Medical-service businesses owned by deep-pocketed private equity firms including KKR, Apollo and Cerberus have received more than $1.5 billion in no-interest loans from federal programs designed to help cash-strapped health-care companies, according to an analysis by Bloomberg News.
Although major private equity investors have been shut out of many coronavirus relief programs, they have found what Bloomberg calls a “back door” at the Health and Human Services Department, which has approved at least $1.5 billion worth of loans, based on a review of more than 40,000 loans made public by HHS.
The money comes from two programs administered by the Centers for Medicare & Medicaid Services that received additional funding through the CARES Act to help companies in the health-care sector survive the pandemic, but “went instead to hospitals, clinics and treatment centers controlled by the richest investment firms as they seek to take advantage of an economic downturn caused by the pandemic to buy ailing businesses,” Bloomberg said.
CMS Administrator Seema Verma said her agency doesn’t ask loan applicants about their ownership structure. “We don’t look into ownership, what we look into is are they Medicare-enrolled providers,” Verma told Bloomberg.
Critics worry that the private equity firms will use the no-interest loans to buy up more health-care companies and load them up with debt, in accordance with their typical business model.
And no-interest loans aren’t the only way private equity is benefiting from coronavirus relief efforts, Bloomberg said. HHS has also provided hundreds of millions of dollars in automatic grants to health-care companies that have cared for Medicare patients over the last two years, including some owned by private equity, and the money never has to be paid back.