{"id":386,"date":"2022-11-14T10:54:09","date_gmt":"2022-11-14T10:54:09","guid":{"rendered":"https:\/\/healthynewsusa.com\/?p=386"},"modified":"2022-11-14T10:54:11","modified_gmt":"2022-11-14T10:54:11","slug":"sick-profit-investigating-private-equitys-stealthy-takeover-of-health-care-across-cities-and-specialties","status":"publish","type":"post","link":"https:\/\/healthynewsusa.com\/?p=386","title":{"rendered":"Sick Profit: Investigating Private Equity\u2019s Stealthy Takeover of Health Care Across Cities and Specialties"},"content":{"rendered":"<div>\n<p>Two-year-old Zion Gastelum died just days after dentists performed root canals and put crowns on six baby teeth at a clinic affiliated with a private equity firm.<\/p>\n<p>His parents sued the Kool Smiles dental clinic in Yuma, Arizona, and its private equity investor, FFL Partners. They argued the procedures were done needlessly, in keeping with a corporate strategy to maximize profits by overtreating kids from lower-income families enrolled in Medicaid. Zion died after being diagnosed with \u201cbrain damage caused by a lack of oxygen,\u201d according to the lawsuit.<\/p>\n<p>Kool Smiles \u201covertreats, underperforms and overbills,\u201d the family alleged in the suit, which was settled last year under confidential terms. FFL Partners and Kool Smiles had no comment but denied liability in court filings.<\/p>\n<p>Private equity is rapidly moving to reshape health care in America, coming off a banner year in 2021, when the deep-pocketed firms plowed $206 billion into more than 1,400 health care acquisitions, according to industry tracker PitchBook.<\/p>\n<p>Seeking quick returns, these investors are buying into eye care clinics, dental management chains, physician practices, hospices, pet care providers, and thousands of other companies that render medical care nearly from cradle to grave. Private equity-backed groups have even set up special \u201cobstetric emergency departments\u201d at some hospitals, which can charge expectant mothers hundreds of dollars extra for routine perinatal care.<\/p>\n<p>As private equity extends its reach into health care, evidence is mounting that the penetration has led to higher prices and diminished quality of care, a KHN investigation has found. KHN found that companies owned or managed by private equity firms have agreed to pay fines of more than $500 million since 2014 to settle at least 34 lawsuits filed under the False Claims Act, a federal law that punishes false billing submissions to the federal government with fines. Most of the time, the private equity owners have avoided liability.<\/p>\n<p>New research by the University of California-Berkeley has identified \u201chot spots\u201d where private equity firms have quietly moved from having a small foothold to controlling more than two-thirds of the market for physician services such as anesthesiology and gastroenterology in 2021. And KHN found that in San Antonio, more than two dozen gastroenterology offices are controlled by a private equity-backed group that <a href=\"https:\/\/khn.org\/news\/article\/private-equity-gastroenterologist-colonoscopy\/\">billed a patient $1,100<\/a> for her share of a colonoscopy charge \u2014 about three times what she paid in another state.<\/p>\n<p>It\u2019s not just prices that are drawing scrutiny.<\/p>\n<p>Whistleblowers and injured patients are turning to the courts to press allegations of misconduct or other improper business dealings. The lawsuits allege that some private equity firms, or companies they invested in, have boosted the bottom line by violating federal false claims and anti-kickback laws or through other profit-boosting strategies that could harm patients.<\/p>\n<p>\u201cTheir model is to deliver short-term financial goals and in order to do that you have to cut corners,\u201d said Mary Inman, an attorney who represents whistleblowers.<\/p>\n<p>Federal regulators, meanwhile, are almost blind to the incursion, since private equity typically acquires practices and hospitals below the regulatory radar. KHN found that more than 90% of private equity takeovers or investments fall below the $101 million threshold that triggers an antitrust review by the Federal Trade Commission and the U.S. Justice Department.<\/p>\n<figure class=\"wp-block-embed is-type-video is-provider-youtube wp-block-embed-youtube wp-embed-aspect-16-9 wp-has-aspect-ratio\">\n<p>\n<span class=\"embed-youtube\" style=\"text-align:center; display: block;\"><\/p>\n<div class=\"youtube-embed\" data-video_id=\"TPVzH88TL4A\"><iframe loading=\"lazy\" title=\"How Private Equity Is Investing in Health Care\" width=\"696\" height=\"392\" src=\"https:\/\/www.youtube.com\/embed\/TPVzH88TL4A?feature=oembed&#038;enablejsapi=1\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture\" allowfullscreen><\/iframe><\/div>\n<p><\/span>\n<\/p>\n<\/figure>\n<p style=\"font-size:25px\"><strong>Spurring Growth<\/strong><\/p>\n<p>Private equity firms pool money from investors, ranging from wealthy people to college endowments and pension funds. They use that money to buy into businesses they hope to flip at a sizable profit, usually within three to seven years, by making them more efficient and lucrative.<\/p>\n<p>Private equity has poured nearly $1 trillion into nearly 8,000 health care transactions during the past decade, according to PitchBook.<\/p>\n<p>Fund managers who back the deals often say they have the expertise to reduce waste and turn around inefficient, or moribund, businesses, and they tout their role in helping to finance new drugs and technologies expected to benefit patients in years to come.<\/p>\n<p>Critics see a far less rosy picture. They argue that private equity\u2019s playbook, while it may work in some industries, is ill suited for health care, when people\u2019s lives are on the line.<\/p>\n<p>\n\t<iframe aria-label=\"Interactive DataWrapper Embed\" frameborder=\"0\" height=\"578\" id=\"datawrapper-chart-nimcw\" scrolling=\"no\" src=\"https:\/\/datawrapper.dwcdn.net\/nimcw\" style=\"width: 0; min-width: 100% !important; border: none;\" title=\"Private Equity Health Industry Deals Soared Over the Past Decade\"><br \/>\n\t<\/iframe>\n<\/p>\n<p>In the health care sphere, private equity has tended to find legal ways to bill more for medical services: trimming services that don\u2019t turn a profit, cutting staff, or employing personnel with less training to perform skilled jobs \u2014 actions that may put patients at risk, critics say.<\/p>\n<p>KHN, in a series of articles published this year, has examined a range of private equity forays into health care, from its <a href=\"https:\/\/khn.org\/news\/article\/emergency-contraception-plan-b-private-equity-abortion-debate\/\">marketing of America\u2019s top-selling emergency contraception<\/a> pill to buying up whole chains of ophthalmology and gastroenterology practices and investing in the <a href=\"https:\/\/khn.org\/news\/article\/hospices-private-equity-firms-end-of-life-care\/\">booming hospice care<\/a> industry and even <a href=\"https:\/\/khn.org\/news\/article\/funeral-homes-private-equity-death-care\/\">funeral homes<\/a>.<\/p>\n<p>These deals happened on top of well-publicized takeovers of hospital emergency room staffing firms that led to outrageous \u201csurprise\u201d medical bills for some patients, as well as the buying up of <a href=\"https:\/\/khn.org\/news\/article\/private-equity-rural-hospitals-closure-missouri-noble-health\/\">entire rural hospital systems<\/a>.<\/p>\n<p>\u201cTheir only goal is to make outsize profits,\u201d said <a href=\"https:\/\/www2.lehigh.edu\/news\/predatory-private-equity-is-wreaking-havoc-on-us-healthcare-reports-laura-katz-olson-in-new\">Laura Olson<\/a>, a political science professor at Lehigh University and a critic of the industry.<\/p>\n<p style=\"font-size:25px\"><strong>Hot Spots<\/strong><\/p>\n<p>When it comes to acquisitions, private equity firms have similar appetites, according to a KHN analysis of 600 deals by the 25 firms that PitchBook says have most frequently invested in health care.<\/p>\n<p>Eighteen of the firms have dental companies listed in their portfolios, and 16 list centers that offer treatment of cataracts, eye surgery, or other vision care, KHN found.<\/p>\n<p>Fourteen have bought stakes in animal hospitals or pet care clinics, a market in which rapid consolidation led to a <a href=\"https:\/\/www.ftc.gov\/news-events\/news\/press-releases\/2022\/06\/ftc-takes-second-action-against-jab-consumer-partners-protect-pet-owners-private-equity-firms-rollup-of-veterinary-services-clinics\">recent antitrust action<\/a> by the FTC. The agency <a href=\"https:\/\/www.wsj.com\/articles\/ftc-probes-market-power-of-one-of-countrys-biggest-anesthesia-providers-11664644401\">reportedly also is investigating<\/a> whether U.S. Anesthesia Partners, which operates anesthesia practices in nine states, has grown too dominant in some areas.<\/p>\n<p>Private equity has flocked to companies that treat autism, drug addiction, and other behavioral health conditions. The firms have made inroads into ancillary services such as diagnostic and urine-testing and software for managing billing and other aspects of medical practice.<\/p>\n<p>Private equity has done so much buying that it now dominates several specialized medical services, such as anesthesiology and gastroenterology, in a few metropolitan areas, according to new research made available to KHN by the <a href=\"https:\/\/petris.org\/\">Nicholas C. Petris Center<\/a> at UC-Berkeley.<\/p>\n<p>Although private equity plays a role in just 14% of gastroenterology practices nationwide, it controls nearly three-quarters of the market in at least five metropolitan areas across five states, including Texas and North Carolina, according to the Petris Center research.<\/p>\n<p>\n\t<iframe aria-label=\"Interactive DataWrapper Embed\" frameborder=\"0\" height=\"578\" id=\"datawrapper-chart-x4AeM\" scrolling=\"no\" src=\"https:\/\/datawrapper.dwcdn.net\/x4AeM\" style=\"width: 0; min-width: 100% !important; border: none;\" title=\"Private Equity's Market Control\"><br \/>\n\t<\/iframe>\n<\/p>\n<p>Similarly, anesthesiology practices tied to private equity hold 12% of the market nationwide but have swallowed up more than two-thirds of it in parts of five states, including the Orlando, Florida, area, according to the data.<\/p>\n<p>These expansions can lead to higher prices for patients, said Yashaswini Singh, a researcher at the Bloomberg School of Public Health at Johns Hopkins University.<\/p>\n<p>In a study of 578 physician practices in dermatology, ophthalmology, and gastroenterology <a href=\"https:\/\/jamanetwork.com\/journals\/jama-health-forum\/fullarticle\/2795946\">published in JAMA Health Forum<\/a> in September, Singh and her team tied private equity takeovers to an average increase of $71 per medical claim filed and a 9% increase in lengthy, more costly, patient visits.<\/p>\n<p>Singh said in an interview that private equity may develop protocols that bring patients back to see physicians more often than in the past, which can drive up costs, or order more lucrative medical services, whether needed or not, that boost profits.<\/p>\n<p>\u201cThere are more questions than answers,\u201d Singh said. \u201cIt really is a black hole.\u201d<\/p>\n<figure class=\"wp-block-image size-full\"><figcaption class=\"wp-element-caption\">Yashaswini Singh, a researcher at the Bloomberg School of Public Health at Johns Hopkins University, has found that private equity takeovers of physician practices lead to higher patient bills.<span class=\"photo-credit\">(Hannah Norman \/ KHN)<\/span><\/figcaption><\/figure>\n<p>Jean Hemphill, a Philadelphia health care attorney, said that in some cases private equity has merely taken advantage of the realities of operating a modern medical practice amid growing administrative costs.<\/p>\n<p>Physicians sometimes sell practices to private equity firms because they promise to take over things like billing, regulatory compliance, and scheduling \u2014 allowing doctors to focus on practicing medicine. (The physicians also might reap a big payout.)<\/p>\n<p>\u201cYou can\u2019t do it on a scale like Marcus Welby used to do it,\u201d Hemphill said, referring to an <a href=\"https:\/\/www.imdb.com\/title\/tt0063927\/\">early 1970s television drama<\/a> about a kindly family doctor who made house calls. \u201cThat\u2019s what leads to larger groups,\u201d she said. \u201cIt is a more efficient way to do it.\u201d<\/p>\n<p>But Laura Alexander, a former vice president of policy at the nonprofit American Antitrust Institute, which collaborated on the Petris Center research, said she is concerned about private equity\u2019s growing dominance in some markets.<\/p>\n<p>\u201cWe\u2019re still at the stage of understanding the scope of the problem,\u201d Alexander said. \u201cOne thing is clear: Much more transparency and scrutiny of these deals is needed.\u201d<\/p>\n<p style=\"font-size:25px\"><strong>\u2018Revenue Maximization\u2019<\/strong><\/p>\n<p>Private equity firms often bring a \u201chands-on\u201d approach to management, taking steps such as placing their representatives on a company\u2019s board of directors and influencing the hiring and firing of key staffers.<\/p>\n<p>\u201cPrivate equity exercises immense control over the operations of health care companies it buys an interest in,\u201d said Jeanne Markey, a Philadelphia whistleblower attorney.<\/p>\n<p>Markey represented physician assistant Michelle O\u2019Connor in a 2015 whistleblower lawsuit filed against National Spine and Pain Centers and its private equity owner, Sentinel Capital Partners.<\/p>\n<p>In just a year under private equity guidance, National Spine\u2019s patient load quadrupled as it grew into one of the nation\u2019s largest pain management chains, treating more than 160,000 people in about 40 offices across five East Coast states, according to the suit.<\/p>\n<p>O\u2019Connor, who worked at two National Spine clinics in Virginia, said the mega-growth strategy sprang from a \u201ccorporate culture in which money trumps the provision of appropriate patient care,\u201d according to the suit.<\/p>\n<p>She cited a \u201crevenue maximization\u201d policy that mandated medical staffers see at least 25 patients a day, up from 16 to 18 before the takeover.<\/p>\n<p>The pain clinics also overcharged Medicare by billing up to $1,100 for \u201cunnecessary and often worthless\u201d back braces and charging up to $1,800 each for urine drug tests that were \u201cmedically unnecessary and often worthless,\u201d according to the suit.<\/p>\n<p>In April 2019, National Spine paid the Justice Department $3.3 million to settle the whistleblower\u2019s civil case without admitting wrongdoing.<\/p>\n<p>Sentinel Capital Partners, which by that time had sold the pain management chain to another private equity firm, paid no part of National Spine\u2019s settlement, court records show. Sentinel Capital Partners had no comment.<\/p>\n<p>In another whistleblower case, a South Florida pharmacy owned by RLH Equity Partners raked in what the lawsuit called an \u201cextraordinarily high\u201d profit on more than $68 million in painkilling and scar creams billed to the military health insurance plan Tricare.<\/p>\n<p>The suit alleges that the pharmacy paid illegal kickbacks to telemarketers who drove the business. One doctor admitted prescribing the creams to scores of patients he had never seen, examined, or even spoken to, according to the suit.<\/p>\n<p>RLH, based in Los Angeles, <a href=\"https:\/\/www.rlhequity.com\/rlh-comments-pca-litigation\/\">disputed the Justice Department\u2019s claims<\/a>. In 2019, RLH and the pharmacy <a href=\"https:\/\/www.justice.gov\/opa\/pr\/compounding-pharmacy-two-its-executives-and-private-equity-firm-agree-pay-2136-million\">paid a total of $21 million<\/a> to settle the case. Neither admitted liability. RLH managing director Michel Glouchevitch told KHN that his company cooperated with the investigation and that \u201cthe individuals responsible for any problems have been terminated.\u201d<\/p>\n<p>In many fraud cases, however, private equity investors walk away scot-free because the companies they own pay the fines. Eileen O\u2019Grady, a researcher at the nonprofit Private Equity Stakeholder Project, said government should require \u201cadded scrutiny\u201d of private equity companies whose holdings run afoul of the law.<\/p>\n<p>\u201cNothing like that exists,\u201d she said.<\/p>\n<figure class=\"wp-block-image size-full\"><img decoding=\"async\" loading=\"lazy\" width=\"3840\" height=\"2560\" src=\"https:\/\/khn.org\/wp-content\/uploads\/sites\/2\/2022\/11\/GettyImages-1238864801_Biden_SOTU.jpg\" alt=\"President Joe Biden delivers the State of the Union address\" class=\"wp-image-1578822\" srcset=\"https:\/\/khn.org\/wp-content\/uploads\/sites\/2\/2022\/11\/GettyImages-1238864801_Biden_SOTU.jpg 3840w, https:\/\/khn.org\/wp-content\/uploads\/sites\/2\/2022\/11\/GettyImages-1238864801_Biden_SOTU.jpg?resize=150,100 150w, https:\/\/khn.org\/wp-content\/uploads\/sites\/2\/2022\/11\/GettyImages-1238864801_Biden_SOTU.jpg?resize=500,333 500w, https:\/\/khn.org\/wp-content\/uploads\/sites\/2\/2022\/11\/GettyImages-1238864801_Biden_SOTU.jpg?resize=768,512 768w, https:\/\/khn.org\/wp-content\/uploads\/sites\/2\/2022\/11\/GettyImages-1238864801_Biden_SOTU.jpg?resize=1270,847 1270w, https:\/\/khn.org\/wp-content\/uploads\/sites\/2\/2022\/11\/GettyImages-1238864801_Biden_SOTU.jpg?resize=1536,1024 1536w, https:\/\/khn.org\/wp-content\/uploads\/sites\/2\/2022\/11\/GettyImages-1238864801_Biden_SOTU.jpg?resize=2048,1365 2048w, https:\/\/khn.org\/wp-content\/uploads\/sites\/2\/2022\/11\/GettyImages-1238864801_Biden_SOTU.jpg?resize=770,513 770w, https:\/\/khn.org\/wp-content\/uploads\/sites\/2\/2022\/11\/GettyImages-1238864801_Biden_SOTU.jpg?resize=840,560 840w, https:\/\/khn.org\/wp-content\/uploads\/sites\/2\/2022\/11\/GettyImages-1238864801_Biden_SOTU.jpg?resize=570,380 570w, https:\/\/khn.org\/wp-content\/uploads\/sites\/2\/2022\/11\/GettyImages-1238864801_Biden_SOTU.jpg?resize=370,247 370w, https:\/\/khn.org\/wp-content\/uploads\/sites\/2\/2022\/11\/GettyImages-1238864801_Biden_SOTU.jpg?resize=270,180 270w, https:\/\/khn.org\/wp-content\/uploads\/sites\/2\/2022\/11\/GettyImages-1238864801_Biden_SOTU.jpg?resize=170,113 170w, https:\/\/khn.org\/wp-content\/uploads\/sites\/2\/2022\/11\/GettyImages-1238864801_Biden_SOTU.jpg?resize=100,67 100w, https:\/\/khn.org\/wp-content\/uploads\/sites\/2\/2022\/11\/GettyImages-1238864801_Biden_SOTU.jpg?resize=120,80 120w, https:\/\/khn.org\/wp-content\/uploads\/sites\/2\/2022\/11\/GettyImages-1238864801_Biden_SOTU.jpg?resize=1170,780 1170w, https:\/\/khn.org\/wp-content\/uploads\/sites\/2\/2022\/11\/GettyImages-1238864801_Biden_SOTU.jpg?resize=300,200 300w, https:\/\/khn.org\/wp-content\/uploads\/sites\/2\/2022\/11\/GettyImages-1238864801_Biden_SOTU.jpg?resize=200,134 200w, https:\/\/khn.org\/wp-content\/uploads\/sites\/2\/2022\/11\/GettyImages-1238864801_Biden_SOTU.jpg?resize=315,210 315w, https:\/\/khn.org\/wp-content\/uploads\/sites\/2\/2022\/11\/GettyImages-1238864801_Biden_SOTU.jpg?resize=630,420 630w, https:\/\/khn.org\/wp-content\/uploads\/sites\/2\/2022\/11\/GettyImages-1238864801_Biden_SOTU.jpg?resize=1200,800 1200w\" sizes=\"auto, (max-width: 3840px) 100vw, 3840px\"\/><figcaption class=\"wp-element-caption\">President Joe Biden delivers the State of the Union address in March. On the eve of his speech, the White House released a statement that accused private equity of \u201cbuying up struggling nursing homes\u201d and putting \u201cprofits before people.\u201d<span class=\"photo-credit\">(Saul Loeb\/AFP\/Bloomberg via Getty Images)<\/span><\/figcaption><\/figure>\n<p style=\"font-size:25px\"><strong>Questions About Quality<\/strong><\/p>\n<p>Whether private equity influences the quality of medical care is tough to discern.<\/p>\n<p>Robert Homchick, a Seattle health care regulatory attorney, said private equity firms \u201cvary tremendously\u201d in how conscientiously they manage health care holdings, which makes generalizing about their performance difficult.<\/p>\n<p>\u201cPrivate equity has some bad actors, but so does the rest of the [health care] industry,\u201d he said. \u201cI think it\u2019s wrong to paint them all with the same brush.\u201d<\/p>\n<p>But incipient research paints a disturbing picture, which took center stage earlier this year.<\/p>\n<p>On the eve of President Joe Biden\u2019s State of the Union speech in March, the White House released a statement that accused private equity of &#8220;<a href=\"https:\/\/www.whitehouse.gov\/briefing-room\/statements-releases\/2022\/02\/28\/fact-sheet-protecting-seniors-and-people-with-disabilities-by-improving-safety-and-quality-of-care-in-the-nations-nursing-homes\/\">buying up struggling nursing homes<\/a>\u201d and putting \u201cprofits before people.\u201d<\/p>\n<p>The covid-19 pandemic had highlighted the \u201ctragic impact\u201d of staffing cuts and other moneysaving tactics in nursing homes, the statement said.<\/p>\n<p>More than 200,000 nursing home residents and staffers had died from covid in the previous two years, according to the White House, and research had linked private equity to inflated nursing costs and elevated patient death rates.<\/p>\n<p>Some injured patients are turning to the courts in hopes of holding the firms accountable for what the patients view as lapses in care or policies that favor profits over patients.<\/p>\n<p>Dozens of lawsuits link patient harm to the sale of Florida medical device maker Exactech to TPG Capital, a Texas private equity firm. TPG <a href=\"https:\/\/www.exac.com\/exactech-announces-completion-of-merger-with-tpg-capital\/\">acquired the device company<\/a> in February 2018 for about $737 million.<\/p>\n<p>In August 2021, Exactech <a href=\"https:\/\/www.exac.com\/wp-content\/uploads\/2022\/04\/Exactech-DHCP-letter.4.6.2022.pdf\">recalled its Optetrak knee replacement system<\/a>, warning that a defect in packaging might cause the implant to loosen or fracture and cause \u201cpain, bone loss or recurrent swelling.\u201d In the lawsuits, more than three dozen patients accuse Exactech of covering up the defects for years, including, some suits say, when \u201cfull disclosure of the magnitude of the problem \u2026 might have negatively impacted\u201d Exactech\u2019s sale to TPG.<\/p>\n<p>Linda White is suing Exactech and TPG, which she asserts is \u201cdirectly involved\u201d in the device company\u2019s affairs.<\/p>\n<p>White had Optetrak implants inserted into both her knees at a Galesburg, Illinois, hospital in June 2012. The right one failed and was replaced with a second Optetrak implant in July 2015, according to her lawsuit. That one also failed, and she had it removed and replaced with a different company\u2019s device in January 2019.<\/p>\n<p>The Exactech implant in White\u2019s left knee had to be removed in May 2019, according to the suit, which is pending in Cook County Circuit Court in Illinois.<\/p>\n<p>In a statement to KHN, Exactech said it conducted an \u201cextensive investigation\u201d when it received reports of \u201cunexpected wear of our implants.\u201d<\/p>\n<p>Exactech said the problem dated to 2005 but was discovered only in July of last year. \u201cExactech disputes the allegations in these lawsuits and intends to vigorously defend itself,\u201d the statement said. TPG declined to comment but has denied the allegations in court filings.<\/p>\n<p style=\"font-size:25px\"><strong>\u2018Invasive Procedures\u2019<\/strong><\/p>\n<p>In the past, private equity business tactics have been linked to scandalously bad care at some dental clinics that treated children from low-income families.<\/p>\n<p>In early 2008, a Washington, D.C., television station aired <a href=\"https:\/\/www.youtube.com\/watch?v=pIoMaw4zC9Q\">a shocking report<\/a> about a local branch of the dental chain Small Smiles that included video of screaming children strapped to straightjacket-like \u201cpapoose boards\u201d before being anesthetized to undergo needless operations like baby root canals.<\/p>\n<p>Five years later, a U.S. Senate report cited the TV expos\u00e9 in voicing alarm at the &#8220;<a href=\"https:\/\/www.finance.senate.gov\/imo\/media\/doc\/Report%20on%20Corporate%20Dentistry--0710.pdf\">corporate practice of dentistry in the Medicaid program<\/a>.\u201d The Senate report stressed that most dentists turned away kids enrolled in Medicaid because of low payments and posed the question: How could private equity make money providing that care when others could not?<\/p>\n<p>\u201cThe answer is \u2018volume,\u2019\u201d according to the report.<\/p>\n<p>Small Smiles <a href=\"https:\/\/www.justice.gov\/opa\/pr\/national-dental-management-company-pays-24-million-resolve-fraud-allegations\">settled several whistleblower cases<\/a> in 2010 by paying the government $24 million. At the time, it was providing \u201cbusiness management and administrative services\u201d to 69 clinics nationwide, according to the Justice Department. It later declared bankruptcy.<\/p>\n<p>But complaints that volume-driven dentistry mills have harmed disadvantaged children didn\u2019t stop.<\/p>\n<p>According to the 2018 lawsuit filed by his parents, Zion Gastelum was hooked up to an oxygen tank after questionable root canals and crowns \u201cthat was empty or not operating properly\u201d and put under the watch of poorly trained staffers who didn\u2019t recognize the blunder until it was too late.<\/p>\n<p>Zion never regained consciousness and died four days later at Phoenix Children\u2019s Hospital, the suit states. The cause of death was \u201cundetermined,\u201d according to the Maricopa County medical examiner\u2019s office. An Arizona state dental board investigation later concluded that the toddler\u2019s care fell below standards, according to the suit.<\/p>\n<p>Less than a month after Zion\u2019s death in December 2017, the dental management company Benevis LLC and its affiliated Kool Smiles clinics <a href=\"https:\/\/www.justice.gov\/opa\/pr\/dental-management-company-benevis-and-its-affiliated-kool-smiles-dental-clinics-pay-239\">agreed to pay the Justice Department $24 million<\/a> to settle False Claims Act lawsuits. The government alleged that the chain performed \u201cmedically unnecessary\u201d dental services, including baby root canals, from January 2009 through December 2011.<\/p>\n<p>In their lawsuit, Zion\u2019s parents blamed his death on corporate billing policies that enforced \u201cproduction quotas for invasive procedures such as root canals and crowns\u201d and threatened to fire or discipline dental staff \u201cfor generating less than a set dollar amount per patient.\u201d<\/p>\n<p>Kool Smiles billed Medicaid $2,604 for Zion\u2019s care, according to the suit. FFL Partners did not respond to requests for comment. In court filings, it denied liability, arguing it did not provide \u201cany medical services that harmed the patient.\u201d<\/p>\n<p style=\"font-size:25px\"><strong>Covering Tracks<\/strong><\/p>\n<p>Under a 1976 federal law called the <a href=\"https:\/\/www.ftc.gov\/legal-library\/browse\/statutes\/hart-scott-rodino-antitrust-improvements-act-1976\">Hart-Scott-Rodino Antitrust Improvements Act<\/a>, deal-makers must report proposed mergers to the FTC and the Justice Department antitrust division for review. The intent is to block deals that stifle competition, which can lead to higher prices and lower-quality services.<\/p>\n<p>But there\u2019s a huge blind spot, which stymies government oversight of more than 90% of private equity investments in health care companies: The current threshold for reporting deals is $101 million.<\/p>\n<p>KHN\u2019s analysis of PitchBook data found that just 423 out of 7,839 private equity health care deals from 2012 through 2021 were known to have exceeded the current threshold.<\/p>\n<p>In some deals, private equity takes a controlling interest in medical practices, and doctors work for the company. In other cases, notably in states whose laws prohibit corporate ownership of physician practices, the private equity firm handles a range of management duties.<\/p>\n<p>Thomas Wollmann, a University of Chicago researcher, said antitrust authorities may not learn of consequential transactions \u201cuntil long after they have been completed\u201d and \u201cit&#8217;s very hard to break them up after the fact.\u201d<\/p>\n<p>In August, the FTC took aim at what it called \u201ca growing trend toward consolidation\u201d by veterinary medicine chains.<\/p>\n<p>The <a href=\"https:\/\/www.ftc.gov\/news-events\/news\/press-releases\/2022\/08\/ftc-approves-final-order-protecting-pet-owners-private-equity-firms-anticompetitive-acquisition\">FTC ordered<\/a> JAB Consumer Partners, a private equity firm based in Luxembourg, to divest from some clinics in the San Francisco Bay and Austin, Texas, areas as part of a proposed $1.1 billion takeover of a rival.<\/p>\n<p>The FTC said the deal would eliminate \u201chead-to-head\u201d competition, \u201cincreasing the likelihood that customers are forced to pay higher prices or experience a degradation in quality of the relevant services.\u201d<\/p>\n<p>Under the order, JAB must <a href=\"https:\/\/www.ftc.gov\/system\/files\/ftc_gov\/pdf\/Decision%20and%20Order.pdf\">obtain FTC approval<\/a> before buying veterinary clinics within 25 miles of the sites it owns in Texas and California.<\/p>\n<p>The FTC would not say how much market consolidation is too much or whether it plans to step up scrutiny of health care mergers and acquisitions.<\/p>\n<p>\u201cEvery case is fact-specific,\u201d Betsy Lordan, an FTC spokesperson, told KHN.<\/p>\n<p>Lordan, who has since left the agency, said regulators are considering updates to regulations governing mergers and are reviewing about 1,900 responses to the January 2022 <a href=\"https:\/\/www.ftc.gov\/system\/files\/documents\/videos\/ftc-virtual-press-conference-merger-guidelines-rfi-joint-announcement\/ftc_virtual_press_conference_for_merger_guidelines_rfi_joint_announcement_01182022.pdf\">request for public comment<\/a>. At least 300 of the comments were from doctors or other health care workers.<\/p>\n<p>Few industry observers expect the concerns to abate; they might even increase.<\/p>\n<p>Investors are flush with \u201cdry powder,\u201d industry parlance for money waiting to stoke a deal.<\/p>\n<p>The Healthcare Private Equity Association, which boasts about 100 investment companies as members, says the firms have $3 trillion in assets and are pursuing a vision for &#8220;<a href=\"https:\/\/hcpea.org\/#!event-list\">building the future of healthcare<\/a>.\u201d<\/p>\n<p>That kind of talk alarms Cornell University professor Rosemary Batt, a longtime critic of private equity. She predicts that investors chasing outsize profits will achieve their goals by \u201csucking the wealth\u201d out of more and more health care providers.<\/p>\n<p>\u201cThey are constantly looking for new financial tricks and strategies,\u201d Batt said.<\/p>\n<p><em>KHN\u2019s Megan Kalata contributed to this article.<\/em><\/p>\n<aside class=\"meta-authors meta\">\n<p>\n\t\t\t\t\t\t\t\t\t\t\t<span class=\"author-name\">Fred Schulte: <\/span><br \/>\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t<a href=\"https:\/\/khn.org\/news\/article\/private-equity-takeover-health-care-cities-specialties\/mailto:fschulte@kff.org\">fschulte@kff.org<\/a>,\t\t\t\t\t\t\t\t\t\t\t<a href=\"http:\/\/twitter.com\/fredschulte\" target=\"_blank\" rel=\"noopener\"><br \/>\n\t\t\t\t\t\t\t@fredschulte<\/a>\n\t\t\t\t\t\t\t\t\t<\/p>\n<\/aside>\n<section class=\"block--category-tag-list \">\n<div class=\"category-tag-list__content-wrapper\">\n<h3 class=\"block--category-tag-list__title\">\n\t\t\t\tRelated Topics\t\t\t<\/h3>\n<p>\t\t\t\t<a class=\"category-tag-list__contact-link\" href=\"https:\/\/khn.org\/contact-us\/\"><br \/>\n\t\t\tContact Us\t\t<\/a><br \/>\n\t\t<a class=\"category-tag-list__tip-link\" href=\"https:\/\/khn.org\/tips\/\"><br \/>\n\t\t\tSubmit a Story Tip\t\t<\/a>\n\t<\/div>\n<\/section><\/div>\n<p><script async src=\"\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Two-year-old Zion Gastelum died just days after dentists performed root canals and put crowns on six baby teeth at a clinic affiliated with a private equity firm. His parents sued the Kool Smiles dental clinic in Yuma, Arizona, and its private equity investor, FFL Partners. They argued the procedures were done needlessly, in keeping with [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":387,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"class_list":["post-386","post","type-post","status-publish","format-standard","has-post-thumbnail","category-aging"],"_links":{"self":[{"href":"https:\/\/healthynewsusa.com\/index.php?rest_route=\/wp\/v2\/posts\/386","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/healthynewsusa.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/healthynewsusa.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/healthynewsusa.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/healthynewsusa.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=386"}],"version-history":[{"count":1,"href":"https:\/\/healthynewsusa.com\/index.php?rest_route=\/wp\/v2\/posts\/386\/revisions"}],"predecessor-version":[{"id":388,"href":"https:\/\/healthynewsusa.com\/index.php?rest_route=\/wp\/v2\/posts\/386\/revisions\/388"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/healthynewsusa.com\/index.php?rest_route=\/wp\/v2\/media\/387"}],"wp:attachment":[{"href":"https:\/\/healthynewsusa.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=386"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/healthynewsusa.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=386"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/healthynewsusa.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=386"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}