Posted 36 days ago
"Hospitals in the U.S. are estimated to be closing at a rate of about thirty a year" is a terrifying statistic. In the case of Philadelphia, where "a quarter of its 1.6 million residents [live] below the poverty line," the closure of its hospitals are even more so. Pomorski's reporting is excellent, looking deep into what happened to Hahnemann University Hospital at the hands of private equity. He also is not afraid to make claims about the nation's health care infrastructure more broadly:
The story of Hahnemann is as much about the structural forces that have compromised many American hospitals—stingy public investment, weak regulation, and a blind belief in the wisdom of the market—as it is about the motives of private-equity firms.
A more in-depth look at the numbers across America, as well as some suggestions for how to change them, is Elizabeth Rosenthal's An American Sickness. Rosenthal, similar to Pomorski in this article, takes a critical look at the American health care industry as business-first, and suggest ways to bring health care, not money, to the forefront of the industry. Specifically, I think she would agree with Pomorski's claim that "[private-equity's] movement into health care has been linked to price hikes, and increase in unnecessary procedures, and the desstabilization of health-care networks."
In this article, Pomorski mainly profiles Joel Freedman, the CEO of Paladin, a real-estate private-equity firm that got its hands into the health care industry. In theory, when he came to make Hahnemann profitable, it seemed to be a positive for the hospital:
In 2014, with Paladin, Freedman signed on to manage Howard University Hospital, in Washington, D.C., which that year reported a fifty-eight-million-dollar loss. Paladin cut salaries, benefits, and operating expenses, and two years later the hospital showed an operating surplus of more than twenty million dollars. “We were incredibly successful,” Freedman said. “I’d become passionate about turnarounds in these communities.”
Doctors and staff in Hahnemann were hopeful for a graceful turnaround. But they soon realize that what they were getting was very different; nurse-consultants hired to "monitor how doctors documented diseased" would change or second-guess the diagnoses of residents in order to make more money out of a procedure. This is largely to do with medical coding, where business-like consultants "price" certains procedures and treatments via a code that is shared with insurance companies. By altering the "code" of the diagnosis that residents suggested, they could potentially squeeze more money out of the treatment given to a patient.
This seems like classic business practice to cut costs (something that I don't agree should be in hospitals, but it is a private one, so they can kind of do as they want). But the real bombshell of this piece is that Pomorski suggests, through others that suggested it in the past like Bernie Sanders, that Freedman might have been intentionally running the hospital into the ground in order to flip the property on which it rested. This is a huge statement, and seems conspiracy-centric, but there is more than enough evidence to suggest it. When Freedman met with state officials to try to "keep Hahnemann afloat" after defaulting on loans, "[government officials] never received the details about the hospital's finances that they needed to determine how to address its operating deficit, which Freedman estimated at between three million and five million dollars per month." Still, that could just be negligence, but Pomorski continues:
Developers speculated that it could be worth as much as a hundred and twenty million dollars—only fifty million less than A.A.H.S. had paid for Hahnemann and St. Christopher’s and all their assets. Crucially, the site was not part of the bankruptcy. Upon buying Hahnemann, Freedman had put its real estate in a suite of holding companies that were now beyond the purview of the bankruptcy court.
It seems oddly peculiar that Freedmon would have done this and then secured a loan that the hospital could not pay back while also refusing to disclose financial data to government officials. Pomorski gives Freedman a chance for rebuttal:
Freedman told me that he would never have invested millions in the venture if he intended to turn a quick profit and leave. But his leveraged buyout made excellent insurance against his own mistakes.
That's fair; it's certainly a stretch and what would probably make sense is that he knew the value of the land and had it secured in case anything happened. It is extremely cynical, although not unfounded, to believe it was all a ploy to sell the land. What I think is more concerning than the "conspiracy" is that private-equity destroyed a hospital, trying to mess with it, while ensuring that it wouldn't lose too much in the process. It's tough though; clearly there should be regulation here to ensure that hospitals can't go under so easily, but Philedelphia General, the public one, had went under years before. I'm not sure what the process would be to change this, but it's a good read and insightful on how money can change something so crucial to us.