with Eileen O’Grady

In This Episode

Across the country, healthcare chains have been buying hospitals up like properties on a Monopoly board — changing their names and shuttering hospitals in rural communities. What’s driving this? The corporate influence on healthcare. Private equity firms with no expertise in healthcare have gotten into the game of consolidation, too, buying up clinics, healthcare companies, and community hospitals and stripping them for their parts. Abdul talks about the consequences and interviews Eileen O’Grady, a researcher and organizer who’s been on the front lines of exposing it.





[AD BREAK] [music break]


Dr. Abdul El-Sayed, narrating: Last week, the U.S. Department of Energy concluded with, quote, “low confidence that the COVID 19 pandemic was caused by a leak from a lab in Wuhan, China.” A radically conservative district court judge in Texas is set to rule on a case that could block access to medication abortions nationwide. A brand new study shows that nearly half of the state and local public health workforce left their organizations between 2017 and 2021. And pharmaceutical giant Eli Lilly slashes the price of insulin by 70%. This is America Dissected. I’m your host, Doctor Abdul El-Sayed. [music break] Today, we’re talking about the corrosive role that private equity plays in health care. Now, if you’re not familiar, private equity is the financial practice of using other people’s money to invest and restructure and often gut small companies, all in the name of short term profit. The unregulated world of private equity has played the villain in many American stories. They were behind the shuttering of Toys R’ Us, RadioShack, and Deadspin. They’re the reason Taylor Swift had to rerecord her masters. But now private equity has turned its attention to something far more insidious than retail blogs or love songs. Even if it’s Taylor we’re talking about here. Across the country, private equity firms are buying up clinics, hospitals, and other health care companies. To appreciate their impact, I want you to think about the hospital you were born in. Given a back of the envelope analysis of our listeners, you were probably born in the seventies, eighties or nineties. The hospital you were born in was probably a true nonprofit hospital owned and operated by some religious organization with a name to match. Saint Someones or X Lutheran or Jewish. Those names, they hearken back to the quaint old times in health care when hospitals were truly nonprofit. The hard work of a charitable organization that raised money to build a hospital, to heal the sick in their local community. Either that or they were actually public like owned and operated by local government. But now, thanks to the pernicious influence of private equity, community hospitals like that are rare. Now, I want you to Google that hospital you were born in. Its name has probably changed. In my case, I was born in Crittenton Hospital in Rochester Hills, Michigan, as was Madonna, by the way. It’s not called Crittenton anymore, though. It’s now Ascension Providence, Rochester Hospital. Mouthful, isn’t it? The story of Crittenton or Ascension Providence Rochester is a case study of the role of private equity behavior in health care. See, the hospital opened its doors in 1967, a suburban outpost of Crittenton General Hospital in Detroit, which itself was an outgrowth of the Florence Crittenton Maternity home that opened its doors in 1897. It was established from the bequest of a New York pharmacist, Charles Crittenton, who had lost his four year old daughter, tragically, to scarlet fever in 1882. Out of his story and pain, he founded a system of truly nonprofit organizations to serve folks around the country. In 2015, the Crittenton Hospital I was born in was bought by Ascension, who claims to be the quote “largest chain of nonprofit hospitals in the country.” They own and operate 2600 health care sites across 19 states. But a nonprofit? Let’s see. The year Ascension bought Crittenton, their CEO took home $14 million dollars. You know any nonprofit leaders making that kind of dough? Yeah, me neither. In fact, just a few weeks ago, Wisconsin Senator Tammy Baldwin lit up Ascension for their shady business practices. In a letter to their CEO, she wrote, and I quote, “Ascension has a mission to serve vulnerable and underserved communities, and they operate as a nonprofit in order to better fulfill this mission. However, I am extremely concerned by the recent cuts to critical programs and squeezing of hospital staff by Ascension hospitals.” She then called out the CEO for failing to, quote, “serve Wisconsin families with affordable undisrupted health care in favor of funneling cash to its investment funds and executives. And here’s the kicker. She says they do this by, quote, “operating like a private equity fund.” She goes on to say Ascension is squeezing staff, closing facilities and extracting cash from its member hospitals for dubious management fees, all to advance its investment activities and provide compensation to its executives. Nonprofit? Yeah, right. But Ascension isn’t alone. They’re just one player in a far bigger market that has been financialized. Treated like just another financial asset by money managers looking to flip companies for profit. And this is happening all over health care, whether it’s chains like Ascension, buying up hospitals and other health care centers, stripping them down by cutting services, cutting wages, or even shutting down centers that aren’t profitable, or it’s actual private equity firms buying up small practices in local communities and doing the same thing. It’s happening all over health care. And the consequences? They’re staggering. For providers, it means that wages are getting squeezed while workloads skyrocket. For patients, it means the loss of critical services or the loss of entire hospitals in your community. But it also means the destruction of relationships you might have had with a long standing institution in your own community. And for all this, that profit margin, the cream on the very top means that the cost of health care just keeps going up, translating into higher health care costs and more people priced out. Today, we’re cutting into all of this. I wanted to understand how private equity works and all the ways it’s reshaping health care and I came upon the work of Eileen O’Grady, our guest today. She’s a researcher and organizer at the Private Equity Stakeholder Project. She’s taking what she’s learning and fighting back. I invited her on to talk about how private equity works, what it’s doing to our health care system and how we take it back. My conversation with Eileen O’Grady after this break. [music break] 




Dr. Abdul El-Sayed: Can you introduce yourself for the tape? 


Eileen O’Grady: Yeah. So I’m Eileen O’Grady, and I am the research director uh for health care for the Private Equity Stakeholder Project, um and we’re a nonprofit watchdog organization looking at private equity and uh sort of the broader financial industry and how that impacts people’s lives. 


Dr. Abdul El-Sayed: Just stepping all the way back here. What is private equity? 


Eileen O’Grady: That is a great question. So private equity is a kind of investment strategy uh in a similar vein as other sort of things we’ve heard of, like venture capital or hedge funds. Um. They’re essentially investment firms that raise funds to buy companies that they then control, and they try to hold on to those companies for a handful of years and during that time find every way they can to increase those companies value and then sell them at a profit. And they do this with usually a bunch of different companies um at the same time. And they do it over and over and over again across lots of different industries. So in some ways, it’s, you know, it’s pretty straightforward. I think what differentiates private equity from other kinds of investment strategies um is sometimes the strategies they use. So they often charge the companies they own fees for, for the privilege of owning being owned by them. They use a lot of debt, um usually leveraged onto the companies that they own. But it really can be boiled down to to an investment strategy. 


Dr. Abdul El-Sayed: Hmm. So what makes them private is that they’re taking interest usually in privately held companies as opposed to public companies? 


Eileen O’Grady: That’s correct. Yeah. So the companies that they buy are not traded on a stock exchange. They’re you know private in the sense that they uh are subject to sort of less regulatory scrutiny and they don’t really have to disclose very much about what they do, which is, you know, often a boon for this kind of investment model. 


Dr. Abdul El-Sayed: And when we talk about equity, you know, it’s always fascinating to me because that term uh has multiple almost counterposed meanings, right? So equity as in the capital stake that you have in a company, as opposed to the way that we talk about equity in uh our line of work, which is about um access to equal opportunities. [laugh] Um. 


Eileen O’Grady: Yeah. 


Dr. Abdul El-Sayed: And so how do you think about like an equity stake? It’s like the percentage ownership that’s the the business uh lingo for it no? 


Eileen O’Grady: Yeah, that’s exactly it. It’s the percentage ownership. So it means that um they’re basically taking a stake of the company that guarantees them, you know, some percentage of the profits. In many cases, private equity firms will outright buy the whole company, meaning they then control the company. They get to choose the board. They get to make, you know, all of the sort of business decisions related to what that company does. 


Dr. Abdul El-Sayed: And when we think about the private equity business, um what are the kinds of things that these companies do to make money? 


Eileen O’Grady: Yeah. So the business model for private equity firms uh is is very focused on increasing cash flow. And so private equity firms, when they buy a company, will do whatever they can to increase those cash flows over a pretty short period of time. So usually private equity firms only hold on to companies for around 4 to 7 years, which um I think is considered relatively short term. And to increase cash flow, they, they you know, do a bunch of different things depending on the industry. There are a couple a couple of things that that, you know, many private equity firms do across the board. So one of those things is charging fees to the companies that they own. So say I buy a grocery store, uh I when I buy that grocery store, can then charge the store $1,000,000 every quarter or every year um for usually like a vaguely defined set of of management or advisory services. I don’t actually have to provide those services. I don’t really have to do anything. I own the store, uh but just for the privilege of being owned by me, that store has to pay me $1,000,000 a year. So that’s one sort of guaranteed cash flow that private equity firms can can essentially siphon out of the companies they own. I think one of the other ways is just growing really big. So one thing that private equity is known for is buying lots of small companies and combining them into one big company. Um. And if they do that, well, that’s all they really have to do to make money is uh sell the big company at a profit. And then, you know, there are lots of other ways we see. Basically cutting costs to increase profit, um which you know I’m sure we’ll talk about. Can can be very harmful, particularly in health care. 


Dr. Abdul El-Sayed: And where do they get the money to buy these companies to make these initial investments? 


Eileen O’Grady: That’s a good question. Um. A couple of ways. Private equity firms mostly don’t use their own money. They use money that they raise from institutional investors, which are usually things like public pension systems or university endowments. So they’ll go to all these public pension systems who are trying to basically generate money to be able to pay out their retirees and get those investors to commit to a fund and then use all of their pooled money to then buy up a bunch of companies, hold onto them for a certain amount of time, you know seven years, sell them and then return the money um return some of the profits to the investors and then keep a bunch of money for themselves as well. So that’s that’s one way we can think about where private equity firms get money. I think, you know, potentially the more troubling way is using a lot of debt. So private equity firms will often borrow money against the companies they buy uh instead of putting in their own money um when it’s called a leverage buyout. So say I want to buy a hospital. Say the hospital costs, you know, $100 million dollars. I can take out a loan for $80 million dollars, but I’m going to put that loan on the hospital. So the hospital now owns $80 million dollars. I’ve just put in $20 million dollars of my own money. But when I sell the hospital, I get all the money back from selling the hospital. Hospital still has to pay back $80 million dollars in debt. So that’s that’s basically a leverage buyout. Um. And it is the bread and butter of private equity. 


Dr. Abdul El-Sayed: So what you’re describing is a investment company that um figures out how to buy out a set of small, privately held companies, at times charges them for the privilege of quote, “being managed by them” and um seeks to make a profit uh by either stripping down costs, um what they call rolling up, or combining a bunch of like uh uh goods, um selling them as a package or uh figuring out how to actually grow them and and and make them larger but really, the what you’re describing has a couple of of key aspects. Number one, um they’re they’re oftentimes um sort of leveraging against the potential for a big win um that doesn’t always pay out. But number two, um even in the short term where they truly are growing a company, it’s always a short term gain. There’s no long term question about what the long term sustainability is, let alone the folks who um who use these these companies that are being bought and sold uh like chess pieces on a chessboard. And I want to ask, um what is the role of private equity in health care? Um. What you’re starting to appreciate is that if there’s no long term responsibility to either the providers of health care or, even more important, the patients on the other end of health care. You start to see what what some of the costs can be. So can you tell us a little bit about the role of private equity in health care, the way that private equity has engaged in the health care system um and what some of the consequences have been? 


Eileen O’Grady: Yeah, so private equity is immensely interested in investing in health care. And I think like we’ve seen private equity invest in virtually every industry you can imagine. But health care is one of the top targets alongside tech. It is it’s it’s up there as as number one or two. Um. And, you know, I think there’s a variety of reasons for that. We have an aging population with you know more complex needs, so more opportunities to profit. We have, um you know, in many areas of the health care industry, a lot of fragmentation. Private equity firms see opportunities to to sort of engage in enroll ups. Um. But, you know, overall, private equity is very interested in health care, and that’s you know pretty much always increasing. Um. So we’ve seen private equity firms invest in virtually every sector of the health care industry. Health care services, so things like hospitals, hospice, nursing homes, behavioral health, um durable medical equipment. Two private equity firms actually dominate the wheelchair parts manufacturing industry. Pharmaceuticals, uh you know, clinical trials, uh medical staffing, like really everything you can think of in health care, private equity firms are there. Uhn. And, you know, it ebbs and flows, I think, where private equity firms focus which specialties they’re interested in. So for for many years, nursing homes was a really popular target. Uh. We’re now seeing a shift to home health care and hospice or, you know, uh things like anesthesiology was really popular for a few years. Now it’s gastroenterology or podiatry um optomology. So the various sort of subsectors that are in vogue change. Health care has always been, or at least for the last decade or so, been incredibly popular. 


Dr. Abdul El-Sayed: Let’s just sort of take an example of that. Let’s say you’re a gastroenterologist and uh you you uh may work at a practice in which you’re a partner. Private equity company rolls up, what happens next? 


Eileen O’Grady: You know, it varies a lot. So for for things like physician’s practices and this is true for for dental practices as well, there are rules basically against direct private equity ownership of practices, laws limiting the corporate practice of medicine. So what private equity firms will do instead of buying a physician’s practice directly is they’ll set up management companies um that are designed basically to own the parts of the business, like business and administrative services, basically everything except clinical operations. Um. And and that’s the way that they’re able to get around these laws that prohibit the corporate practice of medicine. But what’s difficult about it is like it’s a very murky divide between clinical operations and business operations. Clinicians may have agreements with private equity firms or the the companies that own the practice management company that have revenue sharing agreements, that have bonuses tied to productivity, things that could potentially incentivize physicians to have to over treat patients, that could overbill patients. And so it creates these sort of perverse incentives. I and I mean, you know, this is like similar to all for profit health care. But what the private equity business model does is it amplifies all of those incentives. 


Dr. Abdul El-Sayed: Mm. So you basically end up being a physician who may be part of sort of a practice that is now, in effect, contracted to a management company that’s owned by a private equity firm. And the way that they change your business practice is really all about jacking up the revenue. So you know where you are seeing, let’s say, a patient every 12 minutes. Now it’s a patient every 10 minutes. Um. They’re rewarding billing for certain procedures in a way that uh maybe you weren’t rewarded in the past so now you’re incentivized to do a lot more of those procedures. All the while, that same management company is now um working at several other GI practices that are uh owned by the same private equity firm, all setting up for a roll up. Right. Like, that’s kind of that’s kind of the the milieu in which you find yourself? 


Eileen O’Grady: Yeah. So, like, you know, I’ve looked at this recently in in dental care where it’s it’s a similar setup where private equity firms can’t outright own dental practices, but they’ve created these these companies called uh dental service organizations or DSOs, which are essentially physicians practice management companies that manage everything about a dental practice except the clinical operations. So you know they do all the finance administration and marketing. There there is a company that I I wrote about called Cool Smiles, which is a pediatric dental company that um mostly treats children on Medicaid. And a couple of years ago, they paid an almost $24 million dollar settlement uh with the government for allegedly pressuring dentists to perform medically unnecessary root canals on babies. 


Dr. Abdul El-Sayed: Mmmm. 


Eileen O’Grady: Um and and and, you know, kids died at this company. And, you know, even even the government alleged it was it was the profit motive that drove these practices that, you know, ultimately harmed kids and and you know in some cases allegedly led to their deaths. 


Dr. Abdul El-Sayed: Hmm. You shared a bit in that example about what this means for patients and all of us who are either patients or would be patients. But can you talk a little bit uh more about what the impact of private equity in the health care system has meant for uh the nature of health care in our country. 


Eileen O’Grady: That’s a big question. You know, I think you could think about it sort of from two sides. I think the presence of private equity in health care in some ways sort of reveals existing weaknesses in the health care system as well as exploits and exacerbates them. So so, you know, it takes advantage of a sort of lack of regulation, of a fragmentation of of, you know, many, many opportunities to find profit off of of people’s health. Uh. And it it it takes all of those opportunities and it uses those opportunities to you know ultimately reduce the quality of care for people. Um. And, you know, I focus on on private equity in health care. Um. I think private equity is a massive problem um across you know our economy and its impacts on you know various aspects of society. But I also think it is a symptom of something sort of much, much worse, which is that our health care system is broken. And private equity, you know, investing in health care absolutely takes advantage of that. 


Dr. Abdul El-Sayed: Mmm. What you’re describing is almost like the mold that grows in the flooded basement. It’s like our health care system already uh exists to monetize your body in a particular way. And what private equity firms do uh is accelerate all of the gaps of that and find ways to monetize better, more efficiently, more effectively. So where you are spending, um you know, your 12 minutes with your doctor now, it’s going to be 10 minutes where you were getting an objective assessment of your illness you’re now getting an assessment of your illness that’s shaded by a doctor’s incentive to do the the most uh possible health care that bills for the highest possible amount of money. Where you had a relationship with a preexisting doctor that you knew for a long time. You’re now being seen by a clinical staff that you don’t know you may never have met and um may not be there the next time you come around. Um. And where your uh referrals were based on good faith relationships between doctors your doctor thought were really good. They’re now based on referrals in a system of other owned private equity companies. Right. And um all of that. Right. Redounds to the worst care to add insult to injury, literally. You’re also paying a lot more for it, right? Because the whole point is to bill you for all your possibly worth. And, um you know, the interesting thing about about private equity is that it’s not just on the health care side. And this is something listeners of the podcast obviously are familiar with. My hobbyhorse um uh we’ll say downright obsession is that it’s also on the insurance side. And um you have private equity companies coming in and figuring out how to roll up smaller insurers that used to exist based on strong relationships in the community and now are leading us to fewer and fewer options, none of whom have our best interests at heart. Um. You talked about the Cool Smiles case. Um. What are some of the other standout cases uh that you might point us to to understand how private equity has um shaped the American health care landscape? 


Eileen O’Grady: I think one of the most illustrative cases that I’ve seen is uh Prospect Medical Holdings, which is a safety net hospital chain that was owned by a private equity firm called Leonard Green and Partners. Um, a safety net hospital is is a hospital that has committed to treat patients regardless of their insurance status. Um. And so, you know, our often critical uh pillars in communities, especially with, you know, lots of folks who are uninsured. This private equity firm, Leonard Green, um bought these hospitals uh loaded them up with debt over the course of their ten year ownership and then used used the debt to then pay themselves the private equity firm hundreds of millions of dollars. So essentially used these hospitals as a platform to raise debt to pay itself. And all the while, these hospitals are suffering profoundly from major quality issues. They had in one of the hospitals, you know, holes in the ceiling where the rain was coming through. An elevator that was broken for over a year. There were two elevators in this hospital. One of them was broken for a year. There is mold growing out of the wall at a nurse’s station. They they weren’t paying their bills for supplies. There was a hospital that was put under review by regulators for for conditions that put patients in uh immediate jeopardy um and and all of this is going on. The private equity firm is is raking in cash through these dividends. And not only that, they they they took on debt to these hospitals to pay themselves. They paid back the debt, but only by selling the hospital’s real estate. So now these hospitals don’t own their most valuable asset, their real estate. They’re now paying rent to a landlord, a re– actually a real estate investment trust. They’re paying more in rent than they were paying on their mortgage. And and after ten years, the private equity firm said, okay, I think we’re done. We made our money. We’re ready to go. They were able to sell their stake to the minority owners in the hospitals. And now those hospitals are closing down. So their hospital system in the Philly area, Crozer Health, uh shut down their hospice. They had you know not enough staff to continue um their emergency services. And everything is is sort of going down the drain. These are safety net hospitals. And meanwhile, Leonard Green has told its investors, this is actually yeah, you know, we’ve got a lot of bad headlines, got a lot of bad press. You know, people are mad at us, Regulators are mad at us. But we actually made a lot of money on this investment. So don’t worry about it. We’re going to be fine. And they’ve moved on. And this, you know, Leonard Green is a private equity firm. Frequent health care investor. They also own a dental care company where they’ve taken dividends like this by using debt. They’ve been sued, you know, by multiple attorneys general for, you know, allegedly uh false marketing for various schemes that prey on elderly people. And so this is not just a one time thing. This is a business model. It’s a pattern. 


Dr. Abdul El-Sayed, narrating: We’ll be back with more with Eileen O’Grady after this break. 




Dr. Abdul El-Sayed, narrating: And we’re back with more of my conversation with Eileen O’Grady. 


Dr. Abdul El-Sayed: I want to ask right, because one of the, one of the the pieces of this that is really frustrating is one of the sources of the money that invests in private equity firms. Right. You can imagine that this is a pension fund. So, you know, a pension fund for teachers or for a particular union. And these are people who often would have worked in the very institutions that are being raked over and stripped for parts by these private equity firms whose money is now tied up in it. How has um, frankly, that just the sheer immorality of that played out? Has there been pressure to disinvest in some of these firms? Um. What does that look like? And has it been effective? 


Eileen O’Grady: Yeah, I mean, it really runs the gamut. I think a lot of times. All this stuff flies under the radar. You know, the nature of private equity is that it is private. It’s really opaque. So in in you know many of the situations where this kind of thing is happening, the folks whose money is being invested in these companies that are doing it have no idea. When it does come to their attention. Like when you know we bring it up with them, for example, a lot of times they’re pissed, they’re uncomfortable, or they’re disturbed by it. But it sort of gets to like one of the sort of horrible, I think, connections to the fact that people’s retirement security has slowly been eroded for decades and pensions are underfunded, struggling to you know be able to to make payments to their retirees. And they’re sort of told that, you know, the only way that pensions can remain solvent is by investing in things like private equity. And so they sort of have a fiduciary duty to allow their pensions to be invested in things that you know can harm people. I think that’s you know, that’s the sort of grim take on it. But I do think there’s been a lot of, you know, other sort of really good examples of pension funds that say, actually, we’re not okay with this. So in the example that I talked about earlier with Prospect Medical Holdings, the retirement system of the state of Rhode Island was invested in Leonard Green. And in the in the fund that owned um the hospitals, uh including a hospital, a couple of hospitals in Rhode Island itself. And the the treasurer who oversees the Rhode Island pension system, once he found out about it, he was pissed and he wrote Leonard Green a letter and he said, we’re never going to invest in you again unless you you know deal with the situation, unless, you know, the workers at that hospital get their pension back, unless you, you know, put put money back into these hospitals that you stole. Uh and I you know, that was incredibly powerful. 


Dr. Abdul El-Sayed: How do private equity firms justify themselves? Do they? Do they have an argument for some value that they add beyond, you know, marauding uh private companies? 


Eileen O’Grady: Yeah, I think it depends on the industry sort of what the uh justification is. I think in an area like rural health care, which I’ve been looking at recently, it’s that these hospitals would shut down if we unless we you know buy them. And so really we’re the saviors of the health care system because we’re we’re rescuing struggling companies. I think that’s one justification for it. I think, you know, other justifications are that there aren’t enough behavioral health providers. There is there is an acute shortage of of mental health providers in this country. And private equity firms buying and expanding behavioral health companies are addressing that shortage. So, you know, it really does depend on on the industry. I think there are also a couple, you know, some some practices by private equity firms that they really don’t have a justification for. So this practice of saddling the companies they own with debt and then using that debt to pay themselves special dividends, from what I can tell, their only justification is, well, we don’t do it that much, so don’t worry about it. [laugh] So, you know, there’s there’s a certain degree of self-awareness there. 


Dr. Abdul El-Sayed: Are there any private equity firms that do it the right way? Like you could imagine a private equity firm who says, you know what, we really do believe in high quality health care. We’re going to buy distressed um hospitals and we’re going to only operate to improve their uh management and then sell them um because we made them better. You could imagine that model. Does that model exist? Um. Is it even possible to do that way? 


Eileen O’Grady: I can imagine that model. I have not seen it. Um. I would hesitate to say that that no good sort of private equity investment in health care exists. Uh. I am not currently familiar with any. 


Dr. Abdul El-Sayed: Hmm. So I guess I guess the question is why not? Right. Because I could imagine someone saying, listen, I you know, I’m from a rural town and I went to business school and I really, really care about rural hospitals. And we’re going to be the number one manager of high quality rural hospitals. And we really are going to run them for profit. We’re going to figure out this profit model. Is it just because the short term profit is so easy to get that it’s not worth doing it the right way? Or is there something else about the way that um these firms are incentivized? 


Eileen O’Grady: Good question. I mean, I think really that the private equity playbook is to double or triple your investment over a couple of years. And so if we’re talking about a traditional private equity firm that has that goal in mind, I just don’t think that there are very many kinds of health care companies where it’s possible to do that without cutting costs in ways that really hurt patients and workers. I think, you know, you could sort of strike gold on, you know, some kind of, you know, health tech investment, uh uh you know, clinical trial or or, you know, medical device that, you know, really changes the game and makes a ton of money. And, you know, you don’t you don’t have to cut costs in ways that hurt hurt patients or hurt care to do that. Um. 


Dr. Abdul El-Sayed: But then that really wouldn’t be private equity, that would be venture capital at that point.


Eileen O’Grady: Yeah. Exactly. So, you know, I think that it is very possible that the private equity model is just fundamentally at odds with with providing good quality care and, you know, quality health care jobs. Um in which case, I would say that, you know, I would be hard pressed to find an example of someone who’s doing it right. 


Dr. Abdul El-Sayed: So it really is that that sort of decoupling of the function of the business. From the need to have a quick exit and make two X or three X your investment. Right. It’s the fact that that’s what the investors are expecting um that makes this so caustic because, you know, at that point it really is uh impossible to truly turn something around um and then and then sell it for profit that fast. Particularly we’re talking about, you know, a quote “distressed asset” as they would call, you know, a poorly functioning rural or urban hospital. And what we’re getting at is, is a broader trend across our economy of financialisation, the decoupling of the ability to make a dollar from the the the good governance of a business or the high quality management of a business. And, you know, the example that I always pull um from here in Michigan is that, you know, Ford at one point, despite the fact that they were making 15% uh profit, decided to cut some absurdly large number of their workers because GM was doing it. And that was entirely because some market analyst on Wall Street decided that um they weren’t automating fast enough despite being a truly profitable company. And um all of this is about focusing or a system that focuses on the short term incentives. What’s happening next quarter or what’s happening next year? Am I going to get two X or three X in two or three years versus how do we manage a commercial property well so that it is profitable? And, um you know, and returning and, you know, wherever you stand on the economic spectrum. Right. Um. There’s a there’s a real difference between that decoupling versus being invested in the long term functioning of a system. And it’s that disinvestment in the long term functioning that is truly detrimental to health care workers and and most of all, patients. I want to ask you, you know, as we think about where we go from here, have there been efforts to regulate the impact of private equity? You did mention the barring of the corporate practice of medicine, but has there been more effort uh to really zero in on the caustic impact of private equity specifically uh and to address it? 


Eileen O’Grady: Yeah, there there has been increasing, I think, political appetite for for reining in um private equity. There currently isn’t much in the way of regulation of the private equity industry. And so I think like recent attempts have started with transparency. Uh. So just like trying to get private equity firms to disclose anything close to what public companies have to do uh so we can sort of better wrap our heads around what the impact is. I think that’s where it’s kind of started. Um. There was a bill introduced by Elizabeth Warren a few years ago called uh the Stop Wall Street Looting Act, which would have done a few things. Um. I think one of the main things was was creating joint liability for private equity firms and the companies they own. And so it’s basically saying if a company that a private equity firm owns goes bankrupt, for example, private equity firm is to some extent on the hook for that. Or if a company that a private equity firm owns gets sued, particularly for practices related to private equity ownership, say, you know, defrauding Medicare by overbilling for procedures, the private equity firm is to some extent on the hook for that as well. So it kind of seems obvious to me anyway, like why aren’t private equity firms liable for the actions of their portfolio companies if they’re the ones controlling them? But that’s one thing the Stop Wall Street Looting Act aimed to do. Um. It also aimed to put limits on fees that private equity could charge the companies they own on the use of dividends that they fund with debt. So it it was a really ambitious bill um that unfortunately uh did not pass. I think that there are a lot of pro finance, you know, Democrats and Republicans in in Congress that um that were not interested in, you know, pissing off some of their biggest donors. But uh at the state level, I think there’s been some really positive developments. So in Pennsylvania, uh there was a set of bills introduced last year that specifically targeted private equity ownership of hospitals um that included protections for workers from layoffs, things like that. Um. And I guess also at the at the national level, the Biden administration um just proposed a new rule for CMS, um for for private equity ownership of nursing homes. Basically, nursing homes that are owned by private equity firms now have to disclose whether they’re owned by private equity firms, which again, like feels a little bit like low hanging fruit. But when you think about how opaque and shadowy the private equity industry is, these are really significant proposals. Um. And, you know, especially given given the political climate, and what’s possible. It’s you know a step in the right direction. 


Dr. Abdul El-Sayed: You know, what’s interesting what you’re getting at is there are two words at the root of so many of the ways that um our corporate capitalist system have uh have overtaken the best interests of our society. And they’re usually campaign finance. Um. And, you know, you think about private equity firms uh and the ways that the Supreme Court’s interpretation of our First Amendment renders money into speech and its interpretation of our 14th Amendment renders corporations into people um that then uh create these spaces where these extremely profitable but highly dubious corporations then can spend money to protect their own practices um against regulation. And it all comes back uh to this, whether it’s the system of our health care itself or the ways that these um profiteers will exploit uh our health care system. Um. I really appreciate you sharing uh a bit more about the caustic role of private equity in our health care system. I’m hoping to end on a moment of hope, and I know you are a research and campaign manager, meaning that you spend your days organizing people to take um this on. Um. How can people get involved in trying to push back against the role of private equity in health care in their own communities? 


Eileen O’Grady: So I work a lot with grassroots community organizations, with labor unions, worker centers, folks who have seen the impacts of private equity sort of in various aspects of their lives and are choosing to fight back in various ways. So uh joining a union and making sure that they have a collective voice with their coworkers to ensure that uh their jobs are protected um, you know, protesting against a private equity firm that enters their community trying to, you know, convert a nonprofit community hospital into a large corporate chain. So I think a lot of it is is sort of, I guess, being skeptical of, well, everything. Um. But I think being being sort of on the look out, being skeptical and where you see a fight happening in your community, joining it, um whether that means, you know, joining a union, joining, joining a protest, joining a sort of grassroots fight and just sort of staying vigilant. 


Dr. Abdul El-Sayed: I really, really appreciate uh you taking the time. Um. Our guest today was Eileen O’Grady. She’s a research and campaign manager with Private Equity Stakeholder Project. Eileen, thank you so much for taking the time today. 


Eileen O’Grady: Thank you. [music break]


Dr. Abdul El-Sayed, narrating: As usual. Here’s what I’m watching right now. This happened last week. 


[clip of unspecified news reporter 1] Well, the issue of where the pandemic began and how it began has never really gone away. But it’s back center stage because U.S. intelligence officials are now redoubling efforts to investigate the origins of COVID 19. 


[clip of unspecified news reporter 2] The head of the FBI in a brand new interview is saying the agency thinks COVID may have originated, right, may have started with a lab leak in Wuhan, China. 


[clip of unspecified news reporter 3] The FBI has, for quite some time now, assessed that the origins of the pandemic are most likely a potential lab incident in Wuhan. 


Dr. Abdul El-Sayed: That’s right. The Department of Energy did conclude that the virus was accidentally leaked from the Wuhan Institute of Virology, where coronaviruses, very similar to SARS-CoV-2, were being studied. The part you probably didn’t hear amidst all the alarmism that the conclusion had, quote, “low confidence”. Stepping back, you might wonder why the Department of Energy is making this kind of determination in the first place. That’s because they oversee the national laboratories, together with eight other agencies they form the, quote, “intelligence community” and taken collectively, they are unintelligible on the subject. Along with the DOE, the FBI has also concluded with, quote, “moderate confidence” that the virus originated in a laboratory. Four other agencies, though, have concluded with a low confidence that the virus originated naturally jumping from an infected animal likely a bat into humans. Two others, including the CIA, on the fence. But I want you to think about the implications of the right wing trolls currently using the DOE’s announcement to argue that there’s been some sort of conspiracy to cover the origins of COVID-19 up. First they literally just announced it. And second, if there was some big bad conspiracy, why would the U.S. intelligence community be so publicly torn about the whole thing? This doesn’t sound like a conspiracy, which is defined as literally many people conspiring to hold the truth from people. It sounds like a really hard technical question whose answer is very difficult to figure out. That’s not to say that we shouldn’t think long and hard about what the possibility of a lab leak means for the way we carry out science. If, in fact, COVID did emerge from a lab, it suggests that there are certain kinds of experiments that just aren’t worth doing. So-called gain of function research where we deliberately modify viruses to increase their virulence or transmissibility to devise better treatments or prevention strategies simply aren’t worth the risk. Don’t get me wrong, it’s not that I don’t think that there’s some theoretical benefit to testing our inventions against more powerful viruses. It’s that I think the harms are potentially way worse. And according to the DOE, albeit with low confidence, they’ve already borne out. Meanwhile, in Texas, a federal court judge is set to rule on a case that could shape the fate of access to abortion pills nationwide. The case was filed by a coalition of anti-abortion organizations called, quote, “the Alliance for Hippocratic Medicine”, who filed the case last year. Despite being headquartered across the country, the coalition conveniently filed in Amarillo, Texas, where District Court Judge Matthew Kacsmaryk, known for his anti-abortion ideology, conveniently presides. The case is attempting to force the FDA to revoke its authorization of mifepristone, the first of two pills in the most common medication abortion regimen. It does so on allegations that the medication is not actually safe for women and girls and that the FDA did not follow proper protocols when it approved the drug in the year 2000. First, let’s talk about what the ruling would mean for abortion access. The judge could rule any day now, possibly forcing the FDA to rescind its authorization and theoretically robbing people nationwide of this medication. But there are a couple of safeguards here. First, the FDA would appeal the case immediately, and they also have the option to just ignore the order. There’s also an alternative case brought forward by GenBioPro, a manufacturer of abortion medication that does almost exactly the opposite of this case. It’s asking a judge to preempt state bans on the medication. Finally, while the two medication regimen is preferable, this lawsuit only targets the first medication and the other medication Misoprostol can be used alone, safely and effectively. But to understand the impact of this ruling on abortion access, remember that medication abortions do account for over 60% of all abortions, and they’re also more discreet and easier to access, offering a critical lifeline for people who can’t access abortion procedures in states that have banned them. But this case has implications even beyond abortion access. This would be the first case in which a court would have forced the FDA’s hand, meaning that ideology would, for the first time, trump science in decisions over medication authorizations in the U.S.. That is a dangerous precedent to set and one that could be leveraged against all sorts of other treatments. We’ll update you with more as we hear it. A new study out yesterday found that between 2017 and 2021, nearly 50% of the state and local public health workforce left their jobs. What’s worse, it was nearly three quarters for those under 35 or those who had been in those jobs for less than five years. I want you to think about what that means. That means that nearly half of the state and local public health infrastructure turned over and many of them have never been replaced. A whole generation of public health’s future is rethinking their career decisions. That should set off alarm bells for all of us. These are the folks on the front lines of bringing this pandemic to a close, of fighting the next one if it comes along. And if one of the lasting consequences of this pandemic is that we can’t fight the next one because people just don’t want to do this work anymore? We’ll be in even bigger trouble next time. So how do we fix it? Sustained, consistent investments in local public health. But instead, we’re getting the opposite. Communities are gutting their public health infrastructure and vilifying public health workers. There is some silver lining in the cloud. Enrollment in master’s and public health programs is up across the country. For all of us in this field, they can’t graduate fast enough. But there has been some good news this week, too. 


[clip of unspecified news reporter 4] Under pressure from Congress and the American people, drug maker Eli Lilly announced it will reduce prices for some of its most commonly prescribed insulin. 


[clip of unspecified news reporter 5] Eli Lilly says it will cap out-of-pocket costs for insulin at $35 a month. 


Dr. Abdul El-Sayed: That’s right. Pharmaceutical company Eli Lilly announced that they would cut the price of insulin by 70% and cap the out-of-pocket price at $35. I’m not one to call a truce with a pharmaceutical company, but, Eli, for today and today only. You’re good. Make no mistake, though, I’m not giving them credit. All the credit goes to the activists and advocates who’ve been fighting for affordable insulin all along. People like our guests at T1 International, Public Citizen and so many others whose activism, advocacy and hard work made this moment possible. Don’t forget, the patent for insulin was sold for $1, one buck, and these companies, Eli Lilly included, have made millions and millions on it. And meanwhile, upwards of a third of Americans with diabetes have to ration their insulin, risking complications or death because, well, they can’t afford it. Make no mistake, though, this fight’s not over. Not until every single American can afford the insulin they need. But this eh it’s a great start. That’s all we’ve got for today. On your way out. Don’t forget to rate and review. It does go a long way. Also, if you love the show and want to rep us, I hope you’ll consider some America Dissected merch. Check us out on the Crooked store. [music break] America Dissected is a product of Crooked Media. Our producer is Austin Fisher. Our associate producers are Tara Terpstra and Emma Illic-Frank, Vasilis Fotopoulos mixes and masters the show. Production support from Ari Schwartz and Ines Maza. Our theme song is by Taka Yasuzawa and Alex Sugiura. Our executive producers are Leo Duran, Sarah Geismer, Sandy Girard, Michael Martinez, and me. Dr. Abdul El-Sayed, your host. Thanks for listening. [musical break] This show is for general information and entertainment purposes only. It’s not intended to provide specific health care or medical advice and should not be construed as providing health care or medical advice. Please consult your physician with any questions related to your own health. The views expressed in this podcast reflect those of the host and his guests and do not necessarily represent the views and opinions of Wayne County, Michigan, or its Department of Health, Human and Veterans Services.