Private equity-owned health care is guided by expansion and profits; many are calling for more regulation

As Americans age, the home health care sector will
continue to grow. (Photo by G.A. Pflueger, Unsplash)

Home health care businesses may go by nurturing names, such as "Senior Helpers" or "At Home Angels," but the much industry is funded by private equity investors looking to make hefty profits, reports Anna Claire Vollers of Stateline. "Proponents of private equity investment in health care say the infusion of capital helps smaller companies expand into new markets." But skeptics point to places where care companies suddenly pulled out of entire regions when profits waned, leaving elderly people at home with no care.

Private equity-owned health care companies exist to make money for investors. "Private equity firms pool investments from pension funds, endowments, sovereign wealth funds and wealthy individuals to buy controlling stakes in companies," Voller explains. "In health care, critics say, that business model can diminish the quality of care, increase costs and narrow access for patients — particularly in more lightly regulated industries such as home care and hospice care."

Home health care is an appealing business venture because it doesn't face the same level of scrutiny as hospitals and nursing homes, the profit margins are robust, and there's an aging population where "around 10,000 baby boomers turn 65 every day," Voller reports. There will be "millions of people who will need care in the coming years," which will guarantee strong business growth. Plus, insurance companies encourage their customers to use home health care, which again, bolsters profits.

Even with all those benefits, private equity firms tend to pile debt on their companies to fund expansion. "Private equity firms typically aim to acquire a company and boost profits before selling it within five to seven years," Voller reports. "They often purchase companies with borrowed money, using the company's assets as collateral for the loans."

Mary Bugbee, senior research and campaign coordinator for health care at the Private Equity Stakeholder Project, a research and advocacy group, told Voller, "We leave a lot to the whims of the market and allow private players to dictate access to and quality of health care."

State policy and lawmakers are looking at home health care companies as businesses needing more regulatory oversight. "Improving transparency, requiring certain health care staff-to-patient ratios and boosting wages for health care workers can also help protect patients and communities," Voller reports.