Private equity moves into Colo. child care

(Andy Colwell, Special to The Colorado Sun)

A 2022 study published in JAMA Internal Medicine found that when anesthesia companies backed by private equity investors took over a hospital outpatient or surgery center, they raised prices by an average of 26% more than facilities served by independent anesthesia practices. A Washington Post investigation found that prices for services increased 30% after several anesthesiology practices were consolidated in Colorado.

“If they find opportunities to raise prices,” Billings said, “of course they will.”

Private equity firms make their money in a few ways, but a primary method is by restructuring the companies — often by reducing staff — to maximize their profit margin. Studies show that there are higher mortality rates and a lower quality of care in private equity-owned nursing homes, according to a 2023 British Medical Journey review of ​​926 studies published since 2000. 

“These are institutions with major profit motives who fully own and operate the program,” said Haspel. “This is a company saying, ‘I am going to buy you. I’m going to own you for three to seven years to get as much money as possible out of you, and then I’m going to sell you to somebody else.’” 

Warning call

A few states have started to put standards in place that restrict profit-making in preschools. In New Jersey, the state imposes significant budget requirements to limit profit-making in preschools that receive state funding. Work is being done in Massachusetts to limit the amount of state funding any large companies can receive. 

Colorado state representatives like Lorena Garcia emphasize the need to, as the District 35 representative and CEO of the Colorado Statewide Parent Coalition said, “keep public dollars in public spaces.” 

“What are guardrails we can put around child care providers that do accept private equity funds?” she asked. Some of those guardrails may include setting standards for care quality, limiting profit margins for state-funded programs and establishing protections against sudden closures.

Garcia, whose district includes Westminster and Federal Heights, is not currently planning legislation specifically to address the private equity investment in child care centers. 

The NWLC and Open Markets report serves as a “warning for the child care sector,” authors wrote, so legislators like Garcia can be prepared to act and establish protections — such as state standards for quality, limits on for-profit operations or protections against sudden facility closures — as government dollars flow into the industry. 

A universal pre-K program, which funds 15 hours of preschool care per week to children in their year before kindergarten, and proposed early childhood special districts have the potential to provide more support to families — and more tax dollars to daycares.

“With the influx of possible public funding,” NWLC report author Boteach said, “external investors should have guardrails in place to protect the child care industry and the families they serve.” 

Shay Castle contributed reporting. This article was produced in collaboration with Colorado Sun.

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Publish date : 2024-09-03 13:00:00

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