Tag: rural health

Private Equity Coming To Rural Healthcare

A new report by the Private Equity Stakeholder Project (PESP), “Private Equity Descends on Rural Healthcare,” provides an unprecedented look at the private equity industry’s incursion into rural healthcare. The findings were led by PESP healthcare researchers Eileen O’Grady, Michael Fenne, and Mary Bugbee.

“Healthcare systems in America’s rural communities are experiencing an escalating crisis,” said O’Grady, PESP Healthcare Director. “Rural hospitals are closing at a dangerous rate. Chronic staffing shortages plague providers, and the health of people living in rural areas is, by most measures, significantly worse than in non-rural areas. Despite these challenges, private equity appears to still find opportunities to profit off this struggling industry, thereby adding to the strife.”

This sweeping survey examines the extent to which private equity (PE) has invested in rural health, as well as key financial drivers of significant investment activity in this uniquely distressed part of our health system. The new report also examines case studies of PE-owned companies in several rural healthcare sectors that highlight some of the risks posed by private equity’s incursion into rural healthcare.

PESP shares previously unreported data revealing that private equity firms own at least 130 rural hospitals. The private equity firms that dominate the list include Apollo Global Management (LifePoint Health, Scion Health), GoldenTree Asset Management and Davidson Kempner (Quorum Health), and Equity Group Investments (Ardent Health Services).

Similar to private equity’s involvement in other sectors of the healthcare industry, quality of service at PE-owned hospitals can be questionable. “A series of case studies in this report reveals a range of quality issues,” O’Grady added. “Even with substantial financial assistance received during the pandemic, three of the six rural hospitals that closed in 2021 and 2022 were PE-owned.”

In addition to traditional hospital ownership, the PESP report lays bare a new tactic utilized by private equity firms to extract additional value from hospitals they own. By creating separate hospital management companies, these firms have provided themselves new avenues to harvest profits from both nonprofit and public healthcare providers, entities that historically would have not given high returns for their ownership.

“This report includes truly expansive analysis on private equity’s interest and sustained investment in rural healthcare,” O’Grady said. “Private equity’s influence extends far beyond the hospitals they own. In addition to providing a list of PE-owned rural healthcare companies across a variety of specialties, our research digs into several key sectors including emergency care and transport, travel nursing, and behavioral health.”

Finally, the report analyzes the potential motives of PE investment in rural health and proposes policy recommendations to ensure that private equity cannot exploit rural health providers at the cost of quality of care. Some of PESP’s policy recommendations include:

Cyber Vulnerability In Rural Health

Baha Zeidan

By Baha Zeidan, co-founder and CEO, Azalea Health.

Rural hospitals are facing an exorbitant amount of pressure, and the pressure doesn’t seem likely to subside any time soon.

Whether it’s the ongoing labor shortage, the constantly changing regulatory environment or other market forces, the headwinds, at times, seem insurmountable. Couple those concerns with the constant worries about cyberattacks and security vulnerabilities, and the moment seems even more challenging.

It’s not that rural health organizations can’t tackle any of the issues head-on. It’s more a matter of rural health organizations often don’t have the staff or resources to address this topic.

As a result, security is often an afterthought. How rural hospitals and communities focus on security presents an interesting dilemma because they’re vulnerable from a cybersecurity side and particularly vulnerable if their security posture is left unaddressed.

According to the Center for Healthcare Quality and Payment Reform, 150 rural hospitals nationwide closed between 2005 and 2019, and even more closed in 2020. While funding has helped slow the trend of closures amid the pandemic, rural providers still face challenges, partly because they have higher proportions of vulnerable patients, the elderly or the chronically ill.

However, rural health providers still have an arrow left in their quiver: technology. Increasingly, they’re turning to technology to ensure their staff can focus on delivering quality healthcare to patients without forgoing the most pressing needs and cybersecurity in particular.

Cybersecurity is the centerpiece of the path forward

Last year was among the worst years for ransomware attacks on healthcare. Healthcare is an ideal target; private health data is lucrative to sell on the dark web, and providers are more likely to pay ransoms with lives on the line.

Ransomware-as-a-service has also made it easier than ever to launch an attack, making it critical to invest in health IT platforms with built-in security solutions.

However, many rural providers cannot afford to invest in the same technology as their larger counterparts. They often face lean IT teams and limited budgets, constraining their investments and limiting what percentage of their budget they can spend on security.

Rural providers often find themselves on the unfortunate side of the digital divide, whether it’s clinician shortages or a suboptimal revenue cycle that results in a lack of capital. The result is that they may be unaware of the latest security updates, and even if they are, they often can’t implement them.

It’s not all doom and gloom, however. Rural providers can take steps to stay secure.

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