By Tami Kamin Meyer
There is little doubt the American Medical Association (AMA) is worried about the increasing involvement of private equity investment in hospitals that also train medical residents. With the sudden closure of Pennsylvania’s Hahnemann University Hospital in 2019 – after a private equity acquisition left the facility’s 570 residents and fellows without required malpractice insurance fresh in its mind – the AMA announced a policy in November aimed at protecting residents who train at teaching hospitals purchased by private equity firms. That shutdown also left the residents without a position in a training program.
The goal of the resolution, adopted by the AMA’s house of delegates at its interim meeting, is to protect residents whose training hospital has been acquired by a private equity firm. The AMA, whose 2022 membership neared 272,000 physicians nationwide, wants to ensure residents will not lose any benefits they enjoyed and relied upon with the hospital prior to its acquisition, including funding.
In a statement, AMA immediate past board chair Bobby Mukkamala said,
“While positive developments have been made to implement protections for residents since the unexpected closure of Hahnemann, we are concerned that these changes are only temporary.”
The resolution’s impact
It is one thing for the AMA to enact this new policy and yet another for the resolution to have any teeth when the organization wields little actual power in the private equity investment arena.
Dr. Jane Zhu, an internal medicine and primary care physician in Portland, Oregon, and assistant professor at the Oregon Health and Science University, focuses some of her research on private equity investment in the healthcare industry. In her opinion, the AMA’s resolution “won’t affect private equity transactions, overall.”
Despite its lack of overall impact, Zhu supports the AMA resolution. “This is an internal AMA policy but there is no bite to this. Residency programs can choose to abide by the resolution or not.”
Still, she sees the policy as a step in the right direction. The policy “lays the groundwork for more oversight in this area,” says Zhu.
Strange bedfellows
The AMA is in a difficult position. While it “recognizes how PE is beholden to profits and investors that other healthcare facilities aren’t, this policy sets a fallback for residency programs that have important obligations to its residents to prevent another Hahnemann situation,” said Zhu.
“I don’t think this policy will impact where PE will invest. It is meant to prevent the intended and unintended impact on trainees (when PE acquires a teaching hospital), which is a very different set of issues at play,” she said.
Because the goal of PE purchases of hospitals is increased profits for investors, Zhu echoed what she called another AMA worry about such transactions. Private equity is “beholden to investors and the bottom dollar, so healthcare is not necessarily prioritized. The AMA recognized that, and is setting up guardrails to prevent another Hahnemann from occurring.”
Additional AMA concerns about PE
The desire to prevent another debacle where residents are left without benefits or a job when a teaching facility is acquired by PE is but one reason the AMA established the new policy. The AMA is also concerned that private equity ownership of teaching hospitals could impact residents’ or fellows’ ability to qualify for the Public Service Loan Forgiveness Program (PSLF) because it is restricted to nonprofit and publicly owned entities. Therefore, the AMA’s new policy requests the PSLF amend its rules to extend loans to medical students and physicians even if all or part of their residency occurred in a for-profit or government training facility.
The resolution also:
- Proclaims that the academic missions of medical education training programs should not be compromised by its owner’s fiduciary responsibilities to corporate or for-profit owners.
- Supports publicly funded independent research on the effects of PE investments on graduate medical education in the United States.
- Encourages greater transparency in PE transactions involving hospitals and other healthcare facilities.
- Challenges hospitals and doctors considering a corporate investment or partnership to contemplate the ongoing education and welfare of residents who train under physicians in that practice, including weighing the potential financial fallout on trainees.
Prior history
The AMA’s November 2022 resolution was not the first time the organization has sounded the alarm about some of the negative impacts of private equity investment in the healthcare industry.
In an August 1, 2022 article on its website, the AMA labeled the PE industry’s bottom-line strategy as detrimental to the American healthcare system.
The AMA is not the only entity turning up the heat on private equity’s involvement in the healthcare industry.
In October 2022, the Federal Trade Commission and the Department of Justice both vowed to increase their scrutiny on PE transactions amid a growing chorus of concerns about PE investment, the quality of health care, and patient access to healthcare post-merger.
Current DOJ and FTC leadership have indicated a policy shift from the Trump administration’s stance on PE transactions, particularly deals involving healthcare. The two agencies said they will scrutinize both board appointments to ensure antitrust violations have not occurred and PE transactions themselves, regardless of whether the company made a filing pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
