Workers Blow the Whistle on Mass Death

Private equity firms have imposed austerity measures on the hospitals they acquire. In a pandemic, that’s meant countless preventable deaths.

Moe Tkacik August 3, 2020

A healthcare worker gives another a shoulder rub before they go back into the the Covid-19 Unit at United Memorial Medical Center in Houston. As coronavirus cases surge around the country, hospitals are on the verge of being overwhelmed and nurses are being overworked. (Photo by Mark Felix/AFP via Getty Images)

As the coro­n­avirus con­tin­ues to bat­ter the U.S., the hor­ror sto­ries still sound the same: basic med­ical sup­plies nowhere to be found, new patients keep show­ing up gasp­ing for air, nurs­es with impos­si­ble work­loads and back-to-back-to-back shifts, hos­pi­tal staff with inad­e­quate per­son­al pro­tec­tive equip­ment (PPE) get­ting sick.

Private equity firms are often able to finance takeovers by using the very companies they’re buying as collateral for the loans to buy them—loans the newly purchased companies are on the hook to pay back.

It might even sound like no one with any pow­er in Amer­i­can health­care has learned much since March, but that’s not true, accord­ing to Saum Sutaria, chief oper­at­ing offi­cer of Tenet Health­care, a mas­sive, for-prof­it hos­pi­tal chain. We’ve learned a tremen­dous amount,” Sutaria boast­ed to Wall Street ana­lysts dur­ing a con­fer­ence call in mid-June. The McK­in­sey alum and fea­tured Aspen Ideas Fes­ti­val speak­er was talk­ing about how to lim­it Covid-19 costs on a unit basis of managing.”

Of course, hos­pi­tals can low­er their costs in a lot of ways that make patient care worse. Tenet, for exam­ple, fur­loughed an aston­ish­ing 10% of its staff in March and April. It also stopped con­tribut­ing to 401(k) retire­ment accounts, rationed PPE (and threat­ened to fire employ­ees who brought their own), and slashed hours for its nurs­es. Some nurs­es were sent home mid-shift, leav­ing oth­ers to watch sec­tions as big as 20 patients. At a Tenet hos­pi­tal in Mass­a­chu­setts, nurs­es filed more than 50 reports over two weeks in April, doc­u­ment­ing spe­cif­ic instances of how the down­siz­ing jeop­ar­dized patients. One declared she had “[nev­er] been more ashamed to work” somewhere.

Tenet’s pan­dem­ic man­age­ment style has been espe­cial­ly har­row­ing at Detroit Med­ical Cen­ter (DMC), Detroit’s major hos­pi­tal group (with 2,000 beds) and the city’s biggest employ­er. Near­ly 3,000 peo­ple have died from Covid-19 in Wayne Coun­ty, where Detroit is. Mean­while, a law­suit filed by four for­mer DMC nurs­es claims that, at one point, DMC was so short-staffed that a stag­ger­ing num­ber of the deceased were in rig­or mor­tis before any­one noticed they weren’t breath­ing. The staffers allege hos­pi­tal admin­is­tra­tors active­ly increased the death toll by instruct­ing nurs­es not to revive patients sus­pect­ed of hav­ing Covid-19.

As bod­ies piled up, DMC ran out of space for body bags, then ran out of body bags. When a group of overnight nurs­es showed up ear­ly for their shift to plead with their boss­es for rein­force­ments — either from out­side the hos­pi­tal or among the 1,500 staffers the sys­tem had laid off over the past few years — Tenet offi­cials instead sent them home. The day staff, then, worked a 25-hour shift.

The law­suit also claims the emer­gency room’s lack of PPE led to numer­ous unnec­es­sary deaths, as nurs­es and oth­ers became infect­ed after shar­ing hos­pi­tal gowns and masks.

This rad­i­cal aus­ter­i­ty is not com­plete­ly new at DMC, though the pan­dem­ic show­cas­es its pit­falls. In 2011, DMC was pur­chased by Van­guard Health Sys­tems, which was itself con­trolled by The Black­stone Group, a pri­vate equi­ty firm. The deal was hyped with so much promise for the hos­pi­tal that Mike Dug­gan, the for­mer DMC chief exec­u­tive who helped bro­ker the deal, used the sto­ry to get him­self elect­ed may­or. Of course, like many pri­vate equi­ty deals, the goal was nev­er the long-term health of the com­pa­ny (or the patients) but to make mon­ey (fast) by cut­ting costs, extract­ing cash and flip­ping it to anoth­er buyer.

Tak­ing over a giant com­pa­ny gen­er­al­ly requires a giant pile of cash. Pri­vate equi­ty firms are often able to finance those takeovers by using the very com­pa­nies they’re buy­ing as col­lat­er­al for the loans to buy them — loans the new­ly pur­chased com­pa­nies are on the hook to pay back. Rub­bing salt in the wound, pri­vate equi­ty firms often use some of that new cash to pay them­selves a div­i­dend, even when the com­pa­ny they bought isn’t mak­ing money.

So it went with Black­stone, Van­guard Health and DMC. Black­stone took on $1 bil­lion in debt financ­ing to acquire Van­guard Health in 2004, then took on $225 mil­lion in 2010 to acquire DMC as part of Van­guard Health, then took on anoth­er $750 mil­lion dol­lars a year lat­er to finance (among oth­er things) anoth­er div­i­dend, then took on anoth­er $350 mil­lion in March 2012.

By 2013, the hos­pi­tal chain was spend­ing about $200 mil­lion a year on its loan pay­ments. Mean­while, Van­guard Health’s prof­its for the pre­vi­ous five years com­bined totaled just over $80 mil­lion. That’s when Tenet Health­care stepped in, pay­ing $1.8 bil­lion to buy DMC in 2013, includ­ing $2.5 bil­lion in high-inter­est debt.

By 2014, Tenet’s inter­est pay­ments had bal­looned to $754 mil­lion a year — 88% of its cash flow. DMC then slashed spend­ing, axing its high­ly regard­ed pedi­atric aller­gy and asth­ma care pro­gram and down­siz­ing its res­i­den­cy pro­gram in 2019. It also cut a quar­ter of its ster­ile tech­ni­cian staffers between 2006 and 2016, to the point that DMC sur­geons com­plained of blood and tis­sue left inside sup­pos­ed­ly clean sur­gi­cal instru­ments. Some sur­gi­cal pro­ce­dures were actu­al­ly halt­ed part­way through for lack of clean instru­ments; the car­di­ol­o­gists who exposed the scan­dal were then barred from lead­er­ship roles and had their email cre­den­tials revoked. Mean­while, DMC slashed its bud­get for admin­is­ter­ing care to poor, unin­sured patients from $22.9 mil­lion in 2013 to $470,000 in 2016.

Cor­ner-cut­ting in the U.S. health­care sys­tem has affect­ed even rel­a­tive­ly upper-class insti­tu­tions. A doc­tor with the largest pri­vate equi­ty-backed der­ma­tol­ogy chain, for exam­ple, told Bloomberg ear­li­er this year that he start­ed keep­ing toi­let paper in his car (even before the pan­dem­ic) because wait­ing for cor­po­rate approvals” left his office with­out essen­tials too many times. A doc­tor in mid­dle-class Oxford, Miss., was fired after she start­ed a Face­book fundrais­er to buy masks for nurs­es because the pri­vate equi­ty-owned staffing firm did not pro­vide them. An emer­gency room doc­tor with Blackstone’s TeamHealth was fired after writ­ing a Face­book post won­der­ing why the Indi­an reser­va­tion hos­pi­tal (where he vol­un­teered) had a bet­ter equipped Covid-19 triage sys­tem than his hos­pi­tal in the wealth­i­er city of Belling­ham, Wash., (at the time, a Covid-19 hotspot), where staffers were pro­hib­it­ed from pur­chas­ing any­thing with­out approval from a hard-to-reach cor­po­rate expert doc.”

Mean­while, poor peo­ple are increas­ing­ly like­ly to find them­selves aban­doned alto­geth­er, as doc­tors and nurs­es in Philadel­phia and Chica­go learned after Tenet sold off area safe­ty net hos­pi­tals in 2017 and 2019 to a shad­owy South­ern Cal­i­for­nia-based group of small-time investors (the hos­pi­tals were shut down under mys­te­ri­ous finan­cial cir­cum­stances). Tenet is also plan­ning to sell its Mem­phis hos­pi­tals to a chain noto­ri­ous for suing des­ti­tute patients over med­ical debt. Leonard Green & Part­ners, the same Los Ange­les-based pri­vate equi­ty firm that sucked hun­dreds of mil­lions of dol­lars out of the now bank­rupt retail­er J. Crew, shut down a safe­ty net hos­pi­tal sys­tem in San Anto­nio and sold its build­ings to a hotel devel­op­er, extract­ing $658 mil­lion for itself in div­i­dends and fees.

But as Tenet’s Saum Sutaria explained on his con­fer­ence call, the pan­dem­ic is an excit­ing time to prof­it off the poor. Across the coun­try, Tenet and oth­er hos­pi­tal chains have cre­at­ed a process called cohort­ing,” set­ting up DIY Covid-19 wards in rec cen­ters, base­ments, old hos­pice facil­i­ties and sim­i­lar spaces. In con­cert with the bil­lions of dol­lars Tenet received from CARES Act bailouts (not just the for­giv­able loans), this makeshift pan­dem­ic care has cleared hos­pi­tal space for lucra­tive elec­tive surg­eries to con­tin­ue, right on along­side the pan­dem­ic bloodbath.

The har­row­ing con­di­tions inside one such makeshift Covid-19 unit — adja­cent a rel­a­tive­ly emp­ty hos­pi­tal in Edin­burg, Texas, oper­at­ed by the for-prof­it group Doc­tors Hos­pi­tal at Renais­sance — is the sub­ject of a stom­ach-churn­ing viral Twit­ter thread fea­tur­ing claims of patients cov­ered with ants, sto­ries of dirty equip­ment and absen­tee doc­tors, and unnec­es­sary deaths caused by a pre­pos­ter­ous net­work of low-capac­i­ty oxy­gen tanks. The relat­ed Twit­ter sto­ries were col­lect­ed by a Flori­da nurse to whom a rough­ly half-dozen shell-shocked trav­el nurs­es turned — after their staffing agency threat­ened them with demo­bi­liza­tion” should they speak out. Observers quick­ly char­ac­ter­ized the set­up as a geno­cide. For Tenet and an exec­u­tive team long beset by poor earn­ings num­bers and ever ris­ing lit­i­ga­tion costs, how­ev­er, this inno­va­tion” in patient con­sol­i­da­tion” is a point of pride.

We have sim­ply learned how to care for these patients in a more con­sol­i­dat­ed man­ner,” Sutaria boasted.

The heady mix of CARES Act cash, aus­ter­i­ty mea­sures and pub­lic accep­tance of mass death has enabled the pan­dem­ic to breathe tem­po­rary new life into the finan­cial prospects of the so-called health­care indus­try — iron­ic, giv­en at least one company’s pro­hi­bi­tion on reviv­ing Covid-19 patients.

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