Better Solutions for Healthcare

WSJ: A City’s Only Hospital Cut Services. How Locals Fought Back.

By Brian Spegele

April 11, 2021

When the only hospital in a small central Wyoming city stopped delivering babies and cut back on surgeries, local residents sought to start their own. The fight that ensued now stretches to Washington, and is shining an uncomfortable light on one of the country’s biggest hospital chains and its private-equity owner.

LifePoint Health Inc., backed by Apollo Global Management Inc.,  controls the only hospital in working-class Riverton, Wyo. After LifePoint merged Riverton’s hospital with another facility it owns in the city of Lander, 30 miles away, it began consolidating the hospitals’ services.

With many in Riverton worried that cutbacks would hurt the city’s future and some concerned over Lander’s care, local business and community leaders launched an effort to build a new hospital instead. They say they have secured several million dollars in donations for the effort, including land for the proposed hospital from the Eastern Shoshone Native American tribe.

Today, the group is one step away from achieving its goal of securing $40 million of low-interest loans from the Agriculture Department. LifePoint is trying to scupper the efforts by lobbying the Biden administration and Wyoming’s senators to oppose the project.

The CEO of LifePoint’s Wyoming hospitals, John Ferrelli, said in a statement the company opposed the new hospital because it “will not fill gaps in care.” He said the two hospitals’ merger sought to use scale to better serve patients and coordinate care, adding that both markets are currently being well served.

“I believe the promise of this merger has been realized,” he said. “We continue to explore opportunities to expand services locally.”

Riverton’s effort highlights the struggles in rural healthcare nationwide and the clashes between communities and for-profit chains that own small-town hospitals across the country. Financial pressure on hospitals caused by the pandemic has further raised tensions.

“In a rural community like this, healthcare is one of the major pillars holding it up,” says Dr. Eric Ridgway, a longtime Riverton family physician who previously worked in the hospital’s emergency room and now is backing plans to build a new facility.

Private-equity groups, which poured more than $200 billion into North American health investments over the past decade, have at times exacerbated these tensions. Lucrative returns, an aging population and other factors made healthcare companies attractive targets. But private-equity strategies, which can include the aggressive use of debt to fund dividends or selling off local assets to clean up balance sheets, can deepen conflicts with small communities such as Riverton.

Around 24% of U.S. hospitals are owned by for-profit investors, which includes private equity, according to the American Hospital Association. That is up from 16% in 2000.

Wyoming Gov. Mark Gordon, a Republican, said in an interview that private equity’s aggressiveness in driving efficiency at companies it owns is “hugely problematic” for rural healthcare when it leads to a reduction of services.

He called on Apollo to be aware of how its dealings in Wyoming affect communities: “Get the formula right. Don’t just look at it as a business model.”

The governor said LifePoint’s consolidation of health services “wasn’t what they promised the community and it certainly is something they can reverse.”

Apollo declined to comment for this article. LifePoint didn’t comment on the governor’s remarks.

Wyoming Sen. John Barrasso, a Republican, said he supported the Riverton community exploring a new hospital. Sen. Cynthia Lummis, also a Republican, said she supported choice in healthcare, “especially if the people of Wyoming feel that the lack of it is reducing quality of care.”

LifePoint isn’t the only private-equity-backed hospital operator to face resistance.

Steward Health Care, formerly owned by Cerberus Capital Management LP, threatened to close Pennsylvania’s Easton Hospital in the pandemic last year unless the government granted it $40 million. State officials blasted Steward in response, and the hospital was saved only after a local nonprofit operator agreed to buy it.

Leonard Green & Partners LP received congressional scrutiny last year over the more than $500 million in debt-funded dividends it took from Prospect Medical Holdings Inc., which operates hospitals on the East Coast and in California.

Steward says that the Easton Hospital bailout was needed to compensate for losses tied to the pandemic and it put off closing the hospital to ensure the community was well-served in the pandemic. Cerberus says it was pleased the community’s needs were met.

Leonard Green has rejected criticism over the dividends, saying that Prospect is well capitalized and it has worked to ease Prospect’s debt load. Prospect declined to comment.

More than 130 rural hospitals have closed nationwide since 2010. A concern in Riverton is that traveling farther for healthcare puts people at risk, particularly in a state where roads can be impassable in winter. Research has linked hospital closures to higher mortality rates for patients with time-sensitive conditions such as heart attacks and strokes.

Riverton, once home to the Marlboro Man Darrell H. Winfield, sits in the shadows of the Wind River Range. Its population of around 11,000 people makes it one of Wyoming’s 10 biggest cities by population, although it hasn’t seen the booms of tourist spots like Jackson Hole.

Despite the rural setting, Riverton’s hospital had been profitable, according to federal disclosures and former employees. It once managed a robust staff, including full-time surgeons, an OB/GYN, orthopedist and other specialists.

That changed around 2014, as LifePoint began reducing the medical staff, the former employees say. LifePoint then formally merged Riverton’s hospital with the facility it runs in Lander.

One of the first to raise concerns about the hospital with LifePoint was Vivian Watkins, a retired banker who once served as Wyoming’s economic-development director. In a call with LifePoint in 2018, she says the company turned down a request to sell or lease the property to put it back in local hands.