Summary: The Vultures Are Circling
Private equity (PE) firms are now circling like hungry vultures over Community Health Systems (CHS), one of the largest publicly traded hospital companies in the US. Fresh bids are reportedly in the offing — but if history is any guide, this could be a troubling turn of events for workers, patients, and the communities that lean on CHS’s facilities.
Pre-Acquisition: The Status Quo
Community Health Systems has been providing healthcare in rural and suburban markets since the 1980s. With about 85 hospitals in 16 states, the company serves communities often neglected by larger, more urban-focused providers. But the past decade hasn’t been kind — CHS has been struggling with debt, decreased patient volume, and fragmented payer sources, all exacerbated by the recent pandemic.
During PE Involvement: When Asset Stripping Begins
Although the specific PE firms involved remain unnamed, we can’t turn a blind eye to the troubling history of past PE incursions into healthcare. Hospitals have been prime targets for these firms, which typically see opportunities to strip assets, cut costs, and pile on debt before jetting off.
One common strategy is the sale-leaseback, where the hospital’s real estate is sold to a PE firm and then leased back to the hospital at a steep price, turning a once tangible asset into a recurring cost. Add in some layoffs, subcontracting for essential services, and a lucrative dividend recapitalization, and it’s the perfect recipe for financial disaster on an institutional level.
Post-Collapse: The Unavoidable Aftermath
The inevitable result of such financial engineering is often a degraded institution barely able to provide essential services, tarnished reputation, and an overburdened workforce. In worst-case scenarios, the hospitals close, leaving communities without crucial healthcare services. This string of hospital collapses also throws workers—many at the front lines of the pandemic—out of their jobs and into an uncertain future.
Reflection: A Dystopian Financial Carousel
If we’ve learned anything from private equity’s track record with hospitals, it’s that there’s a startling lack of due diligence, and a disturbing willingness to risk public health on the altar of profit. As these firms continue to eye the healthcare industry hungrily against the backdrop of a global health crisis, the potential fallout may be catastrophic for the communities served by community health systems like CHS.
While the financial woes of such institutions need addressing, private equity’s predatory approach is not the panacea. As the saga of CHS unfolds, it’s crucial to remember that healthcare is a public good. Not another stepping stone on a PE firm’s path to profiteering.