Cloture Motion

Floor Speech

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Mr. MURPHY. Madam President, when I was growing up, I had a pediatrician. His name was Dr. Cartlon. He was kind. He was reassuring. His advice and his comfort meant a lot to my parents, who were young parents and in need of a steady shoulder to lean on when their kids were born. I remember Dr. Cartlon distinctly even though he retired when I was pretty young, and I remember that he was a really important part of my family's support system. He was an important part of our community and family identity.

My kids don't have a pediatrician; they have many pediatricians. That is because the big pediatric practice that we use decided that it was inefficient and not cost-effective to assign one pediatrician to every family.

Every time we book an appointment, we go see a different doctor at this practice. They are all competent. Our kids are healthy. This very efficient system--it does mean that we probably get in to see a doctor faster than when my parents were trying to find a last-minute appointment with only a very busy Dr. Cartlon. It is an efficient system, but it is hollow. I don't know any of the doctors' names. We have no relationship with one pediatrician. It is clinical. It is not personal. And while we get good care, I admit it leaves you feeling a little bit empty, a little bit alone, as if you are just a number or a name in an appointment book. Without a Dr. Cartlon that you can count on, that experience is a little less assuring.

So I got curious, and I looked up who owns this very competent, very efficient pediatric practice that we use. What I learned is that the primary investor in our children's pediatric practice is Goldman Sachs.

A Wall Street investment bank owning your children's pediatrician would have sounded silly to Americans a generation ago, but today, the role of private equity and hedge funds and big banks in healthcare ownership is one of the most important stories in healthcare, and by and large, it is bad news for patients.

Right in front of our eyes, the defining purpose of our healthcare system is being transformed. Our hospitals and our nursing homes, our hospice care, even our kids' pediatric practices now exist often for the primary purpose of making obscene amounts of money for investors. It is not about keeping us healthy; it is about return on investment. That is what I want to spend a few minutes talking to my colleagues about today.

Historically, you could count on your doctor's office and your nearest hospital to be locally owned, likely to be not-for-profit, and trust that the reason they existed was to make sure that patients got the care they needed. The people that owned the healthcare institutions you counted on lived in your community. They didn't answer to New York private equity firms or Los Angeles investment companies; they were accountable to you, to their neighbors.

That really mattered. It made you feel safe. It reassured you that you or your loved ones were in good hands--because ultimately that is the only thing that matters. When we are at our most vulnerable-- whether that be because of something joyous, like a pregnancy, or something more worrying, like a difficult diagnosis--all we want to know is that the priority at that institution that we or our loved one is at is that we are being taken care of, that the primary motivation of the person taking care of us is taking care of us, but increasingly, that is no longer the case.

Let's just take for today private equity firms--companies that buy up companies, extract as much rent from them as possible, and then quickly turn them over to the next highest bidder.

Over the past decade, private equity investors have spent more than $1 trillion acquiring hospitals, nursing homes, and physician practices. You can see here in this chart that private equity acquired six times as many medical practices in 2021 compared to just a decade earlier, in 2012.

The reach today of private equity in our healthcare system is enormous. Think everything from specialists, like OB/GYNs and anesthesiologists, to generalists, like primary private care providers and emergency services and urgent care. You might not even know that the new doctor you are seeing or the place where you are getting your blood work done is owned not by anybody in your community but by a far- off private equity firm.

To understand why this is so dangerous, you just have to understand what private equity is all about and how it makes a very small number of people a ton of money. The playbook is pretty simple. Private equity firms invest in companies--largely through borrowed money--then flip them for a quick profit to enrich themselves and their investors. It is called buy, strip, flip.

Buy: The private equity firm uses a leveraged buyout normally, meaning they put up a small amount of their own money and borrow all the rest, immediately saddling their new purchase with huge amounts of debt.

Strip: They comb through the balance sheets to find as many cost- cutting opportunities as possible. They lay off workers. They stop paying vendors. They even might sell the land underneath the company that they bought, giving themselves a big one-time payout, leaving the company to pay rent on the space that they used to own.

And then flip: They find a new buyer or they get bailed out by somebody--sometimes even government--and walk away richer than before and completely insulated from any legal or moral fallout from the consequences of their actions.

Short-term profit is the priority, and in the healthcare system, that comes with real risk and downside because at the moment you are most vulnerable, you want to make sure that the priority is taking care of you.

Let me tell you a story to give you a little example about how this works. Prospect Medical Holdings is a safety-net hospital operator, which means they provide healthcare to people who are on Medicaid, people who don't have insurance. Prospect was acquired by a private equity firm in 2010 and currently owns 16 hospitals in this country in Pennsylvania, California, Rhode Island, and Connecticut.

Before we get into the details, let's talk about how a private equity firm buys a hospital. They raise capital from investors, but a huge portion of the money they raise, as I mentioned before, is borrowed. So from the start, the hospital that they are buying is millions of dollars in debt, additional debt, and is immediately responsible for generating revenue to pay that debt--debt that the hospital didn't acquire, debt that is on the hospital because the ownership company borrowed the money in order to buy the hospital. Sometimes that means taking a bad financial situation and ultimately replacing it with an even worse one.

So in 2016, this company, Prospect, bought three hospitals in my State--Rockville General, Manchester Memorial, and Waterbury Hospital-- for a total of $150 million. Combined, these hospitals serve about 600,000 patients. They employ about 4,000 people.

For most of the people who live in this area, these hospitals are their best and sometimes their only option. Access to emergency rooms, especially if you live in one of the more rural parts of the State, can be a matter of life and death. Many of the patients are on Medicare and Medicaid, and they might not have access to transportation that would allow them to get to a hospital farther away.

I should note that 80 percent of Prospect's revenues come from Medicare and Medicaid reimbursement, meaning this company and the hospitals it owns are largely funded by us, by taxpayers.

These hospitals in Connecticut, I will admit, weren't in great financial shape when they were bought. But they were hopeful that these new owners--these new owners with lots of money at their disposal-- would bring an infusion of investment--that is what was promised--and would help right the ship.

Two years after their purchase, the hospitals in Rockville, Manchester, and Waterbury hadn't seen much of any improvement or investment. In fact, they were beginning to fall into greater disrepair. As the three of them entered some pretty dire financial straits, Prospect didn't make further investments. They took out a $1.1 billion mortgage and made these hospitals the collateral. Surely, they put some of that money--they used the hospitals as collateral. They raised $1.1 billion. Surely, they put that money back into the hospitals to pay for the repairs and improve their financial situations.

You know the story. They didn't do that. In fact, half of that loan-- they used the hospitals for collateral. Half of that loan went to dividends to investors and executives across the country in California, where Prospect was located. And $90 million went straight to one person, the CEO. Let me guarantee you, $90 million would have made a huge difference at Waterbury Hospital. It would have saved lives. But Waterbury Hospital was used as collateral so that Sam Lee, the CEO, could make $90 million. Next to nothing went toward a single one of the 16 hospitals that Prospect owns across the country. Prospect owes the State of Connecticut $67 million in unpaid taxes. They owe the low- income city of Waterbury, which struggles to pay its elementary school teachers, $10.5 million. None of that money went to pay the taxes they owe Connecticut and the city of Waterbury.

Prospect's CEO made $90 million while his company refused to pay taxes. But maybe, you ask, the CEO really needed the money. Well, he didn't. It is just greed. This guy, Sam Lee, I don't know him, but he owns not one but two luxury homes in Los Angeles. They are worth more than $15 million combined. Each of them has its own pool. One even has its own private basketball court. They are 11 minutes from each other. Sam Lee pillaged three Medicaid hospitals in Connecticut so he could have two mansions 11 minutes apart.

But here is the real problem. Sam Lee isn't the exception; he is the rule.

We just finished up a set of hearings in meetings on Steward Health Care, which used the same playbook as Prospect to run their hospitals into the ground while their out-of-State CEO also cashed out. The hospitals Steward bought in Louisiana and Massachusetts were gutted.

A nurse testified before our committee this month that they put dead babies in cardboard boxes because they wouldn't pay for the kind of temporary coffin that would normally be used for a dead child. The nurses would leave during the day to go to local stores to buy basic supplies on their own dime because they didn't have them in the hospital.

The elevators in these Steward Health Care hospitals stopped working. Why? Well, in this case, it is so that CEO, Ralph de la Torre, who ignored a congressional subpoena to appear before the HELP Committee this month, could buy a $40 million, 190-foot yacht with six bedrooms that costs $4 million a year just to keep in the water--dead babies in cardboard boxes so that a CEO could burn $80,000 a week on a crew and shrimp cocktails and champagne for his private yacht. That is obscene. That is revolting. But that is our choice. That is the healthcare system that our laws currently allow to exist.

What is happening at Prospect and Steward is happening all over the country. I am not saying that every private equity firm is as rapacious as those that I am talking about today. And private equity firms will tell you these hospitals and nursing homes were inefficient before they bought them, and they will claim that the private equity ownership increased efficiency and quality.

But here is maybe the most important thing to tell you. It is just not true. Yes, as I explained with regard to my own pediatric practice, efficiency--profit-maximizing efficiency--is often not good for the well-being or the peace of mind of patients. My kid's pediatric practice is efficient, but it doesn't deliver the same kind of satisfaction and peace of mind as it does when you have a reliable pediatrician.

But, more importantly, there is actually no evidence that private equity ownership increases quality or reduces costs. As I am going to tell you, the evidence suggests exactly the opposite is true.

A recent study from Harvard Medical School asked the simple question: Are patients at hospitals acquired by private equity receiving worse care than patients at hospitals not owned by private equity? Researchers analyzed insurance data from almost 5 million Medicare hospitalizations for 10 years, and the findings were stunning, though not surprising.

After a hospital was acquired by a private equity firm, there was a 25-percent increase in complications for patients. Patients experienced 27 percent more falls, 38 percent more bloodstream infections. The rate of surgical site infections was double that of hospitals not owned by private equity. Those are stunning numbers. This is not patient care being 5 percent worse, 10 percent worse. You are talking about infection rates after surgeries having doubled, just because a private equity firm owns it, rather than the hospital being in the hands of the local community.

Why? When private equity takes over, it is mostly not about the patient. It is about the profit. How do you maximize profit really quickly? You have to do it really quickly because you have to start paying back those loans you took out to buy the hospital. You have to start getting ready to flip the asset. You have to make the rich CEOs even richer.

What do you do? You fire employees to cut costs. You force the remaining doctors and nurses to just see more patients for less time. You cut corners on supplies and equipment. You discharge patients much more quickly if that makes you more money.

OK, that is quality. But what about cost? It turns out that private equity ownership is driving up costs for premium payers and taxpayers. One study looked at what happens when a private equity firm engages in a rollup strategy, otherwise known as buying up a lot of small doctor groups in the same market. That study found that in 8 out of 10 specialities they looked at, from oncology to primary care, the price of care went up after these private equity rollups by as much as 16 percent.

So when private equity buys up a healthcare practice, quality goes down, satisfaction goes down, cost to consumers and the government goes up.

It begs a larger question: How has capitalism gone so far off the rails? How have the rules of our economy become so unmoored from the common good and any conception of morality? No one in this country would endorse the healthcare system in which nurses at a hospital are forced to go to the local CVS because the emergency room ran out of Pedialyte, just so the hospital owner could pay for the expensive upkeep of a luxury boat. Nobody in this country thinks it is OK for a hospital CEO to refuse to pay taxes so he can easily make his mortgage payments on his two luxury homes 11 minutes away from each other.

These private equity CEOs, who are hurting people in order to fund their lavish lifestyles, most of them don't think they are doing anything wrong. They think they are just playing by the rules. And to an extent, they are right, because our government, our culture, and our society have deemed it OK for people to make a fortune even when it comes at the expense of hurting other people.

Listen, there are parts of the economy where maximizing profit aligns with maximizing quality, but healthcare is not one of them. People are dying in these hospitals and nursing homes so that the executives can get rich. That is not right, and we don't have to accept it.

We can build a free-market economy that has guardrails to protect against the worst kind of immoral greed and excess. I don't begrudge anybody making money, but if you are making money off the most sacred parts of our economy, like our Medicaid hospitals, and you are making money basically by funneling taxpayer dollars to your own pocketbook, there has to be a limit.

And, today, I am just outlining the problem. But make no mistake, there are solutions. Congress and the President do not have to accept this trend of private equity ownership in our healthcare system and the abuse that it allows.

For instance, the Biden administration and the FTC, through Chair Lina Khan, are taking these risks seriously. They are filing anti-trust suits against private equity-backed healthcare monopolies.

In the Senate, the HELP Committee, as I mentioned, just finished a hearing on the abuses of that one company, Steward Health Care, and we heard outrage from both Republicans and Democrats on the committee. When that CEO refused to testify--ignored the subpoena--Republicans and Democrats voted to sanction him for that illegal action. Congress can take a stand and limit or restrict private equity or investor ownership of healthcare institutions that receive a bulk of their revenue from Federal programs like Medicare or Medicaid.

Let's be clear. This is not the only problem in the American healthcare system. We have a lot of work to do to increase quality and reduce costs. But this new phenomenon--the financialization of healthcare and the rapidly increasing ownership of healthcare intuitions by private equity--has happened virtually overnight, with little public discussion, and it has made all of the failures that already existed in our healthcare system 100 times worse. It has been a boon to the private yacht industry, but it has been largely miserable for patients.

It might feel like this train has left the station, but it has not. It is not too late to turn it around. Congress can and should act.

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