As Steward Health Care Systems LLC’s network of hospitals was struggling, it stopped paying some of its vendors. One of those vendors was a supplier of bereavement boxes, the tiny cases used to transport the remains of newborns who don’t survive. The vendor eventually stopped supplying the cases, which meant that grieving parents had to receive their children’s remains in cardboard shipping boxes.
That story, told by a nurse at a congressional hearing looking into Steward’s bankruptcy, has stuck with me as a heartbreaking example of just how severely some of America’s hospitals are struggling — even as the US health care system absorbs shocking sums of money from patients and taxpayers.
The confounding economics of US health care are one reason that in 1960, the country had roughly 9.2 hospital beds per 1,000 people; but today, that ratio is only about 2.3. Hospital cutbacks and closures have expanded America’s medical deserts — places without nearby health care facilities, or where long waiting times or high costs mean local people can’t get timely care. When hospitals close down, the doctors who worked there often retire or relocate, points out Alan Sager, a professor of health law, policy and management at Boston University.
The declining number of hospitals coincides with some depressing declines in health care metrics. In 1980, the US had similar life expectancy rates to its peer countries; but over the last 40 years, we’ve fallen behind. And in the past 20 years, our maternal mortality rates have also turned in the wrong direction.
The US has to figure out a way to get more bang for its health care buck, and that means preventing more hospitals from closing. That starts — but does not end — with protecting our hospitals from the kind of private equity predation on display at Stewart.
The decline in beds is not due to declining demand. The US has a longstanding obesity problem and rates of gunshot wounds and car accidents that rank among the world’s worst. In other words: hospitals have plenty of customers.
And it’s certainly not due to a lack of money in the system. The US spends more per capita on health care than any other country in the world. We spend far more on health care than we do on defense.
Yet somehow hospitals in this country just can’t seem to make the math work. Some have surely been mismanaged — Steward chief among them — but others have struggled for reasons outside their direct control. The result is that more than 1 in 3 people in the US live in counties without adequate medical care, according to a report by GoodRx, an app that provides prescription drug information and telemedicine services.
The problem is particularly acute in rural areas. But it’s also found in some parts of large cities like Chicago, Los Angeles and New York. According to data compiled by BU’s Sager, the urban hospital closures of the last 50 years have been disproportionately in Black neighborhoods.
The scale of health care spending and the overwhelming demand for care have made hospitals attractive targets for private equity, which seems to think it will have better luck turning them into profitable businesses. But in reality, PE ownership hasn’t been good for patients, and while the firms might provide a temporary financial boost, in the long run, they don’t always save hospitals from closing.
Consider, again, Steward Health. With investment from Cerberus Capital Management, a handful of struggling nonprofit Catholic hospitals became a for-profit chain of 31 facilities — then, after Cerberus’ lucrative exit, declared bankruptcy. (Steward’s CEO resigned at the start of October after defying a congressional subpoena.) Three hospitals in Massachusetts have already had to close and a fourth was seized by the state. Facilities in Florida, Arizona and Louisiana have had to stop offering key services, like ICU care for premature infants and mammography, further weakening America’s hospital network.
Steward is an especially egregious example, but it’s not alone — an estimated 17 PE-backed hospital companies went bust in 2023. Those bankruptcies come after years of eroding quality of care. Scholars find that PE ownership of any hospital is associated with a raft of subpar patient outcomes, as my Bloomberg Opinion colleague Lisa Jarvis has explained — like higher rates of readmission and hospital-acquired infections. Understaffing at Steward resulted in the preventable deaths of patients, according to investigative reporting from the Boston Globe.
Understandably, policymakers want to curtail this sort of thing. A bill proposed by Massachusetts Senator Ed Markey and Representative Pramila Jayapal of Seattle, both Democrats, would subject private equity acquisitions of hospitals to more scrutiny. Under the plan, any future PE deals for hospitals would get additional regulatory review, require more financial disclosures and include more limits on which assets the acquiring PE firm can sell off. (Steward’s woes were compounded by selling its properties in a sale-leaseback deal.)
The proposal is logical, as far as it goes, but it’s not enough. It’s an attempt to stanch the bleeding, not to restore the nation’s hospitals to full health.
America’s hospital network is every bit as important as its network of highways, fire stations and law enforcement. It deserves more public support. When a node in a network crashes, the ripple effects are felt throughout the system, and so it is with hospitals. When a hospital shutters, or decides that certain services are no longer profitable enough to provide, it not only creates new void, it weakens the whole network.
In a previous column, I explained how Maryland provides a model for how to stabilize a hospital network — with a list of essential hospitals, a structure that requires public and private insurers to reimburse at the same rates and a program that pays hospitals based on the population of their service area. Similar reforms could be adopted at the federal level to ensure more Americans have a place to turn for care.
In exchange for this extra support, hospitals should be held to a degree of public scrutiny — to make sure those dollars aren’t being wasted — and be required to offer necessary services regardless of whether they make money.
“A hospital license needs to come with really strict conditions about what the hospital needs to offer, and it needs to include service lines that may not be profitable, but can be subsidized by other service lines,” says Mary Bugbee, healthcare director at the Private Equity Stakeholder Project, a nonprofit watchdog.
A classic example of an essential but money-losing hospital service is childbirth. “You shouldn’t be allowed to call yourself a hospital if you can’t do labor and delivery,” says Bugbee. “But we see hospitals cutting that, especially in rural areas, because it’s not profitable.”
I won’t pretend that fixing America’s hospital system will be easy. In a country as sprawling as the US, Americans may never have the kind of quick access to nearby hospitals that exists in other rich nations, like Japan or the Netherlands. But there’s no doubt we can do better than we are right now. With so many of us in poor health, there’s no time to waste.
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