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Scott Becker - Hospital Price Caps & Private Equity 7-21-26 · Becker’s Healthcare Podcast

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  - There's a small circle of people who truly
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  - understand what it takes to lead a health
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  - system right now. The decisions are enormous.
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  - The variables are constantly shifting, and the stakes
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  - of getting a call wrong don't stay contained.
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  - That's not a complaint. It's a structural reality.
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  - And it's why the most effective c suite
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  - leaders are deliberate about where they go to
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  - pressure test their thinking.
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  - Becker's fourteenth annual CEO and CFO roundtable
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  - brings together more than 1,500
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  - executive level attendees
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  - and nearly 400 speakers for four days built
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  - around growth, financial sustainability,
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  - workforce strategy, and the leadership questions that don't
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  - have easy answers.
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  - Join us November second through the fifth in
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  - Chicago.
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  - For the agenda and event details,
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  - visit beckershospitalreview.com
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  - and click on the events tab in the
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  - upper right.
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  - This is Scott Becker with the Becker's Healthcare
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  - podcast.
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  - Today's discussion will be a short podcast
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  - about
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  - hospital price caps
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  - as well as private equity. So those are
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  - the two topics.
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  - And the the genesis of this discussion is
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  - a newly passed Delaware bill that will price
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  - that will place restrictions on hospital pricing and
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  - cap it at a certain percentage of Medicare
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  - rates,
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  - and and also,
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  - on top of that, restrictions on private equity
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  - investing in health care.
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  - And and these are two things that on
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  - their very face,
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  - maybe on at first glance,
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  - sounds like good ideas. You have you price
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  - cap hospitals,
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  - and somehow that's gonna bring down the cost
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  - of health care
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  - or avoid exorbitant
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  - prices.
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  - And second, you don't allow private equity, and
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  - private equity is one of those things that's
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  - everybody's
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  - one of their favorite scapegoats. You don't allow
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  - private equity. But but let's dig a little
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  - bit deeper.
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  - In California, it's also been on the road
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  - trying to put price caps on hospitals,
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  - emphasize price caps on salaries of administration
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  - and more.
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  - Here's the reality of this.
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  - If you camp prices,
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  - but hospitals and health systems are still
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  - stuck with
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  - the evolving inflationary
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  - cost of
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  - supplies,
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  - equipment,
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  - people, clinicians, and more,
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  - then you put hospitals in really an impossible
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  - spot. And just dig a little bit deeper.
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  - About 60%
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  - of hospitals in our country operate at some
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  - margin,
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  - about 40%
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  - don't. And it's one of the reasons why
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  - at Becker's Healthcare, we're constantly and unfortunately
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  - reporting on hospital closures as well as department
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  - closures.
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  - And people could say all they want about
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  - how hospitals and hospitals are not not managed
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  - perfectly
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  - and how health requests are too high.
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  - But but this answer,
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  - legislating a price cap on hospitals,
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  - is a fun answer for politicians. And what
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  - do I mean by that? What do I
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  - mean by that? What I mean by that
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  - is it's easy to do because on its
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  - face, it sounds good. You're capping the price
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  - of an essential service.
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  - The the the challenge really is this,
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  - is that we don't have enough hospital beds
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  - in our country. Hospital systems are barely breaking
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  - even at least in large part.
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  - The new sort of site neutral payments as
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  - well as the three forty p restrictions
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  - will harm hospitals, not help them. And so
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  - this is something that leads to likely
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  - less hospital beds versus more hospital beds, and
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  - and it's it's
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  - poorly crafted. And, of course, like all politicians,
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  - they haven't come into effect over a few
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  - years, so they're not empowered, at least some
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  - of them, when actually the bad things happen.
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  - But but a fascinating politicization
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  - of pricing in health care. So that's one
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  - subject.
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  - The second subject is the evolving
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  - restrictions on private equity in health care. And
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  - again, I have some involvement in private equity,
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  - so I've got some thoughts on this. But
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  - but a large amount of the private equity
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  - investors are pension funds,
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  - state pension funds, worker pension funds, etcetera, etcetera.
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  - But that's that's not here nor there.
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  - The reality of private equity in health care
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  - is as follows.
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  - About six to 7%
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  - of physicians are controlled
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  - or employed or in contract
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  - with a private equity sponsor or or more
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  - likely, private equity sponsored company
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  - that employs those positions. And in some states,
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  - it's more than others. No question. In other
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  - states, less. But it's six to 7% in
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  - total. Insurance companies in total probably employ you
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  - know, one insurance company famously employs eight to
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  - 9% of all physicians, maybe 10%.
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  - Between them and the others, they're probably 20%
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  - employed by insurance companies. And sort of targeting
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  - private equity versus insurance companies
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  - is easy because private equity lobby is not
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  - as strong as the insurance lobby, but the
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  - actual outcome of this is just stupid and
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  - makes no sense.
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  - The other thing you talk about is private
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  - equity ownership of hospitals.
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  - About 8% of the hospitals in our country
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  - have a private equity sponsor of some sort,
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  - directly or indirect.
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  - Some of those chains,
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  - LifePoint and others, are really well run.
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  - Others are those chains,
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  - Steward HealthCare being the most famous example, was
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  - not as well run and probably recaps itself
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  - and dividend itself out of out of business.
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  - But what you have to remember with Prospect
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  - Holdings,
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  - essentially, the the this issue with, got in
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  - English with the,
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  - with Stewart Healthcare.
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  - And, again, I I'm not defending them specifically,
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  - but making private equity the bogey ban per
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  - person is the wrong approach.
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  - At least half the hospitals that Steward Healthcare
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  - purchased to begin with were probably on the
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  - verge of closure to start with. Out of
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  - the 33, 34, they ended up 10 to
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  - 15 were real trouble when they bought them.
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  - That's why they sold the private equity. They
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  - they were not for profits. They weren't selling
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  - the private equity for somebody to make money
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  - as a for profit institute.
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  - Prospect Holdings is somewhat similar.
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  - Again, a a famous challenging situation. But a
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  - lot of the households they bought were also
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  - in financial trouble when they bought them. So
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  - to sort of make private equity the bogeyman,
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  - when in fact, only about seven to 8%
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  - of hospitals in the country are owned and
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  - operated by private equity or private equity sponsored
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  - companies,
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  - as well as the fact
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  - that with those, at least half of those
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  - are really well run hospitals and have been
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  - huge compliments of the community.
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  - When you look at private equity, it's different
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  - funding source. It's not a bad one or
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  - a good one. It depends on the private
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  - equity operators in the act, but it's not
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  - that different than not for profit health systems
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  - or for profit health systems
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  - that are good and bad operators. We're in
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  - a situation now where 40% of all operators,
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  - hospitals in the country are operating below margin,
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  - and that's not good either.
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  - In any event,
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  - this concept of price caps and attacking private
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  - equity,
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  - to me, doesn't make a lot of sense.
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  - I know there's a lot of listeners that
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  - probably have different perspectives on this, and here's
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  - all I gotta tell you.
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  - I would love to hear your perspective.
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  - I will not take offense.
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  - You know, it I'm thrilled to hear them.
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  - My text, (773)
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  - 766-5322.
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  - Text your thoughts or responses.
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  - Email sbecker@beckershealthcare.com.
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  - Love to hear your thoughts. Love to have
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  - dialogue on it. We think this is very
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  - bad policy. You know, some people say that
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  - I'm a defender of hospitals. I'm a defender
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  - of private equity.
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  - Yes. No. Indifferent. I don't know. I just
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  - believe this is very bad policy. Thank you
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  - for listening to the Becker's HealthCare podcast. We
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  - hope you enjoy this episode. Thank you very
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  - much.