Commentary
Thomas Mezzetti, MD
March 2025—I’ve worked in the past with employers that were wholly or majority owned by private equity firms, and the ethos is conspicuously different from that in which ownership is by medical professionals (either MD or MHA), in that it’s all about the bottom line. We can all acknowledge that efficiencies are necessary in American health care, but the core of its ethos must never be questioned; it’s ultimately all about the patient.
A situation has arisen in my home state of Connecticut that should alarm anyone interested in health care—the decimation of three fine hospitals by private equity mismanagement, a history that reads sadly like a forensic investigation.
In 2016, Waterbury Hospital, Rockville General Hospital, Manchester Memorial Hospital, and Eastern Connecticut Health Network were purchased by Prospect Medical Holdings (PMH), based on the opposite side of the country in Los Angeles. In 2018, PMH (then majority owned by Los Angeles private equity firm Leonard Green & Partners) took out a $1.1 billion loan to fund a $457 million dividend for its executives and investors. The following year, to pay back the loan, PMH sold the real estate (both land and buildings) from its hospitals in Connecticut (as well as those in California and Pennsylvania) to Birmingham, Ala.-based Medical Properties Trust (MPT) for $1.4 billion and then leased back the real estate, a process known as “sale-leaseback.” MPT is one of the world’s largest hospital “landlords.” It owns more than 200 facilities in the U.S. and hundreds more worldwide, and has built a $19 billion industry on the backs of health care institutions and those they serve.
This shortsighted and unsustainable financial arrangement, clearly benefiting the private equity corporate entities at the expense of patient care, drained the Connecticut hospitals of the capital needed for essential expenditures, prompting PMH to unload the operation before it completely failed, while profiting (once again) from the sale.
Enter the buyer: In 2022, Yale New Haven and PMH announced a purchase agreement in which Yale would acquire the struggling hospitals for $435 million, which required approval and a certificate of need from the state’s Office of Health Strategy. By this time, MPT had collected $104 million from the hospitals. As part of the acquisition, Yale insisted on purchasing back the real estate from MPT, while MPT stands to gain $355 million, or 80 percent of the total value of the transaction. As a concession, MPT announced it would receive equity in at least one hospital’s managed care business “in lieu of cash payment for $573 million in loans, unpaid rent and interest, and other amounts owed.” So far, no deal has been reached.
One of Prospect Medical Holdings’ many serious lapses in infrastructural upkeep was in the IT department, which is a major area of vulnerability in any business, particularly health care, as evidenced by several recent catastrophic high-profile cases. Oversight in this area led to a devastating cyberattack in 2023 by the Rhysida ransomware gang, prompting the hospitals to call a state of emergency to the state’s Department of Public Health, as it prevented the hospitals from accessing patient information, scheduling procedures, or receiving Medicare reimbursements. The immediate fallout, which lasted six weeks, forced closure of ERs; cancellation of many elective procedures; lapses of payments to physicians, vendors, and pension plans (totaling millions of dollars); and even failures in basic infrastructural needs like keeping up bed linens or preventing rusting of operating room equipment, deficiencies ultimately leading to the acceptance of a $7 million bailout from the state. Some of the necessary services that were interrupted were never restored, in apparent violation of state law. Because of the hospitals’ inability to keep up with patient care, other nearby hospitals picked up the slack but were nearly overwhelmed by the increased workload, resulting in a crisis of health care access in several regions affecting a total catchment area of about half a million souls and most severely impacting the most vulnerable among them.
As a result of this event, the sale has stalled and Yale has insisted on renegotiation of terms. In the interim it offered a recovery plan for immediate support of the flagging hospitals but has asked for PMH and/or the state to assist in compensating for the devaluation and requisite adjustments to the original purchase price. Governor Ned Lamont has been attempting to broker a settlement, and the sale and certificate of need were approved by the Office of Health Strategy. However, Yale’s demands have not yet been satisfied, and PMH’s liens—unpaid bills and delinquent taxes (more than $100 million)—as well as ongoing lawsuits are continued barriers to the sale. To date, the deal has not been finalized, resulting in the longest delayed hospital system acquisition in the state’s history.
Meanwhile, medical professionals and state legislators are sounding the alarm over the deteriorating conditions at the hospitals, urging an expedited conclusion to the sale. At risk is the adequacy of health care for entire regions. The systems are currently being kept alive on life support due to the resourcefulness of the state and the heroism of providers, but they are highly strained and the current arrangement is unsustainable. If the sale does not go through, it will likely be up to the state to ensure basic health care provision to its citizens.
Connecticut is not alone in being victimized by private equity machinations.
In Pennsylvania in 2020, Dallas-based Steward Health Care (then owned by private equity firm Cerberus Capital Management), the state’s largest tenant of Medical Properties Trust, required a $40 million bailout from the governor. One of the hospitals, Easton, was forced to close as it was no longer able to serve the community’s health care needs. Steward also owns six hospitals in Massachusetts, which it mistreated similarly, leading to bankruptcy filing and requiring the state government to intervene to prevent hospital closures at a cost to the taxpayer of $700 million. Despite this, two of the system’s hospitals still will be forced to close. Several states have been investigating Prospect Medical Holdings for the dubious financial arrangements and suboptimal patient care and quality standards that led to the demise of these and other hospitals.
In light of all this, how is it conscionable to allow private equity firms and real estate trusts to design arrangements that clearly put their own profits over patient care—and to do so to the extent that health care entities are gutted and run into the ground when no more profit can be extracted while putting patient lives at risk? Their rationalizations of benevolently engendering hospital efficiencies ring patently disingenuous; they simply don’t pass the sniff test. When there is so much local talent and within-state infrastructure, what is the justification for allowing for-profit business entities based in faraway California and Alabama to assume ownership of our hospitals, reward their stakeholders with the profits, and enact “sale-leasebacks” to further cripple the institutions that were entrusted with the care of our citizens at their most vulnerable? While private equity capital infusions may be welcome in some instances, wouldn’t it seem reasonable to limit shareholding to minority (less than 50 percent) ownership, so that controlling interest and ultimate, effectual leadership by medical professionals are guaranteed?
We must establish laws to protect our health care institutions from the potential ravages of private equity. I recently read an encouraging article by state senator Jeff Gordon, MD, who represents several districts in Northeast Connecticut and who submitted legislation in 2024 to require our state government to formulate a strategy to properly manage private equity as it affects health care institutions in our state. He has also begun looking into bipartisan reform of the state’s certificate-of-need program to provide stronger limitations, effective accountability, and close oversight of such private equity arrangements. This is a reasonable first step at the local level. However, given the severe ramifications of private equity mismanagement, more scrutiny at the local, state, and federal levels is sorely and quickly needed.
All of this has been written primarily out of concern for patients.
From another perspective, the standpoint of physicians, this is yet an additional manifestation of the growing moral injury our profession faces as a result of having to battle large corporations in defense of our patients and our vocation to serve them. Corporate encroachments, from such powerful entities as private equity owners, big payers (private and governmental), and government regulatory agencies, are incrementally eroding our ability to practice our profession, and we must somehow rise to the level of leadership needed to ensure the survival of the healing mission that began with our Hippocratic Oath.
The task may seem daunting. Each of us is just a single thread, but when woven together we can make an unbreakable rope. But to harness our strength, we must first see the need to act and then call forth the will and sacrifice to do so, for ourselves and the patients we serve. If we think we’re too busy or powerless to do anything about it, be assured that we’ll get a whole lot busier and more powerless if we remain on defense rather than go on the offense. Our mission is much bigger than the practice of pathology—it’s the survival of our profession and our patients—and there’s no better time than now to save them.
Editor’s note: Dr. Mezzetti completed his writing in December 2024. In February he wrote the following: Prospect Medical Holdings declared bankruptcy in January, further imperiling the regional health care situation, prompting Connecticut’s governor to propose legislation to rein in private equity in health care while continuing to oversee the medical needs of the regions involved. This story is still developing.
Thomas Mezzetti is a pathologist and laboratory medical director at Charlotte Hungerford Hospital in Torrington, Conn., and chair of the Connecticut delegation of the CAP House of Delegates.
The views expressed in commentaries published in CAP TODAY are not necessarily those of CAP TODAY or the College of American Pathologists.
A cautionary tale of private equity interference in health care
Commentary
Thomas Mezzetti, MD
March 2025—I’ve worked in the past with employers that were wholly or majority owned by private equity firms, and the ethos is conspicuously different from that in which ownership is by medical professionals (either MD or MHA), in that it’s all about the bottom line. We can all acknowledge that efficiencies are necessary in American health care, but the core of its ethos must never be questioned; it’s ultimately all about the patient.
A situation has arisen in my home state of Connecticut that should alarm anyone interested in health care—the decimation of three fine hospitals by private equity mismanagement, a history that reads sadly like a forensic investigation.
In 2016, Waterbury Hospital, Rockville General Hospital, Manchester Memorial Hospital, and Eastern Connecticut Health Network were purchased by Prospect Medical Holdings (PMH), based on the opposite side of the country in Los Angeles. In 2018, PMH (then majority owned by Los Angeles private equity firm Leonard Green & Partners) took out a $1.1 billion loan to fund a $457 million dividend for its executives and investors. The following year, to pay back the loan, PMH sold the real estate (both land and buildings) from its hospitals in Connecticut (as well as those in California and Pennsylvania) to Birmingham, Ala.-based Medical Properties Trust (MPT) for $1.4 billion and then leased back the real estate, a process known as “sale-leaseback.” MPT is one of the world’s largest hospital “landlords.” It owns more than 200 facilities in the U.S. and hundreds more worldwide, and has built a $19 billion industry on the backs of health care institutions and those they serve.
This shortsighted and unsustainable financial arrangement, clearly benefiting the private equity corporate entities at the expense of patient care, drained the Connecticut hospitals of the capital needed for essential expenditures, prompting PMH to unload the operation before it completely failed, while profiting (once again) from the sale.
Enter the buyer: In 2022, Yale New Haven and PMH announced a purchase agreement in which Yale would acquire the struggling hospitals for $435 million, which required approval and a certificate of need from the state’s Office of Health Strategy. By this time, MPT had collected $104 million from the hospitals. As part of the acquisition, Yale insisted on purchasing back the real estate from MPT, while MPT stands to gain $355 million, or 80 percent of the total value of the transaction. As a concession, MPT announced it would receive equity in at least one hospital’s managed care business “in lieu of cash payment for $573 million in loans, unpaid rent and interest, and other amounts owed.” So far, no deal has been reached.
One of Prospect Medical Holdings’ many serious lapses in infrastructural upkeep was in the IT department, which is a major area of vulnerability in any business, particularly health care, as evidenced by several recent catastrophic high-profile cases. Oversight in this area led to a devastating cyberattack in 2023 by the Rhysida ransomware gang, prompting the hospitals to call a state of emergency to the state’s Department of Public Health, as it prevented the hospitals from accessing patient information, scheduling procedures, or receiving Medicare reimbursements. The immediate fallout, which lasted six weeks, forced closure of ERs; cancellation of many elective procedures; lapses of payments to physicians, vendors, and pension plans (totaling millions of dollars); and even failures in basic infrastructural needs like keeping up bed linens or preventing rusting of operating room equipment, deficiencies ultimately leading to the acceptance of a $7 million bailout from the state. Some of the necessary services that were interrupted were never restored, in apparent violation of state law. Because of the hospitals’ inability to keep up with patient care, other nearby hospitals picked up the slack but were nearly overwhelmed by the increased workload, resulting in a crisis of health care access in several regions affecting a total catchment area of about half a million souls and most severely impacting the most vulnerable among them.
As a result of this event, the sale has stalled and Yale has insisted on renegotiation of terms. In the interim it offered a recovery plan for immediate support of the flagging hospitals but has asked for PMH and/or the state to assist in compensating for the devaluation and requisite adjustments to the original purchase price. Governor Ned Lamont has been attempting to broker a settlement, and the sale and certificate of need were approved by the Office of Health Strategy. However, Yale’s demands have not yet been satisfied, and PMH’s liens—unpaid bills and delinquent taxes (more than $100 million)—as well as ongoing lawsuits are continued barriers to the sale. To date, the deal has not been finalized, resulting in the longest delayed hospital system acquisition in the state’s history.
Meanwhile, medical professionals and state legislators are sounding the alarm over the deteriorating conditions at the hospitals, urging an expedited conclusion to the sale. At risk is the adequacy of health care for entire regions. The systems are currently being kept alive on life support due to the resourcefulness of the state and the heroism of providers, but they are highly strained and the current arrangement is unsustainable. If the sale does not go through, it will likely be up to the state to ensure basic health care provision to its citizens.
Connecticut is not alone in being victimized by private equity machinations.
In Pennsylvania in 2020, Dallas-based Steward Health Care (then owned by private equity firm Cerberus Capital Management), the state’s largest tenant of Medical Properties Trust, required a $40 million bailout from the governor. One of the hospitals, Easton, was forced to close as it was no longer able to serve the community’s health care needs. Steward also owns six hospitals in Massachusetts, which it mistreated similarly, leading to bankruptcy filing and requiring the state government to intervene to prevent hospital closures at a cost to the taxpayer of $700 million. Despite this, two of the system’s hospitals still will be forced to close. Several states have been investigating Prospect Medical Holdings for the dubious financial arrangements and suboptimal patient care and quality standards that led to the demise of these and other hospitals.
In light of all this, how is it conscionable to allow private equity firms and real estate trusts to design arrangements that clearly put their own profits over patient care—and to do so to the extent that health care entities are gutted and run into the ground when no more profit can be extracted while putting patient lives at risk? Their rationalizations of benevolently engendering hospital efficiencies ring patently disingenuous; they simply don’t pass the sniff test. When there is so much local talent and within-state infrastructure, what is the justification for allowing for-profit business entities based in faraway California and Alabama to assume ownership of our hospitals, reward their stakeholders with the profits, and enact “sale-leasebacks” to further cripple the institutions that were entrusted with the care of our citizens at their most vulnerable? While private equity capital infusions may be welcome in some instances, wouldn’t it seem reasonable to limit shareholding to minority (less than 50 percent) ownership, so that controlling interest and ultimate, effectual leadership by medical professionals are guaranteed?
We must establish laws to protect our health care institutions from the potential ravages of private equity. I recently read an encouraging article by state senator Jeff Gordon, MD, who represents several districts in Northeast Connecticut and who submitted legislation in 2024 to require our state government to formulate a strategy to properly manage private equity as it affects health care institutions in our state. He has also begun looking into bipartisan reform of the state’s certificate-of-need program to provide stronger limitations, effective accountability, and close oversight of such private equity arrangements. This is a reasonable first step at the local level. However, given the severe ramifications of private equity mismanagement, more scrutiny at the local, state, and federal levels is sorely and quickly needed.
All of this has been written primarily out of concern for patients.
From another perspective, the standpoint of physicians, this is yet an additional manifestation of the growing moral injury our profession faces as a result of having to battle large corporations in defense of our patients and our vocation to serve them. Corporate encroachments, from such powerful entities as private equity owners, big payers (private and governmental), and government regulatory agencies, are incrementally eroding our ability to practice our profession, and we must somehow rise to the level of leadership needed to ensure the survival of the healing mission that began with our Hippocratic Oath.
The task may seem daunting. Each of us is just a single thread, but when woven together we can make an unbreakable rope. But to harness our strength, we must first see the need to act and then call forth the will and sacrifice to do so, for ourselves and the patients we serve. If we think we’re too busy or powerless to do anything about it, be assured that we’ll get a whole lot busier and more powerless if we remain on defense rather than go on the offense. Our mission is much bigger than the practice of pathology—it’s the survival of our profession and our patients—and there’s no better time than now to save them.
Editor’s note: Dr. Mezzetti completed his writing in December 2024. In February he wrote the following: Prospect Medical Holdings declared bankruptcy in January, further imperiling the regional health care situation, prompting Connecticut’s governor to propose legislation to rein in private equity in health care while continuing to oversee the medical needs of the regions involved. This story is still developing.
Thomas Mezzetti is a pathologist and laboratory medical director at Charlotte Hungerford Hospital in Torrington, Conn., and chair of the Connecticut delegation of the CAP House of Delegates.
The views expressed in commentaries published in CAP TODAY are not necessarily those of CAP TODAY or the College of American Pathologists.
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