Committee hears experts on private equity’s tactics, risks and proposed oversight

Nancy Kane, a presenter and former financial monitor for the Massachusetts Attorney General's Office, said private equity investors typically buy existing health-care organizations with the clear intention of extracting their investment within a limited time frame. "They have to get their money out," Kane said, adding that firms often finance purchases with heavy debt that is placed on the acquired entity rather than the investor.

The committee’s briefing, introduced by Chair Black of the House Committee on Health Care, combined academic review and case history. Kane described commonly used tactics — leveraged buyouts, dividend recapitalizations and sale-leasebacks — and traced how those moves can raise operating costs, reduce staff and leave hospitals vulnerable to bankruptcy.

"Private equity firms typically don't have an interest in making their companies financially healthy for the long term, and they're more interested in extracting wealth in that brief ownership period," Michael Fenney, senior campaign and research coordinator for health care at the Private Equity Stakeholder Project, told the committee.…