In the U.S., the growing role of private equity firms in health care is coming under heightened scrutiny, with Senate committee hearings and a cross-government public inquiry launched earlier this year.
“When private equity firms buy out health-care facilities only to slash staffing and cut quality, patients lose out,” said Federal Trade Commission Chair Lina M. Khan in a statement.
The U.S. Federal Trade Commission and two U.S. departments are looking at whether consolidated ownership may sacrifice patient care and worker safety to generate profits for private-equity investment firms, while costing taxpayers.
In the U.S., companies backed by private equity firms manage emergency rooms and anesthesiology practices. Private equity firms are even buying whole hospitals in the U.S.
That’s not happening in Canada, but private equity investment firms have bought up facilities outside of hospitals, starting about 25 years ago with long-term care homes. That arrangement didn’t show up on the public radar until the COVID-19 pandemic emergency, which hit care homes exceptionally hard.
Canadian researchers have found a disproportionate number of deaths in long-term care residences owned by private equity firms and large chains.
As some provinces welcome private equity in public health care, the firms are increasingly involved in nursing homes and surgery clinics. Here’s what experts say has already happened and what could be around the corner.
Private equity in Canada so far
So far, private equity firms have bought clinics outside of hospitals in Canada offering services including:
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MRI scans in British Columbia, which the provincial government then brought back into the public system because wait times grew too long.
Provinces still pick up the tab for patients’ medically necessary surgeries, such as cataract removals or hip and knee replacements.
One company, Clearpoint Health Network, owns a chain of private surgical centres running 53 operating rooms across the country.
Clearpoint is wholly owned by the $1.5 billion private equity firm Kensington Capital Partners Ltd. Kensington launched the chain through a $35 million purchase of clinics in Ontario, Manitoba, Alberta and B.C. in 2019.
Private equity defined
A private equity firm is an investment firm that purchases private companies that are not listed on stock exchanges and therefore has less regulatory oversight.
In health care, private equity firms may buy up independent clinics to create chains. The goal is to achieve economies of scale by, for example, purchasing medications in bulk or hiring a bookkeeping firm to manage multiple clinics — creating profits for shareholders.
Economist Armine Yalnizyan in Ottawa observes corporate consolidation in health care, long-term care and child care in Europe, the U.S., and increasingly in Canada. Yalnizyan is the Atkinson Fellow on the Future of Workers.
Private equity ownership usually consists of short-term investments, about four to seven years, before the company is sold.
“Companies are bought and held just long enough to make the whole enterprise more profitable and then they’re flipped for a higher price” to another company, Yalnizyan said. “It’s kind of like house flipping, except it’s corporate consolidation.”
What’s the evidence?
Various studies have tried to quantify the benefits and harms of private-equity ownership in health care.
A 2023 systematic review published in the BMJ looked at 55 studies from eight countries including Canada, mainly focused on private-equity ownership of nursing homes, hospitals, dermatology clinics and ophthalmology clinics.
In their review, Joseph Bruch of the University of Chicago and co-authors said evidence across studies suggest mixed impacts of private equity ownership on healthcare quality, with greater evidence that this type of ownership “might degrade quality in some capacity rather than improve it.”
Research on impacts of private equity ownership on health outcomes and costs to operators were less prevalent, they said.
The American Investment Council, which advocates for the private equity industry, disagrees with FTC’s Khan.
The council said it provided the FTC with independent research and data demonstrating the value of private equity investments “in supporting quality, affordable health care,” such as investing in nursing homes that receive less federal support, funding treatments and expanding access to urgent care in rural communities.
Karen Palmer, a health policy researcher and analyst at Simon Fraser University in Burnaby, B.C, began her career in the U.S..
“At the moment, one single private equity investment firm owns the company that owns 14 of our surgical centres across Canada,” Palmer said, referring to Clearpoint.
“I’m concerned about a monopoly and the power that one company has in our health-care system when they own so much of our surgical capacity.”
U.S. lawmakers are investigating the practice of private equity firms acquiring hospitals. Although the role of private equity in the Canadian health-care system is more limited, it is growing and some research shows it can lead to worse patient-care outcomes.
In a response to questions from CBC News, Clearpoint said its mission centres on patient safety and patient experience, adding it is a “trusted partner of public health authorities in every province where we operate.”
“Delivering essential but lower-acuity, routine day procedures in community surgery centres allows hospital operating rooms to focus on more complex, critical surgeries,” Mark Angelo, chief operating officer of Clearpoint Health Network, said in a statement.
“All centres follow the provincial requirements for staffing and clinical quality standards. Our focus is providing comprehensive surgical procedures that do not typically have optional add-ons or upgrades.”
In 2023, U.S. researchers found a 25 per cent increase in infections and falls in private-equity owned hospitals compared with hospitals fully under Medicare, a federal health insurance program in the U.S. that covers seniors.
Palmer said in long-term care homes in Canada, private equity is also tied to more falls and infections related to having fewer staff. She wonders if corners get cut to carve off funds governments paid to the facilities line the pockets of shareholders.
Transparency questions raised
Because private equity firms aren’t subject to the same rules as publicly traded companies, there’s little transparency when it comes to private equity’s involvement in the health sector, Palmer said.
Also, most provinces don’t require facilities to report much on their ownership structure, so the extent of involvement in surgical services is unclear, said Andrew Longhurst, a health policy researcher at Simon Fraser University.
The Ontario government is paying a for-profit clinic more than it pays its public hospitals to perform identical, provincially covered surgeries, according to documents obtained by CBC News.
To increase transparency in the U.S., several state legislatures such as New York now require or have proposed notifications when private equity firms purchase a health-care facility over a certain size.
In Canada, there is some data on ownership of long-term care homes.
Overall, 54 per cent of long-term care homes in Canada are privately owned, according to the Canadian Institute for Health Information.
Private equity firms are drawn to long-term care homes because of their real estate assets, Yalnizyan said. When the firms move in, it buys the property, cleaves it off to sell for condos for instance and then divests the care portion of long-term care.
For Dr. Danyaal Raza, a family physician with Unity Health’s St. Michael’s Hospital in Toronto, it matters who owns long-term care homes in a way that doesn’t apply to other businesses.
“When you’re shopping for a cell phone or a car you can compare how many minutes you get per month, or, you know, miles per gallon,” said Raza, past chair of Canadian Doctors for Medicare. “But when you’re going to a doctor, or you’re going to a hospital, you can’t tell.”
There’s a lot more trust involved when getting health care, he said. “That’s why we have to treat it as a public good, not one that we can boil down to comparison shopping.”